Accounting and Auditing in Dubai: An Overview

Dubai is one of the world’s fastest-growing business hubs, with many companies from various industries setting up operations in Dubai. Companies must keep track of their expenses for effective multinational financial management in Dubai. As with any business, companies in Dubai must ensure the maintenance of proper accounting records and adherence to the required accounting standards. 

Moreover, the step-by-step implementation of the accounting cycle enables companies to provide better knowledge to the stakeholders and prospective investors and quantitative information on monetary assets to the government institutions for audit.  

Most authorities in Dubai request financial statements upon every renewal of the trade licence of the entrepreneur. In order to comply with the same, companies must consider account audits for the creation of the company's performance reports. 

Accounting Standards in Dubai

According to The Securities & Commodities Authority (SCA), compliance with the IFRS, as stated by the Central Bank of Dubai, is mandatory for every business being operated in Dubai. By making IFRS Accounting Standards mandatory, Dubai has become a global financial centre following the best international practices in financial reporting.

All the companies mentioned in the Dubai Financial Market, NASDAQ Dubai must manage their financial records as per the IFRS guidelines. 

IFRS is widely used by over 100 countries across the world. These accounting standards are acclaimed by the International Accounting Standard Board (IASB). The IFRS enables businesses to reverse their inventory under crucial conditions. IFRS also enables businesses the capitalization of development costs. 

Financial Reporting under IFRS Accounting Standards 

All companies must adopt the IFRS model in Dubai, including government organizations.  The major types of financial reports to be prepared under the IFRS Accounting Standards in Dubai are discussed below -

Financial Statements

For the preparation of financial statements under IFRS, companies must record all transactions in an accounting system and make any necessary adjustments. The below-mentioned financial statements must be prepared by the companies:

• Statement of Financial Position (Balance Sheet)
• Statement of Comprehensive Income (Income Statement)
• Statement of Changes in Equity
• Statement of Cash Flows

Reports from the Board of Directors

Under IFRS, such reports must have an overview of the company's activities, address any risks or uncertainties being faced by the company, along with outlining the company's plans for the future.

Reports on Management Decisions & Analysis

This should provide an analysis of the company's financial performance, including information on the company's revenue, expenses, and profitability.

Audit Report

The preparation of an audit report must be done by an external auditor, and it should provide an opinion regarding the financial statements being prepared in accordance with the IFRS and provide any additional insights or recommendations for the company.

Reports on Corporate Governance

 The company's governance structure and practices should be included in this report. They should include information on the company's board of directors (BOD), any committees which have been established, and the company's policies and procedures for the management of risks.

Notes to Accounts

These notes provide additional information on the financial statements of the company, including details on specific transactions or events that may impact the financial performance of the company.

Prospectus

A prospectus is typically prepared when a company is planning for the issuance of securities, such as stocks or bonds. The prospectus should provide accurate and transparent information on the company's financial performance, including its revenue, expenses, and profitability.

Financial Reporting enhances clarity in the accounting practices carried on by a company. It enables the involvement of the government and investors for the examination of the financials and removal of any potential reason for fraud or irregularities in controlling the company’s finance. 

Auditing in Dubai

In Dubai, the statutory audit requirement is crucial for ensuring financial accountability and transparency for companies operating in the region. This requirement helps to make sure that companies provide accurate and reliable financial information to the public, which is especially important for investors, stakeholders, and the general society.

Auditors inspect various financial records and transactions during the statutory audit, including bank balances, accounting records, and related economic exchanges. This process helps in the identification of any discrepancies or inaccuracies in the financial statements and ensures compliance with relevant regulations and standards by the company. The General Meeting of Shareholders is responsible for the selection of statutory auditors, who typically serve for 3 to 5 years, depending on the size and location of the company.

The chosen auditors must be independent and objective and shall report any irregularities or issues they identify during the audit. In Dubai, mainland companies are required by law to undergo a statutory audit, while companies located in free zones may have different requirements depending on the regulations of their specific locale.

Types of Audits in Dubai

The different types of Audits in Dubai are discussed below -

Statutory / External Audit

It is an obligatory audit of financial statements to ensure compliance with applicable rules and regulations. The purpose of a statutory audit is to ensure the accurate representation of the financial position of an organization by the financial statements. The auditor is appointed by the firm’s shareholders, and the report is delivered to them. The auditor's opinion is based on the financial statements being presented fairly in all material respects and its compliance with accounting standards.

