Everything You Must Know About Audit Requirements in RAKEZ
There are more than 45 active free zones in the UAE and many of them mandate the submission of audited financial statements. Failure to submit the audited financial statements to the relevant free zone authorities may invite dire consequences that may imperil your company’s operations. If you have registered a company with the Ras Al Khaimah Economic Zone (RAKEZ) Authority, you need to know about the audit requirements in RAKEZ to avoid fines and other consequences.
Submitting audited financial statements on time with approved auditors in the UAE will also help you maintain your reputation and credibility before the free zone authority. Read ahead to know everything about audit requirements in RAKEZ:
Is It Mandatory to Carry Out an Audit in RAKEZ?
All the companies licensed by RAKEZ are required to get their financial statements audited and submit them to the free zone authority. To avoid being penalised, the companies are advised to maintain their books of accounts properly and get them audited without fail.
When Must a Company Submit Audited Financial Statements?
A company licensed by the RAKEZ free zone Authority needs to submit its audited financial statements within six months from the end of its financial year. Business owners must instruct relevant staff to prepare for the audit well ahead of the date so that they can avoid last-minute surprises and compliance failure.
Who Can Carry Out External Audits in RAKEZ?
New investors may think that they can hire any audit firm in the UAE to get their books of accounts audited. However, all companies incorporated in RAKEZ are required to get their financial statements audited by RAKEZ-approved auditors. An approved auditor is an audit firm enrolled in the RAKEZ-approved auditors’ list.
An audit firm listed by the RAKEZ free zone Authority is required to provide auditing services to RAKEZ companies under the Authority’s implementing regulations. Approved auditors in RAKEZ must also ensure that the audited financial statements of these companies represent a true and accurate financial position.
Should Companies Incorporated for less than a Year Prepare Audited Financial Statements?
This depends on the date on which the company was incorporated in RAKEZ. The RAKEZ Standard Memorandum of Association (MoA) states that a company’s financial year constitutes 12 months from January to December. However, the first financial year should not exceed 18 months or be less than 6 months.
For example, a company incorporated in July 2019 can prepare its first year’s financial statement in December 2020. However, if the company is incorporated in June 2019, the first-year financial statement will have the year-end as December 2019 and will consist of only seven months.
What Happens if a Company Fails to Submit the Audited Financial Statements on Time?
RAKEZ regulations require the companies registered with the free zone Authority to submit audited financial statements on time. If a company incorporated in RAKEZ fails to comply with this requirement, a fine of AED 2,500 will be imposed by the free zone Authority.
Reasons Why You Should Carry Out Audits in RAKEZ
Carrying out audited financial statements RAKEZ is a regulatory requirement mandated by the free zone authority. However, apart from the regulatory compulsion, there are other reasons you should carry out annual audits in the UAE. Some of them are listed below:
- Audits help you better understand the company’s financial position
- It will increase the shareholder’s confidence
- An external audit will improve internal controls and procedure
- Your company will appear more credible in front of banks, the government & potential investors
- Business owners can detect any fraudulent activity
- Companies can avail of any free zone incentives and exemptions granted as per the UAE Corporate Tax Law
- If earning income from one of the relevant activities as per ESR, the audit is mandatory
Documents Needed for an External Audit in RAKEZ
The RAKEZ-approved auditors will require the company management to submit certain documents while carrying out the annual audit. The key documents needed for an external audit in RAKEZ are given below:
- Bank Statements
- Independent balance confirmations from banks, customers, suppliers, and related parties
- Credit/ debit confirmation for all financial transactions
- Copies of bills and invoices
- Memorandum of Association (MoA)
- Articles of Association (AOA)
- Latest Trade License
- Registration Details for VAT and Excise Tax (If Applicable) including returns of the full year
- Books of Accounts
Hire Approved Auditors in RAKEZ to Ensure Compliance
RAKEZ-approved auditors such as Jitendra Chartered Accountants (JCA) can help you to submit your audited financial statements to the free zone authority within the specified time. JCA can ensure that the financial statements are prepared as per the local and international reporting standards. JCA is one of the few audit firms in Dubai with more than 21 years of experience. We are registered with the RAKEZ as an approved auditor and can help you comply with your annual financial audits.