UAE is home to many international businesses and entrepreneurs, both local and foreign. The sheer number of business opportunities provided by the UAE is available only in few countries worldwide. The UAE, due to its proximity to countries in Asia, Europe and Africa, has certain geographic advantages which attract businesses. For companies to carry out business, the most important things are a conducive environment and a fair and reliant system of rules and regulations. The Government of the UAE has simplified and streamlined the process for the benefit of the company. A statutory audit is one such requirement of the UAE companies while dealing with various government authorities.
What is a Statutory Audit in the UAE?
A statutory audit can be broadly defined as a legally required inspection of the reliability of the financial accounts and records of a company or any government agency. A statutory audit is intended to examine and ascertain whether an organization delivers a reliable and accurate representation of its financial placement by evaluating information, such as bank balances, business transactions, and the company's accounting records.
A statute is generally a regulation or law implemented by the associated government or company's legislative branch. Multilevel laws may be passed by the Federal or Emirati governments, which are to be adhered to by the businesses. Regarding the company, a regulation also applies to a law set by the company's management or respective board of directors. The main purpose of a statutory audit is to determine if an organization provides a fair and accurate representation of its financial position.
The statutory audit is also a legally required check of the accuracy of a company's or government's financial books and statements. The objective of the audit is to ascertain whether the funds have been appropriately handled and that all accounts and filings required are accurate.
Requirements of Statutory Audit
During the Statutory audit, various reports of a business regarding revenue or benefits, profit /loss statements, returns on investment, expenditures, and other things are included in the audit process. All the entities in the UAE which are registered under the Companies Act, as Private Limited companies or Public Limited companies, are required to get books of accounts audited every year. In the UAE, due to various banking and regulatory requirements, a company is required to audit books of accounts. To carry out the statutory audit, the company needs to appoint independent Statutory Auditors to perform a statutory audit for the business.
Statutory Audit Process in the UAE
The method for statutory audit requirement in UAE requires a complete and thorough check of the business working conditions and controls. A statutory auditor needs to verify all the internal systems, including details of records. The statutory audit plays a significant role in identifying gaps and scrutinizing the accompanying fixes. The below-mentioned steps define the process of Statutory audit in the UAE:
- A licensed statutory auditor is appointed by company management or the company's board.
- The appointed statutory auditor accepts to conduct the statutory audit of the financial accounts of the company.
- The statutory auditor or his team will begin by understanding the company's operating environment in various departments. The team will also ascertain if the industry guidelines are followed in the company operations.
- The auditor team will monitor multiple controls in place and the procedures employed in the company. It also includes inspection of past audit reports of various teams to understand the observations made and actions taken.
- The auditor will finally test all the financial statements, which include bank balances and secured and unsecured loan statements, company balance sheet, insurance balances, trade payables and receives, import/export and inventory details etc
- The auditor will prepare a detailed report with all the observations and submit the same to the company management. This report is very crucial while renewing the company license with the relevant Government authorities.
Jaxa Chartered Accountants are independent certified statutory auditors with offices spread across the UAE serving many local and international clients. Our experienced consultants help our clients with all information regarding the importance of statutory audit and conduct statutory audits as per the requirements of relevant UAE laws. We have successfully undertaken statutory audits over several years. Please Contact Us for any information regarding the statutory audit. We'd be happy to assist!