An audit is an examination or assessment of various books of accounts by an auditor followed by physical checking of inventory, to ensure that all departments are following the acknowledged system of recording transactions. This procedure is carried out to determine the accuracy of financial statements provided by the organization.
Audit of accounts is mandatory for some form of entities like free zone companies (FZCO) & free zone establishments (FZE). For branches of these companies whether local & foreign audit reports may not be necessary to be submitted to most free zones.
To finalize audits, it is important to maintain accounting records & documents. In UAE the general prerequisite for businesses is to sustain their records for no less than five years. The Commercial Companies Law states that the audit of accounts is necessary for all companies in the mainland.
Some free zones, particularly in the northern emirates do not necessitate the submission of audited accounts for certain companies; it is important to know that this waiver is only for the submission of audit report to the authorities. However, the preparation of audit report for the entity itself cannot be overlooked.
Now that the tax system already is a concern, companies will surely find it essential to maintain their accounting records & audited statements as well. This will give them more insights on which part of the company requires more attention & how the management can assist in taking care of it.
As an entrepreneur in UAE, getting accounts audited every year is important for you as it ensures that your company’s records are sorted & consistent. During an audit, auditors in UAE examine a company’s internal controls, existing systems & financial statements.
The purpose of auditing internally is to provide insight into an organization’s culture, policies, procedures, that aids board & management administrate by authenticating internal controls such as operating effectiveness, risk mitigation controls, & compliance with any relevant laws or regulations.
An audit scope is commonly referred to as the amount of time taken & documents required in an audit, it is an important factor in all types of auditing. The audit scope, eventually, verifies how severely an audit is performed. It can range from simple to complete, including all company documents. Audit scope means the depth of an audit performed. Audits are performed for several purposes: regular “checkups” of company records, to check for internal errors, for the purpose of finding fraud inside a company, for the purpose of finding fraud in another company. Due to this fact, audit scope & objectives have a different meaning depending on the person performing the audit as well as the reason behind the audit.
The principal reasons for the audit are to deliver rational assurance that the financial statements are free from material misstatements & errors. This is to guarantee that all the events that may adversely affect the company have been disclosed.
What are the primary responsibilities of auditors during an audit in UAE?
An auditor is tasked in drilling professional reasoning & sustaining professional uncertainty during an audit service. An audit firms in UAE also do the following:
- Evaluate the suitability for all accounting policies that are employed by the business, as well as the rationality for each accounting estimate & related disclosure which was made the company’s owner.
- Drive a decision on the relevance for the use of a director of a going matter basis for accounting & whether material ambiguities exist associated with the conditions or events which may have caused the significant doubt with regards to the ability of an entity in continuing to be a going concern.
- Estimate the overall form, presentation, & content of company financial statements, including leaks, as well as whether the financial statements are representing all the underlying events & transactions in a way that the company achieves a fair presentation.
- Acquire adequate audit evidence with regards to financial information of entities within a group to express a professional opinion on secured financial statements.