CA, ACCA, CIA, M.Com, Bsc (Hons.)
Partner at Push Digits
With the rise in corporate scandals and irregular financial practices, the need for an Independent Auditor to verify the financial records of a Company is increasing all the time. The competence and reputation of the Audit Firm performing the External Audit of a Company is equally important as the users of the Audited Financial Statements such as Government Authorities, Free Zones, Banks, Investors and other stakeholders see the Auditor’s work as significantly important in making their decisions. Our Audit Firm, Nadeem and Umendra Chartered Accountants is a very well recognized Audit Firm in UAE having a large client portfolio belonging to various industries and our Audit Reports are widely accepted in all Free Zones and Banks of UAE.
Every company wishing to conduct business in the UAE is subject to an annual external audit of their Financial Records by a qualified auditing firm. The reasoning behind this is that it maintains transparency and assures compliance with official regulations. For this reason it is essential to connect with an auditor in Dubai to assure that you are in compliance
The world’s best businesses can barely wait to expand into the United Arab Emirates! There is so much opportunity here that Multinationals are just lining up, waiting to find their chance to break into the market.
They recognise a fair and level playing field when they see one. Every company seeks an advantage over its competitors—it’s only natural—but it should never be because the law is applied differently in each case. In the UAE businesses all follow the same rules, and one of the most important has to do with financial record keeping and reporting.
Following the Rules – Statutory Audit
Every company wishing to conduct business in the UAE is subject to an annual external audit of their Financial Records by a qualified auditing firm. The reasoning behind this is that it maintains transparency and assures compliance with official regulations.
As always, some auditing firms are more skilled than others, but the most important aspect when selecting an auditor is to obtain the services of an auditing firm that is based in the UAE. Foreign firms don’t have the knowledge to take advantage of all the subtleties; the best they can do is follow the letter of the law and hope they don’t make a very costly mistake. That is where our Audit team comes into the picture.
The UAE’s Best Choice for Auditors in Dubai
We are a leading Auditing Firm in Dubai, with more than two decades of experience. We are registered with all of the Banks, Government Authorities, the RERA (Real Estate Regulatory Agency), as well as all of the Free Zone Authorities. This means that we can provide all necessary services, for the widest possible range of clients, for all of their External Audit requirements.
Our auditors are certified by International Chartered Accountancy Bodies such as ACCA, ICAEW, ICAP and ICAI. They possess complete knowledge of the Auditing and Accounting Standards issued by Professional Bodies such as IAASB (International Auditing and Assurance Standards Board) and follow the stringent standards of organisations such as the ACFE (Association of Certified Fraud Examiners).
This attention to detail boosts the public’s confidence, and that of the company’s stakeholders. A premier Auditing Team can have a dramatic impact, assuring everyone that the company is operating as it should, and that its financial house is in order.
A profitable, sensible business can’t afford to be dabbling in accounting with inexperienced auditors. You need an established service provider—with a flawless reputation—to garner the maximum benefits, and to assure that you stay firmly on the right side of the law.
In the Spirit of Fairness
This is not only necessary, but essential, because each firm must have their financial results available for the various stakeholders, without any material misstatements. This applies to your competitors, too. Your report can be seen by each firm you wish to do business within the UAE, at their request and your willingness to share this information with them. In the same way, you can request access to similar reports for each company with whom you wish to conduct business.
What is in the Report?
Audited Financial Statements include the Independent Auditors’ Report, Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows, and Notes to the Financial Statements. Each item is of interest to various parties, but to some, the most important part is merely its existence and the final result.
Audit Firms in the UAE
Roles, Responsibilities, and Accountability
Roles of UAE Auditors
Auditors maintain the confidence of investors every day in Dubai and UAE markets. Their professional reputations, reliability, independence, and unbiased Audit Reports serve as the basis for this confidence. The result: a stable, reliable, and steady growth rate across the whole UAE.
The best firms, like our Firm, fulfill the role of independent professionals, providing assurance about the fairness and accuracy of the Financial Information of a Company. That reliability requires that the auditor report all of the facts accurately.
It Affects You
Your task is to find the best auditors available. They know how to ask the right questions; how to help you report information in the best light; how to make sure that valuable claims aren’t overlooked. If information is missing, they can help you to obtain it; if figures aren’t reconciling they can tell you where the problem arose and steer you towards finding that essential data.
Once they have all the information, their job is to report accurately, without influence. This is how your report can hold so much power with other business people, and in your relationships with them. Shareholders, stakeholders, and other businesses must be convinced of the utter reliability of the report or they won’t choose to grant licences, issue permits, invest, or do business with you at all.
It Protects You
External audits can also serve to verify the company’s operations are ethical and meet any legal requirements. This can help the company avoid any expensive investigations by government agencies, or possible penalties. In today’s litigious environment, some people and groups are quick to file suit at any hint of management misbehavior or incompetence. External audits will defuse any such actions, or provide a valuable defensive tool in the event that action is pursued.
