Why Do You Need Audited Financial Reports by a Third-party or an Independent Auditor in the UAE?
The key objective of an external audit is to give an independent opinion on the financial statement of an organization to enhance confidence for intended users of the financial report. The intended users can be the government, licensing authorities (mainland or free zones), investors, banks and other government authorities etc. The external Auditors in Dubai will determine whether your company’s financial statements are fairly presented in accordance with local and international standards such as the IFRS.
Auditing your company’s books of accounts will promote consistency and objectivity in its financial reports and assures external parties that the financial statements are true and fair. However, submission of audited financial statements is not compulsory for mainland companies and many free zones in the northern emirates. Yet, many companies would require to audit their financial reports under certain circumstances.
Read ahead to know the situations that warrant audited financial reports in the UAE:
1. For the Renewal of the Trade License
Most free zone authorities in Dubai have made it mandatory for companies to submit audited financial statements. They demand audited financial statements at the time of the renewal of the trade license or within a specified period after the completion of the financial year. The free zone authority will not renew the license of a company if it fails to submit the audited financial statements on time. Some of the free zones that demand the submission of audited financial statements include Dubai Airport Free Zone (DAFZA), Dubai International Financial Centre (DIFC), Dubai Silicon Oasis (DSO), and the companies registered with the Dubai Development Authority (DDA). Hire the best audit firms in Dubai to properly audit your financial statements and void the revocation of your trade license.
2. To comply with the regulations
Even though the submission of audit reports is voluntary for most mainland companies, companies operating in certain industries are still required to have audited financial statements as mandated by the relevant regulatory authority. This requirement especially applies to hotels, insurance companies, and Insurance brokers.
3. For Companies Under Liquidation
When a company is under liquidation in the UAE, the shareholders need to have their financial statements audited. The liquidator of the company, which can be any licensed audit firm in the UAE, needs to submit a final liquidation report to the licensing authority. The liquidator will require audited financial statements which show nil assets and liabilities of the company to prepare the liquidation report.
4. For the Branch of a Company
The UAE government allows the formation of a branch of a local company as well as a branch of a foreign company in the country. However, the branch offices will be required to submit the audited books of accounts at the time of trade license renewal or within a specified period after the completion of the financial year. They should audit their financial reports through audit firms in the UAE. The accounts of the branch should be separate from those of the parent company.
5. For the Purpose of UAE Corporate Tax
The UAE has recently released the “Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses (the UAE Corporate Tax Law)”, which mentions the requirement for audited financial statements. Clause 1 of Article 54 of the Law says the Federal Tax Authority (FTA) request a taxable person through notice or decision to submit the financial statements used to determine the Taxable Income for a Tax Period in the form and manner and within the timeline prescribed by the Authority. Clause 2 of the same article says the Ministry of Finance may issue a decision requiring categories of Taxable Persons to prepare and maintain audited or certified financial statements.
Know more about Corporate Tax here
6. For submission to the Bank and other non-banking financial institutions
Banks and other non-banking financial institutions may ask the companies to get their books of accounts audited. Submission of audited financial statements may be required when you apply for a business loan or funding. Similarly, suppliers or other dealers would like to have a look at your audited financial statements to verify your credentials as well as your financial creditworthiness to deal with you.
7. For obtaining ICV Certification in the UAE
If you are a company aiming to secure the national in-country value (ICV) certification in the UAE, you should get your financial statements audited. Obtaining an ICV certificate will help suppliers to win tenders from government and semi-government entities. If you secure ICV certification, you can gain a certain weightage during the assessment of tenders. Businesses need to submit audited financial statements that are not older than two years from the certification year. Hire experienced audit firms in Dubai to get your financial statements audited for the purpose of ICV certification.
8. For Making Better Business Decisions
Having audited financial statements will help you understand your company’s financial position, evaluate its performance, and assess the progress of the business. Based on the audit report, entrepreneurs can make better business decisions. Availing of bespoke auditing services in Dubai will help you make efficient business decisions.
Hire the Best Audit Companies in Dubai, UAE
Annual audits can be a time of anxiety for businesses but entrepreneurs can navigate them easily by hiring the best audit firms in Dubai such as Jitendra Chartered Accountants (JCA). JCA is one of the top auditing companies in Dubai with years of experience. Apart from audit services in Dubai, JCA also offers bespoke services such as accounting, corporate tax advisory, VAT compliance, Economic Substance Regulation (ESR) services, and Anti-money Laundering compliance service.