5 Benefits of Carrying Out an Annual Audit

Not all companies in the UAE are required to file audited financial statements annually. However, you will do well to practice business due diligence by hiring an audit services provider and subjecting your company to an annual audit.

Be Compliant

The main benefit of doing an annual audit, of course, is it helps you comply with statutory audit requirements. Governments ordinarily require a statutory audit of companies doing business in their territories, and the UAE is no exception. But the specific requirements vary depending on the jurisdiction.

Onshore Companies

As per the UAE's Commercial Companies Law of 2015, all companies formed onshore or in the UAE mainland need to undergo an annual audit. Onshore companies actually need to hold on to their audited financial records for a minimum of five years. Keep this in mind when you take advantage of the new decree allowing 100% direct foreign investment in specific economic activities in the UAE mainland. Side note: The Dubai Economic Department (DED) has already released a list of over 1,000 economic activities where Dubai allows 100% foreign ownership or foreign direct investment. It is an excellent time to set up shop in Dubai. Non-UAE nationals may now do business and operate in the mainland instead of being relegated and restricted to doing business in the free zones.

Offshore Companies

On the other hand, companies formed offshore or in any of the free zones may or may not be required to submit to an annual audit. It depends on the free zone's regulatory authority. Some free zones mandate the annual filing of audited financial statements. A few of these free zones are:

• Dubai Airport Free Zone
• Dubai International Financial Centre
• Dubai Multi Commodities Centre
• Dubai South
• Jebel Ali Free Zone

Moreover, in some free zones, regulations require companies or establishments to keep their audited financial statements for a minimum of six years; longer than the Commercial Companies Law. Wherever in the UAE your business may be located, it is good practice to obtain company auditing services from an external financial auditor and have your financial records audited at the end of every fiscal year. If there is one thing you don't want to do in the UAE, it's violating statutory requirements and running afoul of the law and being subject to fines as well as the non-renewal of your business license.

Be Transparent and Trustworthy

A financial audit reinforces transparency. An audit is part of the checks and balances mechanism of financial record-keeping. In other words, audits exist to keep companies honest. Thus, when you subject your company's financial statements to an external audit, you are effectively declaring to everyone that you have nothing to hide. It is akin to saying that anyone can peruse your company books and come away with an accurate picture of your company's status and financial health. This enforced transparency reassures stakeholders (e.g., shareholders, joint venture partners, government regulatory authorities, consumers, clients, suppliers, etc.). Audits, therefore, benefit your company by increasing your company's perceived trustworthiness among your company's stakeholders. And this perception of trustworthiness has a direct impact on your company's bottom line. You should be able to get more investors if audited financial statements support your financial position. You should also win more lucrative contracts; clients want to do business with established, trustworthy firms for business continuity.

Keep Management and Employees in Check

Even if annual audits are not legally required, it will be in your best interest to undertake a due diligence audit once a year. Malversation of funds is a risk that you must be aware of and against which you must be on guard. By subjecting your company to annual audits, you can keep everyone at the company in check. External financial audits can help shine the light on corruption, both minor and major, that could be causing your company significant financial losses.

Make Decisions Based on Valid Data

Of course, your non-audited financial statements already provide you with the data you need to make business decisions. From it, you can see which areas of your business are thriving and which are causing losses. You can make intelligent reorganization decisions based on such data. However, it would be better if you're basing your business decisions on audited financial statements. An external audit will add a layer of assurance and ensure that the data driving your business decisions are valid.

Spot Internal Control Weaknesses and Inefficiencies

Auditors do not only check the integrity of the figures included in financial statements. They also evaluate their validity. And they do this by assessing accounting systems, procedures, and processes. Therefore, auditors can spot internal control weaknesses, wrong record-keeping practices, and operating inefficiencies. So, by having your company audited annually, you can identify problems well before they become issues.

MBG Company Audit Services

At MBG, we do not only help spot internal control weaknesses and operating inefficiencies.  We also provide recommendations that can help you improve internal control and efficiency, streamline operations, and cut back on unnecessary expenses. Contact us if you need audit services in Dubai or anywhere else in the UAE.