Audit & Assurance Services in Dubai and other Emirates of UAE
UAE’s Market is one the world’s fastest developing markets and increasing numbers of Foreign Multinationals are expanding their operations into the UAE. To maintain transparency and assure compliance with regulations it is required that the Companies undertake an annual external audit of their Financial Records by qualified Audit Firms in Dubai and present their financial results to the various stakeholders without any material misstatements. NUF Chartered Accountants, is one of the leading Auditing Firms in Dubai. We are registered with all the Banks, Government & Free Zone Authorities and RERA (Real Estate Regulatory Agency) and provide services to a range of Audit Clients for their External Audit requirements.
Audit Firms in UAE – Role, Responsibilities and Accountability
1) Role of Audit firms in UAE
Auditors contribute greatly to investors’ confidence in the Dubai and UAE market. Professional, reliable, independent and unbiased Audit Reports issued by audit firms in UAE, serve as the basis for promoting confidence in the Market and leading to an overall growing Economy.
To achieve this, financial auditors have to take up the role of Independent Professionals who provide a reasonable assurance on the fairness and accuracy of the Financial Information of a Company. True auditor independence sometimes requires auditors to place the relationship and popularity with the Management of that Company secondary to serving in the best interests of the Shareholders and the Society at large.
Especially in cases where Ownership of the Company is separate from Management, the external auditors have to play an important role to assure the Shareholders and other Stakeholders that the Financial Statements prepared by the management are accurate and complete according to the Auditors’ Professional Judgment.
2) Responsibilities of Auditing Firms in UAE
There is a line of separation in External Audit between the preparation of Financial Statements and expressing reasonable independent opinion on the fairness of Financial Statements without any material misstatements. External auditors do not prepare a company’s financial statements, they only provide opinions about the validity of the statements prepared by the company.
Auditing companies in UAE have a responsibility to prove to their Audit Firm and the Audit Profession in General, that they have worked with their best integrity, independence and objectivity. Auditing Firms are responsible for keeping up to date with the changes in Accounting and Auditing Standards and maintaining sufficient personal competency to issue a reasonable Audit Opinion on the Financial Statements of a Company.
Another responsibility of Auditors is to make recommendations to their audit clients for improvements in the Company’s Financial, Operational and Strategic Policies and Procedures. These suggestions increase the value of the External Audit to the Company’s Business.
3) Accountability of Auditors in UAE
Auditing Firms in Dubai and other Emirates of the UAE are primarily accountable to the Government Authorities and Departments such as the following:
i. Ministry of Economy (MOE)
ii. Accountants & Auditors Association UAE (AAA)
iii. Dubai Financial Services Authority (DFSA)
iv. Real Estate Regulatory Agency (RERA) for RERA Audits (e.g Real Estate Projects and Owners’ Associations)
v. Free Zone Authorities where the Audited Company is registered (such as Jebel Ali Free Zone, Dubai Airport Free Zone, DMCC etc)
Audit firms in UAE are also accountable to the following stakeholders who are direct or indirect beneficiaries of Audit Reports:
i. Shareholders of the Company
ii. Management and Directors
iii. Banks / Financial Institutions
iv. Customers, Suppliers, Employees and the Society at large
v. Audit Profession
Our expertise and experience in professional accounting and consultancy equips us to provide our services to a wide range of clients ranging from service providers, traders to manufacturers. Our clients have every reason to say that we are the best professionals in the town in terms of our quality work and competitive prices.
Laws, Regulations and Governing Authorities regulating the Audit Process and Auditors in all Emirates of the UAE
Like every modern growing economy, the need for regulating the reporting on the Financial Statements of Companies by External Auditors is of paramount importance. United Arab Emirates has created a set of laws and regulations, set forth by various Governing Authorities that oversee the practice of financial reporting. These rules require adoption of IFRS (International Financial Reporting Standards) for robust financial reporting by Companies and establish criteria for selecting audit companies in dubai, sharjah, abu dhabi and other emirates of the UAE.
