Companies in the UAE needs auditing as it is an important factor in any business. It assists in compliance with the law, prevention of fraud and the display of financial transparency and accountability. There are various kinds of audits that are present in the UAE and companies may consider seeking services of professional Audit firms in Dubai. In this article, the various types of audits in the UAE will be highlighted as well as the significance of audit.
Types of Audits in the UAE
The following are some of the common types of audits carried out by the businesses operating within the UAE:
External Audit
An external audit is the process of assessing the correctness, completeness and fairness of the financial statement of an organization in accordance with the standard accounting practices and other legal provisions. The external auditors are hired by the shareholders and present their findings to the shareholders through an audit report. The primary purpose of an external audit is to obtain reasonable assurance that the financial statements are not misleading.
Internal Audit
Internal audit is an optional self-reporting activity that examines the company’s internal control, risk management, and governance in an effort to support the achievement of particular organizational goals. These are employees of the organization who work in the internal audit department and are accountable to the audit committee of the board of directors. Internal audit is also very general in its range of responsibilities because it can address any issues that may impact the success of the company.
Forensic Audit
Forensic audit is therefore the use of auditing and investigation in circumstances that may contain legal aspects. Samples of circumstances that may necessitate forensic audits include fraud investigations, calculating losses in insurance claims, disputes of business partners on profit sharing, and checking on claims of negligence involving the accountancy profession. Forensic audit results can be presented in the court of law on matters of finance as an opinion of an expert.
Tax Audit
The tax audits are used to verify the accuracy of the tax returns filed by a firm and are hence useful in establishing the extent of over or under taxation owed to the tax departments. While in some jurisdictions, particularly those with a certain threshold of revenue or turnover, the companies are subjected to tax audits after regular intervals of time, in other jurisdictions, the companies are randomly selected for tax audits through balloting system.
Compliance Audit
Legal compliance audits are done with a main purpose of determining the regulatory compliance of an organization with the laws within its jurisdiction and with the international legal requirements. Business compliance audits can be performed either by internal or external auditors.
Table: Comparison of Different Types of Audits in UAE
| Type of Audit | Key Activities | Benefits |
|---|---|---|
| External Audit | Examination of financial statements for accuracy, completeness, and compliance | Provides credibility to financial statements, detects and prevents fraud, ensures compliance, provides recommendations for improvement, enhances investor confidence |
| Internal Audit | Monitoring and evaluating internal controls, risk management, and governance | Improves internal controls and risk management, detects and prevents fraud, ensures compliance, provides recommendations for improvement, enhances corporate governance and accountability |
| Forensic Audit | Investigation of financial fraud and misconduct | Detects and prevents financial fraud, provides expert evidence in legal proceedings, assists in recovering lost assets, enhances investor confidence |
| Tax Audit | Review of tax returns and assessments for accuracy | Ensures compliance with tax laws and regulations, identifies potential tax savings and credits, provides recommendations for tax planning and compliance, enhances investor confidence |
| Compliance Audit | Assessment of compliance with applicable laws, regulations, and standards | Ensures compliance, identifies potential compliance risks and exposures, provides recommendations for improvement, enhances investor confidence |
FAQs
- What are the distinctions that can be made between internal and external audits?
Internal audits are systematic and purposive inspections carried out within an organization that seeks to offer assurance on controls, risks, and governance frameworks. In contrast, external audits are statutory for some types of organizations and include the assessment of the accuracy and reliability of financial reports by an outside auditor.
- Is a tax audit compulsory in the UAE?
Tax audits are compulsory for companies operating in the UAE based on certain conditions.
- What is their role in forensic audit and what is the aim in conducting such an audit?
The aim of a forensic audit is to employ auditing and investigation to areas which may have legal repercussions.
- Why are compliance audits important?
Compliance audit is important for business operating in the UAE because it’s a way of assessing their compliance level with laws and standards governing their operations.
In conclusion, it is crucial for businesses in UAE to have adequate knowledge about the various types of audits in UAE for them to achieve accurate and fair value reporting, adherence to the set legal requirements, and proper risk management. To increase the chances of having professional and efficient auditing services companies should engage the best Audit firms in Dubai.
