Commercial Companies Federal Decree-Law No. 32/2021 stated it is compulsory for all the companies established in the UAE mainland to get their financial audits. UAE is famous for its swiftly growing economy and flourishing business environment. With a host of companies working within its borders, it is important to maintain transparency and financial integrity. It is only maintained through auditing. Auditing helps as a means to validate the financial precision and compliance of companies with the appropriate protocols.
What is the Legal Framework for Audits in UAE?
The Legal Framework of Audit Requirements in the UAE is;
UAE Commercial Companies LawÂ
As per Federal Law No. 2 of 2015;
- All mainland companies have to prepare and submit annual audited financial statements.
- Audits have to be conducted by a registered and licensed auditor in the UAE.
Free Zone Regulations
- DIFC (Dubai International Financial Centre) and ADGM (Abu Dhabi Global Market) have their particular audit obligations.
- Regulatory bodies in these zones follow global standards. It is often allied with IFRS (International Financial Reporting Standards).
International Financial Reporting Standards (IFRS)
UAE companies have to follow International Financial Reporting Standards for financial reporting. It ensures global compliance and consistency.
What are the Audit Requirements In the UAE?
Audit requirements in the UAE are planned to ensure financial transparency and regulatory obedience across numerous types of companies. Here are the key audit requirements for companies;
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Compliance with Global Values
Companies in the UAE are mandatory to formulate their financial statements in line with International Financial Reporting Standards (IFRS). This lines up local practices with international accounting standards and ensures constancy and consistency in financial reporting.
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Submission and Reporting Deadlines
Companies have to submit their audited financial reports to the relevant authorities as per the specified period. It is usually between three to 6 months after the end of the financial year. It is important to take care of timely submission because it is crucial for maintaining regulatory compliance and avoiding penalties.
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Exemptions
Not all businesses are subject to fulfilling their obligations. Some small businesses and dormant entities may fall under the category of exemption from mandatory audits. It all depends on their scope and revenue. Explicit exemptions can differ based on the free zone protocols or other valid regulations.
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Annual Audit Obligation
As per the UAE Commercial Companies Law of Federal Law No. 2 of 2015, all mainland companies are obligated to undertake an annual audit. This comprises;
- Limited Liability Companies (LLCs)
- Joint-stock companies
- Partnerships
Entities working in free zones, such as the Jebel Ali Free Zone (JAFZA), Dubai International Financial Centre (DIFC), and Abu Dhabi Global Market (ADGM), are also mandatory to submit annual audited financial statements. It is important to know that each free zone may have its explicit protocols, but adherence to global standards and opportune submission is generally expected.
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Penalties for Non-Compliance
If a business fails to comply with all audit requirements except exempted one can result in significant penalties. It may include fines, deferral of business licenses, and legal consequences. Such measures are compulsory to sustain the integrity of financial reporting and protect investor interests.
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Auditor Qualifications
The audit must be performed by a registered or licensed auditor in the UAE. The auditor must be approved by the applicable regulatory bodies to make sure they meet the mandatory standards of capability and integrity.
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Record-Keeping Requirements
Companies are also mandated to keep correct financial records for a minimum of 5 years. These records must be accessible for evaluation during audits. It ensures transparency and liability in financial reporting.
Conclusion
It is indispensable for businesses to acquaint themselves with the explicit protocols and requirements that apply to their legal structure and industry. Compliance with audit requirements can augment transparency, responsibility, and investor confidence. It also backs to the overall constancy and growth of the company. It is recommended to get assistance from FAR Consulting Middle East. Their proficient team can help businesses to address the problems timely and effectively.Â