|Laws and Regulations||Main elements of the Laws and Regulations concerning External Audit|
|Ministerial Resolution No. (518) Of 2009
Governance Rules and
Corporate Discipline Standards
|i. An External Audit Firm shall be appointed by the Board of Directors
ii. The External Audit Firm shall be independent from the Company and its Board of Directors
iii. The External Auditor shall not perform other managerial duties for the Company which impacts on the Auditor’s independence and objectivity
iv. The auditors shall attend the AGA of the Company being audited to present the Audited Financial Statements and the results of their Audit
|Federal Law No. 2 of 2015 concerning Commercial Companies (replacing the previous Federal Law No. 8 of 1984 concerning Commercial Companies)||i. Proper accounting records shall be maintained and kept by a Company to accurately reflect its transactions and financial performance to the Partners / Shareholders of the Company at any point of time
ii. The financial records shall be kept for at least 5 years from the end of any Financial Year End at the Company’s Head Office
iii. Every JSC (Joint Stock Company) or LLC (Limited Liability Company) shall appoint External Audit Firm in accordance with the provisions of this Law
iv. Annual Financial Accounts including Balance Sheet and Profit and Loss shall be prepared by every Company
v. International Accounting Standards shall be applied to reflect a clear and accurate view of the Financial Performance
|Guarantee Account Law No. (8) of 2007||i. Under this Law, approved auditing companies in Dubai have to be appointed for the Audit of Projects developed by the Real Estate Developers in Dubai. Banks which operate Escrow Accounts for these Projects in Dubai, are also required to have the Annual External Audit performed from their end by RERA approved Auditors in Dubai
ii. The Audit Report has to be prepared in accordance with the Audit Scope issued by RERA (Real Estate Regulatory Agency) and has to be submitted annually to RERA within the deadline announced by RERA, which is January 31, 2016 for the Audit Reports completed for the year ended December 31, 2015
|Law No. (27) of 2007 regarding Ownership of Jointly Owned Property in the Emirate of Dubai||i. Every Owners’ Association formed in Dubai shall appoint an Association Manager for managing the Owners’ Association’s various affairs including Accounting and Financial Management
ii. RERA (Real Estate Regulatory Agency) approved dubai audit firms shall be appointed for the Audit of every Owners’ Association registered with RERA
iii. The Audit Reports of Owners’ Associations issued by RERA Approved financial auditors shall be submitted to RERA annually
|Implementing Regulations No. 1/99
Issued pursuant to Law No 2. Of 1986 applicable to Jebel Ali Free Zone Companies
|i. Accounting records shall be maintained and kept at the Jebel Ali Free Zone Office of the Company, open for inspection by JAFZA or the Shareholders of the Company
ii. Annual Financial Statements shall be prepared by each Jebel Ali Free Zone registered Company
iii. Annual Audited Financial Statements shall be signed by the Director(s) and submitted to the Free Zone Authority within at least 3 months of the Financial Year End of the Company
iv. The Jebel Ali Free Zone registered Company shall appoint an approved JAFZA Audit Firm for the annual audit of the Financial Statements and Audit Report shall be submitted to JAFZA
|Similar Rules and Regulations issued by other Free Zone Authorities governing External Auditors and the External Audit Process||i. Dubai Airport Free Zone: Provisions of the Law No. 2 of 1996 applicable to Dubai Airport Free Zone requires Annual Financial Statements of every DAFZ registered Company to be audited by approved DAFZA audit and accounting firm in dubai.
ii. Dubai Multi Commodities Centre: DMCC Company Regulations, 2003, as amended by DMCC Regulation No. 1 of 2007, DMCC Regulation No. 1 of 2009 and DMCC Regulation No. 1 of 2013, requires every DMCC registered Company to appoint DMCC approved auditors for their external audit requirements.
iii. Sharjah Airport International Free Zone: Annual External Audit is also a requirement for every SAIF Zone registered Company by an approved audit firm in uae, under Decree No. 2 of 1995 issued in Sharjah on May 8, 1995 applicable to SAIF Zone Companies
iv. Hamriyah Free Zone: Rules and Regulations Concerning the Hamriyah Free Zone Companies issued pursuant to Sharjah Emiri Decree No. (6) Of 1995 As Amended By Sharjah Executive Council Resolution No. (1) Of 2000, also calls for independent, unbiased and transparent Annual Audit by an approved registered audit firm for every Company registered in Hamriyah Free Zone
Stakeholders of External Audit in Dubai
There are many stakeholders of an Audited Financial Statements of a Company. These stakeholders will include people, organizations, government bodies and financial institutions who are directly or indirectly related to the Company’s business whose External Audit is conducted. Audited Financial Statements are also available to public and investors specifically for larger organizations which are listed on stock exchange.