Regulatory Audit (Tax Audit)

It is an audit conducted by a government agency or regulatory body to ensure compliance with regulatory requirements. i.e., VAT & Corporate Assessment Audit. The aim of this type of audit is the evaluation of an organization's adherence to laws and regulations governing its operations. The appointment of the auditor is made by the regulatory body. The auditor's opinion is based on whether the organization has complied with all applicable laws and regulations.

Performance Audit (Internal Audit)

It is an independent audit carried out for the evaluation of the effectiveness and efficiency of an organization's operations. A performance audit aims towards the identification of the areas for improvement in an organization's processes and operations. The appointment of the auditor can be made by the organization's management or a government agency; the auditor's opinion is based on the effectiveness and efficiency of the organization’s operations and its compliance with applicable laws and regulations.

Forensic Audit

Forensic audit or fraud investigation has become increasingly relevant due to the rise of corporate fraud. The objective of a forensic audit is the tracking and investigation of matters related to fraud, financial crimes & commercial disputes. Even for the purpose of filing a case, the Police in Dubai ask for the auditor’s certificate. The audit also ascertains the root & causes of financial errors, alleged employee fraud, reduction in company revenue, increase in cost & other operational matters.

Forensic audits involve a wide spectrum of investigative activities, such as an audit for the purpose of prosecution of a party for fraud, embezzlement or other financial crimes. Apart from financial fraud, a forensic audit may also include activities such as bankruptcy filing disputes, closures of businesses etc. A forensic audit is carried out when there is a possibility for the evidence gathered to be used in court.

Audit of Sales

Retail businesses operating in shopping malls in Dubai are obligated to submit a Statement of Gross Turnover that is being audited by an approved auditor. This requirement is on the basis of the terms in the Lease Agreement. The definition of gross turnover will be as specified in the lease agreement providing for certain components of sales to be included/excluded respectively. Carrying out an audit of sales helps in reviewing the sales collection process to potentially identify control deficiencies and ensures the tenant's compliance with the lease agreement, along with providing assurance of reported gross sales to the landlord.

It must be noted that a statutory audit is one of the most crucial audits among other audits.

Statutory Audit Requirements in Dubai

Statutory audit requirements are provided by the government for the screening and evaluation of business performance. These requirements are almost similar but may differ depending on the business type and the company's location. Statutory audit requirements in Dubai require the following necessary papers:

• Information with regards to the fixed assets, bank accounts & statements, displaying financial transaction details, cash receipts, and payment.
• Data related to secured and unsecured loans and advances, as well as trade payables and receivables.
• Information on both local and imported purchases.
• Specifics about local sales and export sales.
• Details about inventory, administrative costs, and expenses related to selling.
• Information about foreign exchange earnings and expenses.
• Details about statutory dues and other levies that need to be paid.

The Procedure of Statutory Audit in Dubai

Under Dubai Federal Law no. (2) Of 2015, companies in Dubai must conduct a statutory audit, during which the auditors will request the necessary papers discussed above for review.

The entrepreneur must hire a competent statutory auditor to carry out such an audit. The statutory audit process in Dubai involves comprehending the company's operational conditions and controls together with testing internal systems and records.

The audit scrutinizes records maintained by the organization, including financial transaction records and other finance-relevant necessary papers, such as revenue and expenditure reports, return on investment, and much more. This helps in establishing a cumulative financial ratio. Through the statutory audit process, gaps can be identified, and accompanying actions can be scrutinized. It is important to note that any inaccuracies may result in penalties or even imprisonment.

Services provided by Enterslice

At Enterslice, the team has a thorough knowledge of accounting and auditing requirements in Dubai and their importance for our client's business. Gathering all the necessary papers and analysing the accounting and auditing requirements in Dubai requirements can be daunting; however, the same can be handled effortlessly by our team. We can provide our clients with clear and concise details on the accounting and auditing requirements of their business. Our team of professionals has a proven track record of helping businesses in Dubai succeed, and we're committed to delivering nothing but the best to our clients.

We provide the following services in respect of Accounting and Auditing in Dubai.