Responsibilities of UAE Auditors
It is important to understand that external auditors do not prepare a company’s financial statements. Where a Company lacks in a proper accounting function, then our Accounting Team of Push Digits can assist in preparing and compiling the Financial Statements for the Audit. The function of Auditors is to assess the veracity of the Financial Statements; to assure readers that what is stated is true and fair. They must be able to say that the company’s Financial Statements represent a fair and honest assessment, without any material misstatements.
In many cases, the fact that a company has received the highly sought-after and much coveted Unqualified Opinion isn’t enough. Companies will still look to see which Auditing Firm provided the opinion, and if those auditors were based in the UAE itself.
They want to know that the auditors are well-known for being up-to-date on the official standards, and that they have a reputation for utter integrity. They want to be assured that the auditing company’s assessments enjoy wide acceptance.
Auditors also make recommendations for improvements in the company’s financial, operational, and strategic policies & procedures. These suggestions can result in an increase in the value of the External Audit, and in the company itself, as it becomes more efficient.
Accountability of UAE Auditors
Auditing Firms in Dubai, and other UAE Emirates, are primarily accountable to the government authorities and their departments, such as the following:
- Ministry of the Economy (MOE)
- Accountants & Auditors Association UAE (AAA)
- Dubai Financial Services Authority (DFSA)
- Real Estate Regulatory Agency (RERA) for RERA Audits (e.g. Real Estate Projects and Owners’ Associations)
- Free Zone Authorities where the Audited Company is registered (e.g. Jebel Ali Free Zone, Dubai Airport Free Zone, DMCC, etc)
In addition, auditing firms are also accountable to the following stakeholders who are direct or indirect beneficiaries of Audit Reports:
- Shareholders of the Company
- Banks and Financial Institutions
- Customers, Suppliers, Employees
- the Audit Profession itself
- And, of course, Society-at-large.
Beyond External Audits, we also provide client services such as setting up new businesses in the UAE. As a full-service accounting firm in Dubai our experience can streamline the process for you. Here are some additional services we offer:
- Audit & Assurance: We can independently verify the information you rely on for business decisions with our audit and assurance services.
- Risk based audits: We will investigate your internal audit process to determine if potential risks are being managed effectively with our risk-based audit services
- Assurance services to shareholders, regulators, bankers and lenders: Shareholders, lenders and regulators can be confident in company’s financial reports, thanks to our assurance services.
- Compilation & review services: We will assist you in preparing standards-based Financial Statements and report our opinions about the content of those statements with our compilation and review services.
- Attestation services: We will examine your financial reports and express our opinion on the validity of information in the reports with our attestation services.
- Statutory audit services: As approved Auditors in Dubai we are qualified to perform statutory audits.
- Compliance with IFRS: We can ensure that your Financial Statements are prepared according to International Financial Reporting Standards (IFRS).
- Attestation of Financial Statements: We can examine and attest your company’s Financial Statements with our formal external audit services.
- Management reports: We can analyze company’s performance and provide you with in-depth management reports of business performance.
- Internal controls review: We can investigate your company’s internal controls and report on their effectiveness.
- Assurance to lenders: Our auditing services can provide assurance to the shareholders, bankers and lenders regarding the performance of the company.
- Assurance to relevant authorities: We are familiar with the regulatory financial landscape in UAE and we are authorized to perform auditing services. We can provide assurance to authorities that your Financial Statements are valid.
- Review or reporting and other processes: We will work with your designated audit personnel to assure proper internal audit procedures and reporting are being used.
- Performance reporting: We can provide regular reports on the on-going performance of the company.
- Company’s policies & procedures: We can examine transactions and report compliance with the company’s policies & procedures.
Stakeholders of External Audits in Dubai & the UAE
As mentioned earlier, there are many stakeholders of audited Financial Statements of a company, including organisations, government bodies, and financial institutions who are directly or indirectly related to the Company’s business. These external audits are also available to public and investors, especially for larger organisations which are listed on the stock exchange.
Our expertise and experience in professional accounting and consultancy readies us to provide our services to a whole range of clients. We support service providers, investors, buyers, traders, manufacturers, and everything in between.
It comes as no surprise when our clients say that we are the best professionals in town when it comes to our quality work and competitive prices. Look at all these high-profile organisations whom we are pleased to number among our customers:
In large companies shareholders and management are insulated from each other, perhaps only getting together annually for a stockholder’s meeting. Most stockholders don’t even attend such meetings, preferring to sign a proxy for their voting shares so a company representative who represents their opinion can attend in their place.
Information to stockholders might be conveyed by ordinary daily news in the media, and an interim report, but most directly by Quarterly Reports and the Annual Financial Summary. But how do the stakeholders know these self-published results are accurate?
Like everyone else, they rely on the professional work of accounting and audit firms to provide a transparent and unbiased opinion of these Financial Results, and the assessment of Operations and Controls. This provides a clear picture of how Management has performed during the year.
