Conducting an audit can be a very complex and time-intensive task and particularly when financial records and supporting documents are not properly organised. However, an audit can provide valuable assurance over a company’s financial statements and help management identify areas that may require attention or improvement. For businesses operating in the UAE, maintaining accurate accounting records and supporting documentation is also important for meeting applicable tax and regulatory requirements.
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What is Audit?
An audit is a thorough check of all the books of accounts, financial transactions of a company, statutory records, etc. The objective of a financial statement audit is to obtain reasonable assurance that the financial statements are free from material misstatement and to enable the auditor to express an independent opinion on those financial statements.
An audit can strengthen confidence in a company’s financial reporting by providing an independent assessment of its financial statements. It may also help identify material errors, inconsistencies or weaknesses in financial processes that require management’s attention. It also provides a helping hand to the stakeholders and the potential investors and allows them to take decisions which would suit their requirements.
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List of Documents Required for Audit of a Company
Before an audit begins, the auditor will generally provide the company with an information and document request based on the nature and scope of the engagement. Preparing the required records and supporting documents in advance can help the audit process run more efficiently. The requirements usually consist of a list of documents which, if prepared beforehand, could result in the quick and early ending of the complete audit process.
Let’s have a look at the documents required during an audit:
1. Reports on the Payroll
The payroll reports are very important from the point of audit as the number of employees in a company can cause a significant increase in the duration of the audit. Payroll records help the auditor verify employee-related expenses and assess whether payroll balances and related liabilities are appropriately recorded. Depending on the scope of the audit, supporting documents may include payroll reports, employment-related records and details of outstanding employee benefits.
2. List of All the Bank Accounts Used
All the bank accounts of the company need to be listed and the necessary documents of each of the accounts need to be presented to the auditor. This would greatly simplify the work of the auditor as he will not have to gather the necessary documents during the audit.
3. List and Evidence of all the Transactions
The company which is being audited should mention all the transactions conducted in the set duration and should also provide significant transactions, including sales and purchase invoices, receipts, payment records, contracts, and other relevant documentation. An auditor will require the invoices to find out the total spending of the company in the period and whether the amount matches the amount in the books of accounts.
4. The General Ledger
The ledger contains the details of all the transactions made during a specific period of time. The general ledger provides a detailed record of the accounts and transactions recorded during the financial period. It helps the auditor trace balances and transactions to supporting documentation and reconcile them with the financial statements.
Nowadays, instead of preparing the ledger manually, most of the companies use accounting software, which can help businesses record transactions, maintain ledgers, and generate financial reports more efficiently. Accounting software will greatly increase the accuracy of a company and would reduce the time taken to produce a ledger.
5. Trial Balance of the Company
A trial balance helps properly organise the company’s transactions and helps the auditor trace the history of any particular transaction. The trial balance can also be prepared using accounting software.
6. Copies of all legal documents
Relevant legal and corporate documents may include the trade licence, certificate of incorporation, memorandum and articles of association, share certificates, corporate structure information, tax registration certificates and other documents relevant to the company’s legal and tax status.
7. Confirmations
Depending on the nature and scope of the audit, the auditor may obtain external confirmations from banks, customers, suppliers, lenders and other relevant parties. The auditor determines the confirmations required and selects the parties or balances to be confirmed based on the audit procedures and risk assessment.
8. Schedules
Supporting schedules may include fixed asset registers, depreciation schedules, inventory records, receivables and payables ageing, prepayments, accruals, provisions and other account reconciliations. The specific schedules required will depend on the company’s activities and the scope of the audit.
9. Loan Documents
A company may acquire debts during the process of running the company. By providing the proper documents regarding a loan, a lot of time that would have been used up in the audit process will be saved.
This is not a complete and definitive list of the documents that are required during an audit. Some of the other documents that might be required by the auditor may include bank statements, the previous audit report, minutes of board meetings conducted, etc. The business should use the above-mentioned list as a template for preparation of a financial audit of the company.
Best Auditing Services in the UAE
Preparing for an audit can be time-consuming, particularly when financial records and supporting documents are not properly organised. Working with an experienced audit firm can help businesses prepare the required information, address accounting issues and complete the audit process more efficiently.
If you are looking for an audit firm in Dubai that can handle all your audit-related needs and provide solutions customised to your company, you should definitely consider availing the services of “JAXA Chartered Accountants”.
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