The primary objective of a financial audit is to provide regulators, investors, directors, and managers with reasonable assurance that financial statements are accurate and complete.
Companies in Dubai are required to maintain their financial records for a minimum of five years. This stipulation serves multiple purposes, including facilitating regulatory oversight, aiding in dispute resolution, and supporting the internal management process.
Being ready for an audit will help you avoid any last-minute surprises and make the job easy for the auditors in Dubai. In this blog, we will discuss how to stay audit-ready and avoid audit stress.
Understand the scope of the audit.
Audits are about the financial records of organizations or people. Audits can be classified into various groups such as:
- External Audits: External parties conducting audits assist in eliminating prejudice in examining a corporation’s finances. The purpose of these audits is to identify if there are any material errors present in the accounts.
A clean or unqualified auditor’s opinion gives assurance to users of financial statements that the financials are represented fairly in all important respects. External audits help stakeholders improve their decisions regarding the company under audit by providing more pertinent information.
- Internal audits: Internal auditors are employed by the company or organization for whom they’re performing an audit. The resulting audit report is given directly to management and the board of directors.
They’re not employed internally, but consultant auditors use the standards of the company they’re auditing rather than a separate set of standards. Internal auditors are typically used when an organization doesn’t have the in-house resources to audit certain parts of its operations.
Review and reconcile accounts
Your statements of accounts ought to be internally reviewed, and all accounts should be reconciled properly before the audit.
- Bank Reconciliation: Ensure that your business accounts correspond with your bank records.
- Accounts Receivable and Payable: Verify all invoices, payments, and receipts. Any unpaid invoices or discrepancies must be settled before the audit.
- Fixed Assets Register: Check for additions, disposals, or changes in the value of assets that may occur.
Ensure VAT compilations
In compliance with VAT regulations lies the essence of a financial audit in Dubai. Make sure that all VAT returns, payments, and records are approved by the concerned authorities.
- Filing Records for VAT: Freedom from the filing deadlines must be observed to ensure that all VAT returns submitted are timely filed and accurately represent your company’s tax position.
- Tax Invoices & Receipts: Correctly documenting all VAT-paid transactions will enable you to support VAT claims.
- Cross-check VAT Input/Output: Auditors shall investigate VAT claims to make sure that every input/output VAT has been accurately determined and reported.
Gather all relevant documentation.
A typical financial audit in Dubai requires the companies to go through a lot of paperwork. And they are, as mentioned,
- Bank statements
- Bank records
- Updated trade license
- Financial statements
- Fixed asset records
- Invoices
- Memorandum of association
- Tax documentation
- Contract
- List of transaction details
Select the best audit firms in Dubai.
Selecting the best financial auditing firm in Dubai is crucial to ensuring the success of the process. VAT accounting is advisable, as it is one of the most trustworthy financial audit firms in Dubai.
Evaluate internal controls
To ascertain that your internal processes are mitigating fraud and financial mismanagement risks, auditors frequently analyze the efficacy of your internal controls.
- Segregation of Duties: Make sure to assign different people the tasks that involve authorizing transactions, recording them, and managing cash flows; this would help in avoiding any possibility of conflict of interest.
- Access Control: Check who can access financial documents as well as sensitive data with the intention that they can be accessed solely by authorized personnel.
Be Ready for Auditor Questions
While performing an audit, auditors may pose questions and seek clarifications about some transactions, documents, or accounting operations. Being ready for these questions will make the audit process faster.
- As a Point of Contact: Have a key team member, usually somebody from the finance department, whose responsibility is answering auditor queries and providing information that is required.
- Be Ready to Explain Unexpected Situations Be prepared to clarify any inconsistencies or oddities in your financial statements, e.g., abnormally large transactions or differences.
Final Review before the Audit
Before an audit takes place, every financial document must undergo a conclusive review to ascertain that nothing is amiss.
- Look At The Trial Balance: Make certain that your trial balance corresponds with the reports of financial statements.
- Confirm Conformance: Make sure your values are the same in different financial documents for consistency across all reports.
Post-Audit Follow-Up
After the audit is done, make sure that any recommendations or findings from auditors are dealt with promptly. This will help avoid future problems and keep your business within compliance.
- Implement Recommendations: Respond to any deficient areas or recommendations given by the auditors to better your internal controls and finance practices.
- Get Ready for Next Year: Take advantage of this audit experience as a way of improving upon and making future financial record-keeping more efficient.
Conclusion
Preparing for a financial audit in Dubai is lengthy, methodical, legal, and requires teamwork. Understanding audit requirements, having control of cash documents, and following the rules governing Dubai are some of the measures that can lead to smoothness and success in auditing.