There are many legal entities that have financial or authority relationships with a given company. These include suppliers, customers, employees, government bodies & departments, free zone authorities, banks & other financial institutions, and of course, investors.
Their concerns are manifold, such as knowing if a company is capable of paying its bills, and if they are capable of supplying their service or product as described by their business model. Their customers want to know that a product warranty will still be valid if they ever need to make a claim.
Employees need to know that their pay cheques will continue, and that their jobs are reasonably secure. They want to feel that the company they work for is reputable.
Governing Authorities must be assured that the company is working within the laws and meets the standards set for their industry. They need to know that the company is fulfilling its obligations. In cases of litigation they must be confident that the company is doing its part to be a responsible corporate citizen. Only then can they issue licences and other legal instruments in good conscience.
Free Zone Authorities grant licences to companies to operate within these zones, and they require external audits from every registered Company in any Free Zone. These must be conducted by approved accounting firms in UAE. In the event of liquidation or closure of a company, these Authorities also require the Liquidation Audit Report.
In terms of finances, the banks and financial institutions of Dubai and the UAE issue business loans for expansion, raising capital for new investments, or for mergers and consolidations. For this reason they are vitally concerned with the Financial Health of the company. An unsatisfactory external audit report could result in the withdrawal of financing.
Any worthy investor is going to consult with the external audit reports for a given company before placing any funds with them. Investing with a growing company planning to acquire another company, or perform a merger, will require a Due Diligence report that will strongly affect an investor’s opinion. Our reports guide thousands of investors to make wise decisions every day.
IFRS (International Financial Reporting Standards)
These are the rules to be followed by Accountants to maintain books of accounts which are consistent, reliable, relevant, and comparable to those found anywhere else in the world.
These standards were first issued by IASC (International Accounting Standards Committee) which existed from 1973-2001, thereafter replaced by the IASB (International Accounting Standards Board). These original standards, called the IAS (International Accounting Standards), were numbered IAS 1 to IAS 41.
Modern standards issued by IASB are referred to as IFRS (International Financial Reporting Standards) and include the first original IAS standards, but any time an IFRS standard contradicts an IAS standard, the IFRS supersedes the older version.
In Dubai, every Company preparing Accounts and reporting the Financial Results in the Financial Statements must 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.
The Four Types of Audit Opinion
Audit opinions must always be seen by the public as being uninfluenced and unbiased. Even a hint of impropriety diminishes the value of the audit opinion, rendering it useless.
It is vital 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 stating whether the Financial Statements represent the financial position and results of the Company fairly, without any material misstatements.
There are four types of Audit Opinion issued by the auditors in their Audit Reports. Let’s look at each one.
The Unqualified Opinion
This coveted result, the Unqualified Opinion is often referred to as a clean Audit Opinion. This is the goal for every company audited because it opens so many important business doors.
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). In essence it means that the Auditors do not have any reservations with respect to any numbers or matters disclosed in the Financial Statements.
The Audit Opinion cannot be considered as an absolute assurance regarding the health or integrity of accounting records of the Company being audited, but is a reasonable assurance that the Financial Statements present fair and true view of the results of the Company being audited.
A Qualified Audit Opinion is issued when auditors are not able to obtain sufficient evidence through auditing with respect to an account balance, a class of transaction, or a disclosure note, or if any of these have been materially misstated.
The Audit Report is then issued with an explanatory paragraph appended called the “Basis for Qualified Opinion”. This 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 of the Financial Statements. The misstatement is related to only those matter(s) which have been stated in the Basis for Qualified Opinion paragraph.
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. As such, it will be perceived negatively by all stakeholders, particularly those such as Shareholders, Bankers and Investors.
Disclaimer of Opinion
This fourth type of Audit Report is the most undesirable type issued by Auditors in Dubai and the rest of the UAE. It is negatively perceived by all stakeholders of the Company such as Shareholders, Bankers, Lenders, Investors, etc., and will have a significant negative impact on the company’s operations and ability to function.
A Disclaimer of Opinion is issued if:
- The Auditing Firm is not independent or there is significant conflict of interest;
- There is evidence of significant Going Concern problems in the Company being audited (financial limitations to continued healthy operation);
- There are high uncertainties in the business;
- Scope limitation exists due to which the Auditors cannot form a reasonable Audit Opinion.
In the case of a Disclaimer of Opinion, the Auditors can be unable to form an opinion about the Financial Statements due to the problems identified above.
Deciding on which Accounting or Auditing Firm in the UAE you should use for the External Audit should be approached thoughtfully. This is a very important decision and requires consideration of the following factors:
- History of the Auditing Firm in the UAE;
- Experience of the Audit Partner, Audit Team, & audit services within the UAE;
- Qualifications and competence of the Audit Partner and the Audit Team;
- References from clients to endorse the quality of the Audit work;
- The Fee charged in comparison to the Audit Quality provided.
For more information on how we can serve you with the best External Audit services for your Company, please contact our Audit Partner, Farhan Aqil at [email protected]raca.ae or +971 50 3958931