The term audit encompasses more than just numbers and statements. Auditing is a process of evaluating an organization’s financial records to determine whether they are accurate and in line with the auditing standards and regulations. An audit report helps shareholders and stakeholders to verify and evaluate an organization’s entire financial status. It covers all the facts and figures relevant to the company’s assets and liabilities.
The Auditing Milieu in Dubai
Dubai is one of the most sought-after destinations for business setup in the Middle East. A healthy economy, investor-friendly policies, world-class infrastructure and attractive incentives have made investors to look forward and start their business in Dubai. The increased competition has made entities to enhance their reputation and creditability to attract the stakeholders and shareholders of the company. The young and educated population of Dubai examines the audit report before doing any business with the entity. All these factors have augmented the scope for auditing firms in Dubai.
Advantages of Audit in Dubai
- Auditing helps to locate the errors in financial statements
- A good audit helps in identifying frauds, if any
- An audit report acts as a fund-raising tool; the financial institutions or banks are likely to lend loans easily to companies that have financial statements and are compliant with the auditing standards
- Audit report is a mandatory document at the time of renewal of license in most of the free zones in the UAE
- At the event of unforeseen happenings, an audit report acts as an insurance to settle the claims
- An audit report enhances the credibility and viability of a company
- Better internal control is possible with the help of audits
Requirements for an Initial Audit in Dubai
Any organization that is willing to get its financial statements audited for the first time needs to be ready with the following documents:
- General ledger
- Trial balance
- Loan statements
- Copies of loans, leases, and material contracts
- Depreciation schedule
- Lists of all new fixed assets purchases with purchase invoice
- Board minutes
- Payroll reports
- Stock subscription and option agreements
- Copies of pending or completed merger agreements
- Names and contact details of any attorneys used and stock transfer agent
- Details of all bank accounts
- Articles of Association (AOA)
Audit procedure varies according to the type of industry, firm and scope of an audit. The following is a general audit procedure followed by an auditor or auditing firm in Dubai, UAE:
1. Request for Documents
The auditor asks for documents listed on the audit preliminary checklist. These documents include a previous audit report, ledgers, and bank statements. He/she may also request for board minutes, organizational charts and standing laws.
2. Prelusive Meeting
The auditor calls for an open meeting with the senior management and key staff. The meeting is arranged to discuss the scope and objective of the audit and to determine the time frame for the audit.
3. Preparation of Audit Plan
The auditor examines the information contained in the documents and plans out how the audit can be conducted. A risk workshop is conducted to recognize possible problems and then audit plan is drafted.
4. Paper/Field Work
The auditor collects the information from the open meeting. Fieldwork is then conducted to study the procedures and processes. The auditor will review the internal control to evaluate whether policies and procedures are compliant with the regulations. He will also give an opportunity to the organization to respond to problems, if any.
5. Drafting Report
Once the fieldwork is complete, the auditor prepares a report describing the findings of the audit. Generally, the report includes posting problems, mathematical errors, and other audit concerns. The auditor then prepares an opinion sheet detailing the findings of the audit and recommends solutions to any problems.
6. Closing Meeting
The auditor arranges for a meeting with the management to discuss the report and management responses. If there are any remaining issues, they’re reviewed and resolved at this point.
Altogether, an audit report acts as the backbone of any business in Dubai. It is worth noting that the UAE government has made it mandatory for all companies to prepare audit report. So, no company can look away from the process of audit in Dubai. There is a host of audit firms in Dubai providing all necessary audit service in Dubai and rest of the UAE region. At JAXA, we assist our clients in analyzing the performance of the business against objectives and evaluate the business processes. We also asses business risks and benchmark them against the industry standards. For audit services in Dubai and the rest of the UAE, contact us – we’d be glad to assist!