Financial Audit in UAE

Companies in the UAE are exposed to growing financial regulations. As corporate tax has been introduced, financial audits have become more critical than ever. Several companies now have to file audited financial reports to stay in line with tax legislation. Not adhering to the same may result in fines, which is why audits have become a part of critical financial management.

JCA, Jitendra Chartered Accountants, works as an external auditors committed to generating accurate and useful audit reports for your company.

What is a Financial Audit?

A financial audit is an examination of the accounts of a business or company. It can be done by external as well as in house auditors. These auditors verify whether financial statements are accurate and according to rules. The process makes companies credible and transparent while it identifies any possible financial dangers.

The UAE government has stringent policies for audits of a financial nature. The principal objectives of audits in the country are:

• Verification of financial transactions to be accurate and authentic.
• Granting guarantee of compliance with financial rules, regulations, and tax legislation.
• Examining sources of revenues, including taxes, fees, penalties, and profits.
• Identifying instances of financial fraud and irregularities.

Forms of Financial Audits

1. Internal Audit –Carried out by the company’s in-house audit personnel for process improvements.
2. External Audit –Done by a third-party independent auditor for an objective assessment.
3. Government Audit –Verifies adherence to taxation and public money management.
4. Forensic Audit –Exposes money laundering and criminal behaviour.

Who is Required to Undertake a Financial Audit in the UAE?

Under UAE corporate tax laws, certain businesses must conduct a financial audit:

• Businesses with revenue exceeding AED 50 million must submit audited financial statements.
• Qualifying Free Zone companies are required to provide audited reports.
• Companies asked for by the Federal Tax Authority (FTA) need to prepare and present financial statements.

Important Documents in a Financial Audit

Companies needed to present financial audits need to prepare a number of financial statements, including:

• Statement of Financial Position –A list of assets, liabilities, and equity.
• Statement of profit or loss and other Comprehensive – A presentation of profit and loss.
• Statement of Cash Flow –A summary of cash inflow and outflow.
• Statement of Changes in Equity – Information on shareholder investments and profits.

Compliance with Accounting Standards

Companies within the UAE should adhere to specified accounting standards in accordance with revenue:

1. International Financial Reporting Standards (IFRS) for entities generating revenue greater than AED 50 million.
2. IFRS for SMEs is used by businesses with a lower revenue than AED 50 million.
3. UAE GAAP (generally accepted accounting principles).

All these standards enable financial statements to be true representations and conforming to regulation standards.

Advantages of Undertaking a Financial Audit

There are several advantages provided by conducting a financial audit:

• Better financial control– Uncover business strengths and weaknesses in finances.
• Prevention of fraud– Assists in the detection of fraud.
• Higher credibility – Will gain trust with investors, banks, and stakeholders.
• Compliance with tax – Accurate tax reporting and less risk of penalties.

Corporate Tax and Financial Audits

The UAE imposed corporate tax on June 1, 2023. The rate of tax is 9% for income above AED 375,000, with firms operating below this level being exempt. Entities subject to corporate tax are expected to provide audited accounts to the FTA to enable accurate calculation and payment of taxes.

Audit Companies in UAE

There are companies like JCA in the UAE offering external audit services, such as:

• Corporate tax audits
• VAT audits
• Excise tax audits
• Financial statement review

These help companies provide correct and unbiased financial assessments, ensuring compliance with local statutes.

Record Keeping Requirements

Companies are required to keep financial books for a period of not less than six years from the accounting period in which they are associated. The accounting books should also substantiate financial statements and tax returns.

Why Choose Jitendra Chartered Accountants?

Financial audits play an important role in business transparency and fraud prevention. JCA keeps its clients aware of constantly evolving regulations and ensures that their financial records are accurate and up to date upon assessment. Let our experts perform your financial audits for smooth operations and to prevent any legal trouble.