Types of Audit Engagements in the UAE | Push Digits Chartered Accountants

Types of Audit Engagements in the UAE

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Types of Audit Engagements

What is an Audit?

An audit is an evaluation of an organization’s systems, processes, controls, and of course accounting records. It can be conducted internally or by external audit firms. Auditing is also governed by International Standards on Auditing (ISA), International Accounting Standards (IAS), and International Financial Reporting Standards (IFRS). Other essential characteristics of an audit are as follows:

  • Performed by competent individuals independent from operations or processes;
  • Entails documentation of planning, sampling, and testing processes;
  • Involves reporting of findings and recommendation of corrective actions;
  • Includes monitoring and follow-up procedures; and,
  • Involves regular communication with the Management and Executive Board.

Companies engage in audit services for legal or statutory purposes. Auditors also evaluate internal processes and suggest practical improvements. Key stakeholders rely on audit reports in making business decisions.

Main Classification of Audits

An audit can be divided into different categories. It usually depends on the relationship between clients and auditors. Generally, it can be classified as an external or internal audit.

External Audit

External audits are provided by third-party professionals or accounting firms. This type of audit emphasizes the impartiality of auditors. It also provides reasonable assurance that the use of company resources strictly adheres to relevant laws, regulations, and company policies.

The main objective of external auditors is to provide a professional opinion on the reasonableness of the areas under audit. They must maintain professional skepticism and a high degree of expertise to ensure the quality of their judgment. External auditors must also possess the qualities necessary to make high-quality audits and reports. These include appropriate skills, knowledge, experience, and independence.

External auditors mainly follow International Standards on Auditing (ISA) as established by the International Auditing and Assurance Standards Board (IAASB). Auditors provide valuable insights into an organization’s performance, processes, and controls. Given the prevalence of fraud and increasing regulatory requirements, auditors add credibility to the information presented in the financial statements to help the users in their decision-making.

Internal Audit

Internal auditing is an independent evaluation activity. Its primary objective is to strengthen internal controls and processes and add value to an organization’s operations. It also plays an important role in achieving the company’s objectives through the systematic evaluation of risk management, control, and governance processes.

Internal auditors perform a wide range of activities in accordance with the standards set by the Institute of Internal Auditors. These standards are adopted at the country and company levels. Internal audit firms usually perform the following functions:

  • Review of financial and operational processes and information;
  • Review of compliance with company’s policies and procedures, and relevant laws and regulations;
  • Evaluation and assessment of the economic and efficient use of company’s resources;
  • Follow-through review of specific programs and processes;
  • Operational reviews and specific process reviews requested by the management;
  • Evaluation and monitoring of an organization’s risk management process; and,
  • Review of the effectiveness of internal controls and governance processes.

Meanwhile, the essential features of an effective internal audit activity are the following:

  • Professional competence, independence, and sufficient training of auditors;
  • Relationship building between internal auditors and other stakeholders of the company;
  • A thorough review of planning, control, and verification procedures; and,
  • Proper evaluation, communication, and monitoring of audit results.

Management is primarily responsible for setting organizational policies and procedures. They also ensure the establishment of adequate controls and risk management. Hence, internal auditors should report control deficiencies to the appropriate level of management.

Main Difference Between External and Internal Audits

Internal and external audits differ in many ways. One main difference between them is the level of independence. Internal auditors are usually employed by the company. Meanwhile, external auditors are entirely independent of the organization.

Internal auditors evaluate not only the financial controls but also the entire internal control procedures of the organization. It includes governance, risk assessment, and internal processes. Whereas external auditors usually conduct financial audits and evaluate the organization’s processes relevant to the preparation and reporting of financial statements. In short, an internal audit has a broader scope than an external audit.

Overlapping of External and Internal Audits

According to many experts, the reliance by external auditors on internal auditors’ work has become more apparent in recent years. Since the work of the two audit functions overlaps to some degree, both can benefit from successful cooperation.

Hence, the integration between the two audit functions is important. The ways good internal audits can help external auditors include:

  • External auditors may reduce their audit procedures if the internal auditor’s work program is efficient.
  • External auditors can rely on the internal auditor’s control process examination.
  • External auditors can rely on the organizational problems identified in the internal auditor’s reports.

Indeed, the coordination of both audits can result in more efficient works. Their integration helps in the achievement of audit objectives and provides value-added services to the organization.

Types of Audit Engagements in Abu Dhabi

There are many types of services in the auditing industry. These services vary based on the complexity of regulatory compliance and business requirements of a country and/or location. As a result, audit firms and professionals continue to emerge, especially in countries with a very dynamic economy, such as the UAE.

Audit companies in Abu Dhabi and all other states of the UAE are composed of local and international firms. Small and medium-sized organizations are audited by mid-tier or local firms whereas large organizations, government-owned or controlled entities, and financial institutions are audited by international audit firms. Audit firms typically offer the following services:

Financial Audit

Financial audits in the UAE are conducted by licensed audit firms from the Ministry of Economy. A financial audit evaluates the fairness of an organization’s financial statements. Auditors examine the conformity of financial statements with accounting principles and standards. They usually provide a professional opinion as part of their audit report.

Statutory Audit

This type of audit is required by a specific law or statute. Its main purpose is to determine the fairness and accuracy of an organization’s financial information. It also evaluates the proper handling of funds and the accuracy of records and filing requirements. Almost all the companies in UAE are required by the commercial transactions law to submit audited financial statements annually. Statutory audits in the UAE are usually conducted for listed companies, banks, limited liability companies, branches of foreign firms, and other financial institutions.

Process, System, and Operations Audit

This audit involves the detailed examination of an organization’s processes, systems, and operations. It intends to identify any weaknesses or deficiencies based on set criteria or standards. Its overall objective is to improve the areas under audit. Both internal and external auditors may conduct this audit.

Compliance Audit

A compliance audit involves the examination of a business function to verify its conformance with external regulatory standards as well as internal compliance-related policies and procedures. This type of audit is usually conducted in various departments of an organization such as human resources, finance, information technology, etc. In the UAE, regulations such as the Labour Law, Pensions and Securities Law, and special requirements issued by the Ministry of Labour and Social Affairs can be used as a reference in conducting compliance audits.

Forensics Audit

Forensic audits are conducted when an investigation is required for a specific account head or overall financial statements. The evidence or results of a forensic audit can be used in legal proceeding, settlement claims, dispute resolutions etc. This type of audit requires a good combination of accounting and investigative skills. Forensic auditors are also engaged in investigating financial scandals such as fraud and embezzlement. Other business situations like cessation of operations and filing of bankruptcy can also be subjected to forensics audits.

Tax Audit

Tax audits are usually conducted by government authorities to assess the accuracy and completeness of tax returns, tax payments and declarations. Taxation is always tricky in every country. Hence, it is always suggested to take help from any good tax consultant in UAE.


Organizations are facing significant economic challenges today as a result of rapid changes in the business climate, technological advancements, and statutory requirements. These complexities highlight the importance of different types of audits to help these companies remain in compliance.

Push Digits Chartered Accountants is one of the leading audit firms in UAE. We provide all types of audit and assurance related services to our clients within UAE as well as outside the UAE. Contact us at 0503958931 to discuss your audit requirements.


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