What are the Different Stages of External Audit Process in the UAE?

Getting the books of accounts audited by independent and reputed auditing firms in the UAE is crucial for the companies to reassure their stakeholders that their financial statements represents true and fair value and are free from any irregularities including material misrepresentation and material misstatements. The Chartered Accountant in the UAE recommends that the companies should hire independent audit firms in the UAE to analyse the business’ financial position and effectiveness of internal controls and compliance with local and international regulations relating to books of accounts and law.

The UAE Commercial Companies Law, Federal Law No. 2 of 2015, mandates that every LLC company in the UAE should get their books of accounts audited by the registered auditors in the UAE. Many free zone authorities also have made it mandatory to free zone companies (FZC) and free zone establishments (FZE) to get their books audited from registered audit firms in their free zones in the UAE. However, some free zones mandate the requirement of preparing the audit report but do not enforce it.

How External Auditors in the UAE Conduct Audit through Various Phases?

External auditors are neutral and independent professionals whose audit reports help businesses comply with regulations and thereby increase the company’s credibility among the stakeholders and reviewers such as banks and governments. The external auditors carry out the process of auditing in different stages to form an opinion on financial statements that they are free from material misstatements and shows a true and fair view. They are:

1. Audit  Planning

The first, and therefore the most important, stage in the whole audit process, wherein the external auditor plans and lays out the strategy to conduct the audit of a company. The auditor at this stage needs to discuss with the client about the scope of the audit, timescales and resources and needs to understand the company’s business structure and their approach. The auditors form the top auditing firms in the UAE will also establish the responsibilities of both the client and the auditors regarding the external audit procedure.

2. Client Understanding

Eliminating the risk of material misstatement in the financial statements is crucial to the role of an external auditor. The auditor from the auditing firms in Dubai or the UAE must have to gather ample background information on the company and its environment to cut this risk. The auditor at this stage will obtain an understanding of the internal controls in the company, which will help him identify the key areas that are prone to the risk of misstatement.

3. Risk Assessment

After obtaining an understanding of the entity and its environment, the auditor identifies the risks that are relevant to financial reporting objectives, including fraud risks. The auditor at this stage will assess the probability of the misstatement arising as a result of such risks. An auditor from the top auditing firms in the UAE will form an action plan to address the risk.

4. Perform Tests of Controls

Auditors perform tests of controls to see how effective are the systems of controls used by the company in detecting or averting material misstatements. If the auditor is convinced that the controls are efficient he may decide to rely on the systems of controls subject to different kinds of evidence and external confirmations. A weak system of controls would force the auditor to augment substantive testing.

5. Performing the Audit

After performing tests on controls, the auditor checks for accuracy in the accounting records. The auditors in the UAE at this stage also analyse transactions and disclosure.  External auditors will check whether the company’s accounting records are in compliance with the local and international regulations including the International Financial Reporting Standards (IFRS). The external audit is mainly done based on sample check but rather the same does not reduce the auditor’s responsibility to form an opinion. For this purpose, the auditor uses various ratios and comparisons with last year’s figures. Documentary evidence, external confirmations and internal controls are the crucial things which every auditor asks to form an opinion on each and every item of financial statements and profit and loss. Auditors then conduct a meeting with the senior management to discuss the findings of the audit.

6. Audit Report

At the final stage of the audit process, the external auditor from the auditing firm in the UAE will present the audit report which reflects his true and fair opinion on the financial statement of the company with its qualified opinion wherever required when the auditor is not satisfied with the evidence or explanations for the nature of transactions or the line item in the financial statements including profit and loss. The report could be considered as an appraisal of the company’s financial position. Many free zone authorities in the UAE depend heavily upon the auditor’s report of the companies registered with them.

Why Choose Jitendra Chartered Accountants?

Jitendra Chartered Accountants (JCA) is one of the leading groups of the Chartered Accountants in the UAE. JCA’s highly qualified team of auditors are committed to helping the companies in the UAE to ensure that their books of accounts are free from material misstatements. Being one of the most reputed audit firms in the UAE, the JCA has delivered unbiased audit reports to thousands of clients thereby enhancing the company’s credibility before authorities. Hiring the audit services to JCA’s well-experienced auditors would enable the companies to reassure their stakeholders that their financial statements are free of any risks.

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