Companies in the UAE cater to both the local and international markets. The processes involved in the recording and accounting the financial transactions are subjected to many regulatory scrutinizes and must be robust. The external audit with a wide range of benefits can provide a neutral and unbiased examination of its records, both internally and externally.
The external audit is a type of audit wherein external independent third-party certified auditors with absolutely no links to the company carry out the audit process. The external auditors will not be under the company's payroll. The external audit involves examining the accuracy of the company's books and records prepared by the accounts department.
The external audit is required for numerous reasons, from mandatory legal requirements to building trust with the company's shareholders. The external audit's main objective is to determine and establish the company's accounts' accuracy and genuineness. The company whose accounts are subjected to external auditing will bear the audit's expenses, which is carried out in a defined timeline. There are additional advantages to the company from the external audit, discussed in the sections below.
Steps involved in External Audit Process
The following are the steps involved in the audit:
- The company's management or the board of directors make a joint decision to conduct the external audit of the company's accounts.
- The company's board appoint an external auditor or audit firm after thorough research. In case the external audit is required by the state department or by the law, then the relevant authorities will approve the external audit appointment.
- The appointed auditor shall approve the project to be audited.
- A team of experts from the external auditors shall gather all the required company's accounts and records, including payroll, purchase records, invoices issues, payments completed, bank account statements, and financial investments.
- The audit is thoroughly carried out to establish the company records' accuracy and report any irregularities found in the books.
- An external audit report is prepared and submitted to the company's management or board.
Benefits of External Audit for UAE Companies
Companies usually have an in-house internal audit team to improve internal processes and control mechanisms. An external auditor, a qualified expert, will be instrumental in assuring its accounts and processes. The following are a few of the benefits of external audit for the companies in the UAE:
- The external audit is conducted to examine the accuracy of statements and financial accounts. It will help the shareholders and the company's board to understand the financial standing of the company.
- In the UAE, it is mandatory for companies operating in the Freezones like DMCC, Jebel Ali Free zone, DAFZA free zone company to gets the accounts audited by an authorized external auditor at the time of license renewal.
- The external auditor is a licensed professional, independent third party who conducts a thorough, unbiased review of its books and records. It will help attract investors to the company who will decide based on the audit report submitted by the external auditor.
- The external audit report plays a very crucial role when at the time of getting loans from the banks and financial institutions. Financial institutions demand to produce the external audit report while ascertaining the companies' overdraft facility or loan applications.
- Dubai and the UAE, in general, home to many international companies operating in the different regulatory environment. Hence the mandatory compliance with International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) has established an external audit report, an important document evaluating its financial health.
- The external audit will help assess business risks, and the auditor will provide relative suggestions to improve the process of bookkeeping and accounting. The company's board can make decisions to mitigate the risks based on the audit report.
How can we Help?
Jaxa Chartered Accountants are one of the leading auditing company in Dubai and the UAE. We are the Approved auditors in major UAE Freezones. Our consultants will help clients in the bookkeeping and accounting process in the company and assist them with internal and external auditing. Please Contact Us for any queries with regards to the external audit requirements and the process involved. We'd be glad to assist you!