Financial audits are a critical component of corporate governance and financial transparency for companies operating in the United Arab Emirates (UAE), as they are in many other countries.
As per UAE legal framework, most of the Entities are required to have their financial statements audited. For instance, UAE mainland companies are required to have audited financial statements in accordance with federal law No. 32 of 2021, which specifically mentions the rules and guidelines to be followed by commercial companies.
Similarly, all rules and regulation of all major free zones of the UAE have set requirements for audited financial statements. Additionally, Dubai’s free zone authorities often mandate the submission of audited financial accounts when renewing a trade license or within a specified timeframe after the conclusion of the financial year. Failure to submit audited financial statements can result in the denial of license renewal, and in certain instances, companies may incur penalties for either not submitting or submitting their financial statements after certain due dates.
In the case of regulated business activity, such as Insurance Brokers, businesses are required to have their financial statements audited by a regulatory authority.
The UAEs corporate tax law on taxation of corporations and businesses released the “Federal Decree Law” that falls under No.47 of 2022. which refers to the necessity of financial statements that have been audited. According to Clause 1 of Article 54 of the Law, the Federal Tax Authority (FTA) may invite a taxable person to produce the financial statements used to calculate the taxable income for a tax period in the format and time frame specified by the Authority by notice or decision.
In accordance with clause 2, the Ministry of Finance may decide to make it necessary for specific taxpaying entities to establish and maintain audited or certified financial statements.
Banks and other non-banking financial institutions may request that the businesses have an audit performed on their books of accounts. Companies are required to provide audited financial statements for any financial facilities such as loans, letter of credits (LC), or any other type of finance. Similarly, in order to confirm your qualifications and financial trustworthiness to do business with you, suppliers or other dealers will prefer to see a copy of your audited financial accounts.
Get your financial accounts audited if you own a business and want to obtain the national in-country value (ICV) certification in the UAE. Having an ICV certificate will make it easier for vendors to obtain government and semi-government contract bids.
Any time in the future, the company’s audit report may be needed for immigration. Companies are finding it more and more vital to keep their accounting records and audits as the UAE’s tax system becomes more active and in action. This provides the business with greater insights into which parts of the business need more focus and how to handle them going forward.
In the UAE, shareholders who own stock in a firm that is going through liquidation must have their financial accounts audited. The licensing authorities must receive a final liquidation report from the company’s liquidator, which may be any licensed audit firm in the UAE. To create the liquidation report, the liquidator will need audited financial accounts that indicate that the firm has no assets or obligations.
Financial statement audits are crucial for maintaining transparency, compliance, and credibility in the business environment of the UAE. We at AccouConsult can assist businesses to not only fulfill their legal requirements but also enhance investor confidence, protect shareholders, and contribute to better financial management and decision-making within the company.