|Stakeholders||How they are related to an External Audit|
|i. Shareholders and Management||In larger Companies, there is a separation between the Shareholders and Management, and these are the Companies where Shareholders rely on the professional work of accounting and audit firms to provide a transparent and unbiased opinion on their Financial Results, Operations and Controls. In such cases, Shareholders and Management of the Company are the Primary Stakeholders where the Shareholders want to see a clear picture of how the Management has performed during the year|
Other stakeholders of audited accounts are less directly concerned with the affairs of the Company than the Owners and Management of the Company. These stakeholders are:
|Stakeholders||How they are related to an External Audit|
|ii. Suppliers to the Company||These stakeholders need to know whether the customer (audited company) to which they are supplying goods or services, are financially viable to pay off their debts on time|
|iii. Customers of the Company||Customers need to know whether the Company is a going concern and it will exist in the foreseeable future to provide them the after sales services or will be able to honor the warranty claims of its customers|
|iv. Employees working for the Company||Employees need to know whether the Company they work for upholds the minimum required reputation and standard in its related industry. They also need to know whether the Company is a going concern and will be able to pay the salaries to its employees|
|v. Government Bodies & Departments||Government Authorities need to know whether the Company is operating within its defined boundaries and up to the standards required for doing business. They also need to know whether there have been any legal cases against the Company and is the Company fulfilling its obligations. Government Departments in Dubai require the auded financial statements of a Company in various instances such as renewing the license, liquidating a Company or where a possible fraud or legal case / litigation are involved|
|vi. Free Zone Authorities||Free Zone Authorities in Dubai grant licenses to Companies and require audited financial statements from every registered Company in any Free Zone, conducted by approved accounting firms in UAE. These Authorities also require the Liquidation Audit Report in case of liquidation / closure of a Company|
|vii. Banks / Financial Institutions||The Banks and Financial Institutions in Dubai grant business loans to Companies for various reasons such as expansion of business, raising external finance for new product or service lines etc. These Banks and Financial Institutions require Audited Financial Statements to be submitted by every Company to which they have given loan or finance. Without the submission of annual audit report, the banks may not renew the facilities and may even suspend the facilities.|
|viii. Investors||Audited Financial Statements are the primary requirement of any investor who is planning to invest money in any Company. The investors will want to see whether their invested money will be a good investment decision or not. Due diligence report is required by a Company looking to acquire the Business of another Company fully or partly|
Types of Audit Opinion issued by Audit Firms in Dubai
It is important to note that an audit opinion issued by an Audit Firm is not an opinion about a business’s operation or a recommendation for investment. The audit opinion concerns only the validity of the financial statements issued by the Company being audited. The Audit Opinion is only a reasonable expression from the auditors to state whether the Financial Statements present fairly the financial position and results of the Company being audited without any material misstatements.
There are mainly four types of Audit Opinion issued by the auditors at the end of their Professional Audit work in their Audit Reports.
|Audit Opinion||Defining the Audit Opinion|
|i. Unqualified Opinion||Often referred to as a clean Audit Opinion, an Unqualified Opinion is issued by Auditors when the Financial Statements give a true and fair view of the financial position and performance of the Company in accordance with IFRS (International Financial Reporting Standards).
This means that the Auditors do not have any reservation with respect to any numbers or matters disclosed in the Financial Statements.
The Audit Opinion however is a reasonable assurance that the Financial Statements present fair and true view of the results of the Company being audited. It cannot be considered as an absolute assurance regarding the health or integrity of accounting records of the Company being audited.
|ii. Qualified Opinion||A Qualified Audit Opinion is issued when they are not able to obtain sufficient audit evidence with respect to an account balance, a class of transaction or a disclosure note or the same has been materially misstated.
