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External Audit Services – Dubai Airport Free Zone (DAFZA)
Dubai Airport Free Zone was established by decree in 1996. It occupies land adjacent to the Dubai Airport but is not technically part of the airport. This one of several independent free zones in and around Dubai and in the UAE. Each free zone is independently governed by a local authority and is designed to provide business-friendly environments for new businesses. Most of these free zones are guaranteed tax-free for up to 50 years with many additional benefits for companies doing business inside the free zones. There are minimal restrictions on funds transfers into and out of the free zones and very few limitations on business activities within the free zones and with companies outside the UAE. There are some special requirements for doing business in the UAE outside the free zones. These free zones have exhibited significant growth rates for years and are internationally recognized as attractive places for new business formation.
The Dubai Airport Free Zone is regulated by the Dubai Airport Free Zone Authority (DAFZA). DAFZA establishes the requirements for creating businesses in the free zone. It also administers the licensing, license renewals, and business financial activities and reporting. The requirements are not burdensome but businesses do need to be aware of the requirements to avoid conflict.
DAFZA External Audit Requirements
One of the requirements imposed by DAFZA is regular External Audits. At the end of each business’s fiscal year, the business is required to renew the business license. As part of the renewal process the business’s owners/managers must submit an External Audit Report from an authorized audit firm. DAFZA uses the information in the business’s financial reports along with the audit report to assure the business is operating ethically, legally and within the limits established by both the free zone authority and the UAE (where applicable). This assures the authority that the business’s reports can be trusted and that the business is not acting fraudulently or inappropriately.
Why is an External Audit Required?
The Free Zone Authority has several reasons for the audit requirement:
• Independent audits provide information the authorities need to assure the commercial environment is well regulated.
• An independent audit assures the financial statements are complete and nothing is being hidden.
• The audit report assures the authorities that the business’s financial reports are accurate and reliable.
• An independent auditor is required by international auditing standards to disclose any fraud or misconduct uncovered by the audit.
DAFZA maintains a list of approved auditing firms authorized to perform the required external audits. Businesses in the free zone are required to select a firm from the approved list to perform the annual audit of their accounts. The firms on the list are all UAE licensed financial service providers and must meet several standards to maintain approval. For continued approval audit firms must provide proof that their employees are maintaining knowledge of the changing standards of auditing and are regularly provided with professional development education.
Additional benefits of an External Audit?
An external audit provides additional benefits beyond business license renewal. The business management will have the comfort of knowing the financial reports are accurate and that authorities are not likely pursuing legal actions for fraud…etc. Authorities will know the business is operating within the laws and is not posed to threaten citizens. Citizens where the business operates will know the business is a good steward of resources and the environment and is a good corporate neighbor. Banks and investors will know the business is not putting their investment at excessive risk. Employees will view the external audit report and the financial statements as indicators of job security and financial stability. Some smaller government agencies can look to the audit report and financial statements for evidence that the company is following specific regulations such as import/export or labor practices.