Accounting Outsourcing Services

Accounting plays a vital role in running every business successfully. Being a commercial hub, Dubai has a large number of businesses, and they all require the maintenance of books, accounts and tracking financial transactions. Accounting outsourcing in Dubai is the best practice adopted for keeping the books of accounts accurate and error-free. We offer accounting outsourcing services in Dubai to help our clients in the identification of financial indicators and performance promptly, enabling them to make the right decisions in their business at the right time. By choosing our team as the partner in Dubai, the clients can avail of professional accounting services delivered with the utmost confidentiality and security in the shortest turnaround. Our Accounting Services include the following.

• Assessment of initial work procedure
• Assembling data and recap current financial solidity and position
• Creation of various records like vouchers, invoices, bills, bank statements, etc.
• Data recording
• Generation of financial statements, financial analyses report, etc.
• Meeting with administration
• Indorse strategies and actions 

Accounting Supervision

After the implementation of VAT in Dubai, there is a growing trend of external review of in-house accounting and bookkeeping functions. Management needs independent assurance as if the accounting function is operating smoothly, without any errors and as per best practices. The scope of supervision work can vary from engagement to engagement as mutually decided with management but can typically include reviewing monthly balance sheets, profit and loss, trial balance and ledgers, VAT and substantiating those with underlying transactions and necessary papers. Such reviews can be done periodically, but monthly or quarterly reviews will be most suitable. Our services in respect of  the same are enlisted below -

• A proper review of books of accounts along with required supporting necessary papers
• Timely recognition of revenue transactions as per accounting principles
• Keen analysis of sales of the business from various angles of contributions of business products and services
• necessary paperation of the payments made by the company
• Analysing whether the payments are being recorded on an accrual basis while undergoing a proper cut-off procedure at the end of each month
• Proper record-keeping and recognition of the variety of prepayments, advances, unearned income, and much more by properly verifying the associated accounting records or transactions
• Monthly reviewing and preparation of financial reports along with issuing them to the management, including financial ratio analysis, financial statements, analysis on working capital, marginal safety, and much more.

Account Reconciliation Services

We offer professional account reconciliation services in Dubai for small and medium enterprises, corporate houses, and large organizations. Through our expert account reconciliation services, we make sure that the actual account balance matches the corresponding bank statement, preventing fraudulence and legal issues to help our clients focus fully on their business goals. Outsourcing account reconciliation services to a financial expert like us not just ascertain the accuracy of the client’s company’s financial statements but also ensure compliance with regulatory/ statutory requirements.

• Bank Statement Reconciliation
• Vendor Reconciliation Service
• Customer Reconciliation 
• Inter-company Reconciliation 
• Prepaid Reconciliation

Updating Of Backlog Accounts

We are a leading accounting and auditing firm providing the below-mentioned services with regard to updating and backlogging accounts. 

• Updating of backlog accounts in Dubai for maintaining the book of accounts from the date of the company incorporation in the prescribed format under the Dubai Commercial Companies Act
• Set up the backlog account in order to maintain an accurate check on the company's financial flow.
• Analysing and reviewing all the supporting necessary papers of the  accounts
• Support in the preparation of books of account from the date of their company establishment, updating backlog accounts in Dubai.
• Preparation and finalization of  the books of account on a periodic basis to avoid any kind of mistakes

Book Keeping Services

Bookkeeping, i.e. maintaining records of financial transactions, is a vital part of any accounting function, but for Small and Medium Businesses managing in-house Bookkeeping is a costly and time-consuming process as it requires them to hire a full-time accountant. It is also very important that the company books are up to date and maintained correctly for better financial reporting, Audit, and Tax purposes.

We offer the following Book Keeping Services.

• Selection of suitable accounting software. 
• Creation and/or redefinition of Chart of Accounts.
• Booking invoices. 
• Recording receipts from customers against invoices.
• Recording invoices from suppliers and other expenses.
• Entering payments in accounting software.
• Recording adjustments through Journal entries.
• Recording accruals, depreciation, and payables.
• Ensuring VAT is accounted for accurately.
• Monthly closing and generation of financial reports.

Financial Reporting

An ideal and precise financial reporting is derived from a robust and efficient accounting method of a company. Financial reporting allows external parties in making effective decisions with regard to investments, mergers, acquisitions, etc. Our services include

• Set up a Double Entry system
• Preparation of Trial balance
• Recording Ledger entry

Preparation of Financial statements and other required reports as per the financial reporting norms