The Audit Report is issued with a Basis for Qualified Opinion Paragraph which states clearly what has been the basis on which the Audit Firm has issued a Qualified Opinion.
In the case of a Qualified Opinion, the matter(s) for which Auditors have issued a Qualified Audit Report is not pervasive to the whole Financial Statements and the misstatement is related to only those matter(s) which have been stated in Basis for Qualified Opinion Paragraph.
|iii. Adverse Opinion||The third type of Audit Opinion is an Adverse Opinion. In this type of Audit Opinion, the misstatements identified by the Auditors are so significant that they become pervasive to the whole Financial Statements and therefore the auditors state that the Financial Statements are materially misstated and do not conform to IFRS (International Financial Reporting Standards).
If this type of Audit Opinion is issued by external auditors, it impacts on the outlook of the Company being audited negatively and as such will be perceived by any stakeholders such as Shareholders, Bankers and Investors negatively.
|iv. Disclaimer of Opinion||A Disclaimer of Opinion is issued if;
a) The Auditing Firm is not independent or there is significant conflict of interest,
b) There is evidence of significant Going Concern problem in the Company being audited,
c) There are high uncertainties in the Business, or
d) Scope limitation exists due to which the Auditors cannot form a reasonable Audit Opinion
In the case of a Disclaimer of Opinion, the Auditors simply refuse to form an opinion on the Financial Statements due to the problems as identified above.
This fourth type of Audit Report is the most negative type issued by the Accounting Firms in Dubai and other emirates of the UAE. It is negatively perceived by any stakeholders of the Company such as Shareholders, Bankers, Lenders, Investors etc.
International Standards regulating Financial Reporting and Auditing Firms in UAE
|International Standards||Key contents of the Standards|
|i. IFRS (International Financial Reporting Standards)||In the simplest terms, IFRS are the rules to be followed by the Accountants to maintain books of accounts which are consistent, reliable, relevant and comparable.
These standards were first issued by IASC (International Accounting Standards Committee), the predecessor of IASB (International Accounting Standards Board), from 1973 to 2001 after which IASB took charge of the Professional Work. Standards which were issued by IASC, called the IAS (International Accounting Standards), are still in use and are being continuously developed. Standards issued by IASB are referred to as IFRS (International Financial Reporting Standards).
In Dubai, every Company preparing Accounts and reporting the Financial Results in the Financial Statements, have to comply with IFRS. Accordingly, the auditors have to check and give reasonable assurance as Audit Opinion that the Financial Statements are in compliance with IFRS.
|ii. ISA (International Standards on Auditing)||Just like IFRS are the key rules meant for the Accountants in their work, ISA (International Standards on Auditing) are the principles and guidelines laid out for the external auditors, to discharge their Auditing duties Professionally and add value to the Audit Profession.
The ISA are issued by IFAC (International Federation of Accountants) through IAASB (International Auditing and Assurance Standards Board). Matters such as Audit Engagement with a Company, type of audit procedures to be performed, audit evidence to be collected, representations to be obtained from the Company and finally which Audit Opinion to be issued in what cases are all guided to the financial auditors by ISA (International Standards on Auditing).
Push Digits, in Strategic Partnership with NUF Chartered Accountants and their Professionally Qualified Auditors and Accountants in Dubai, is the key to your effective and efficient External Audit in Dubai & other Emirates of UAE.
The decision for which an Accounting or Auditing Firm in UAE should be approached for the External Audit is a most important one and needs consideration of the following factors:
- History of the Auditing Firm in UAE
- Experience of the Audit Partner, Audit Team, and audit services UAE
- Qualifications and competence of the Audit Partner and Audit Team
- References from some available clients to endorse the quality of Audit work
- The Fee charged in comparison to the Audit Quality provided
Farhan Aqil, an experienced and qualified Chartered Accountant, is Partner at Push Digits and an Audit Partner at NUF Chartered Accountants and through his commitment of quality work and his team’s capabilities, we make sure that every Audit we perform is of an outstanding quality. Our clients always achieve the best quality External Audit from our team and we are proud to uphold the highest standards of Audit and Accounting Profession.