Audit Function in United Arab Emirates
Auditing is an area that has evolved a lot and of recent it has become indispensible. This is because there is a completely new dimension presented by this practice. Initially, auditing used to concentrate mostly on corporate compliance plus institution of strong financial controls. However, the modern businesses in United Arab Emirates do not have much worry with financial controls or compliance but rather are concerned with risk assessment and mitigation. For any listed company, auditing play a key role in risk assessment aspect. It mainly acts as the watchdog to the shareholders of the company and gives assessment to impending risks.
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However, the influx of foreign investors in the Dubai listed companies market is redefining and giving auditing profession a new international obligation to fulfill.
The audit functions in UAE are as outlined below.
As noted earlier, businesses in Dubai are getting listed. One the key features for a listed business is that accountability is very instrumental and this accountability is evaluated by an independent body. This body is the auditors. To ensure compliance, the auditors endeavor to examine the accounting system used by the company. The accounting system ought to comply and conform to the IFRS for any listed company or any other company that is involved in accounting exercises and hence the auditor checks whether this aspect has been complied with. Each organization has policies it has put in place to take care of the interests of the firm. It is thus, an audit function to see that internal control systems instituted by the management are being complied with. In ensuring that every transaction is accounted for, the auditor does vouching. This exercise confirms accuracy of the recorded data thus giving a true reflection of the real financial situation.
Compliance calls for verification. Therefore, it is an audit function to verify each asset and liability of the organization. Remember that investors do not have the time to go round checking in everything and they solely rely on what is recorded on the books of accounts. The auditor is the one entitled to do the verification of all the assets owned by the company and liabilities as recorded. In addition to verifying this, the auditor values these assets and liabilities and checks whether they are as per the law requirements or policies agreed by all the stakeholders. in addition to this, the auditor crosschecks what is regarded as an income and what is regarded as a capital investment.
Once the auditor has checked all the aspects regarding to compliance a report is compiled. The report forms the fundamental work of the auditor. It is this compliance report that is presented to the investors during the annual financial report release meeting. It goes along side the financial statements of the organization. As mentioned earlier, no law in UAE that pressurizes for compilation of this report but banks will ask for financial reports that have been audited and new investors rely on audited work.
This report validates that what the financial statements are reporting have complied fully with IFRS and a true reflection of the state of the company is well represented in those statements.
2. Laws and Regulation
As had been mentioned earlier, Dubai does not have rules that make it a must for organizations to have auditing departments. However, it is a business center that is highly populated with investors from outside the country. Therefore, a key function assigned to the audit firms is that they are hired to verify that a new established business comply with key legal regulations...