To survive in the competitive business space of UAE, every entrepreneur must take steps towards continuous improvement towards their customer and business goals. Good financial management is crucial for growth and no matter how good the business idea might sound, if it is not financially feasible, then the business will not survive. Everything must be well balanced to grow the business!
To assess and make further business decisions, an audit is required! An audit is an evaluation of business operations & functions, and it is mandatory. Audits are done by third parties i.e. auditing firms, and accounting companies to analyse business operations and report for any potential risk to the company’s financial status.
Who needs to audit their accounts?
Does every business owner have to audit their accounts?
Or Do Small & Medium businesses need to audit their accounts?
Yes all companies must appoint a licensed auditor registered with the Ministry of Economy, UAE to audit their book of accounts. However, most SMEs businesses do not follow this and Companies under the SME & get their auditing done based on specific criteria:
- Free zone businesses: Many free zone authorities have made it mandatory for the companies to get themselves audited to renew their trade license. For example Dubai Airport Free Zone (DAFZA), Creative City Fujairah, Dubai International Financial Centre (DIFC) etc.
- Company liquidation: SMEs need to get their account audited to provide the liquidator’s report at the time of liquidation.
- Foreign company branches: All foreign businesses have to provide their audited financial statements of all business branches registered in the UAE.
- Taxation Requirement: To ascertain the book profits of the company in the computation of corporate taxes.
Auditing is important because many government bodies such as municipalities, ministerial departments, and insurance authorities require the companies to show their audited financial statements.
Importance & Benefits of auditing your accounts
The main purpose of conducting an audit is to ensure that the risk management, internal controls and governance of the company are working well. Here a third party depicts the company’s survival and growth in future.
Therefore, any company that is registered in the UAE must amend the MOA[Memorandum of Association] on & before June 30, 2017, and must get their accounts audited with a registered auditor.
Also, there are benefits of getting your accounts audited:
Better Management & finances
An audit involves the complete process to assess the business progress, and current financial position and taking guidance from financial experts. Here, you will find where you can save money and reinvest the same towards the future of the company.
Most small businesses cannot afford to have a full-time financial officer or an experienced account manager on board. Therefore, auditing makes it accessible for them to sit with the experts and develop better business strategies for growth.
Identifying fraud and loopholes
External auditors are well versed with industry practices and they will help you to identify the loopholes in your system that can cost you a lot in the long term. They will also provide essential inputs for improved financial decision-making.
Net worth & liquidation:
If you are looking to attract investors, then you need to know the real net worth of your business. Most business owners ask you for your business net worth at the time of giving your business proposal. Therefore, an audit report from a certified third-party auditing firm adds more credibility to your pitch.
Third-party requirements:
Multiple institutions will ask you for your business’s audit report to proceed with your request further. It can be lenders such as the banks, and NBFCs[Non-Banking Financial Corporations] that will ask you to get your account audited by a certified third party for further approval of your application. Not only financial corporations, but suppliers might also ask you to provide your audited documents to verify the company’s credibility, as many suppliers would not risk their goods against default on payment by a company that is financially at risk.
Summing Up – Every Company must get its accounts audited.
Getting your accounts audited in a way to identify, and correct your mistakes from the very start. It will help you to avoid making big mistakes, which is crucial for success, especially for new businesses.AMAJ is a registered auditor who can audit your books of accounts.
