A statutory audit is an inspection and evaluation of the financial records and statements of an institution, whether it be a government organization or a business, that is required by law. The legislation mandates that it be carried out at predetermined periods. As the financial records and information provided by these businesses to the public serve as a representation of the entity's financial position and performance, the main goal of this audit is to confirm their accuracy and fairness.
Typically, a statutory audit is carried out to confirm the accuracy of the financial records and statements that a business discloses to the public. The public can use this audit to check whether the company is conducting its business in accordance with the necessary laws and regulations. In order to acquire a clear and transparent picture of the company's operations and its current financial status, a number of factors are checked during a statutory audit, including bank balances, accounting records, current working conditions, internal systems, and more.
Audit Requirements for Statutory Audit
A company must hire an impartial statutory auditor in the UAE to perform the audit in order to undertake a statutory audit. In addition, there are a number of prerequisites that must be met, including:
- Providing thorough details regarding fixed assets.
- Delivering bank account statements that include credit and debit transactions for the designated audit period.
- If relevant, providing information on any secured and unsecured debts.
- Delivering data about business payables and receivables.
- Documenting purchases and sales for items that are both domestically produced and imported or exported.
- Providing information about the inventory.
- Providing tax records and data on statutory charges and obligations.
- Calculating the costs associated with selling and running the business.
- Details on foreign exchange profits and expenses
The statutory auditor may also ask for further records, statements, or accounts from the company. Depending on the size and complexity of the company's activities, the audit's length can change and could last a month or longer.
Benefits of Statutory Audit for Companies
- Improves the company's goodwill and reputation.
- Increases the legitimacy of the company and public trust.
- Offers customers and investors an in-depth assessment of the company's performance and financial status.
How Companies in the UAE Benefit from Statutory Auditing
- Free-zone companies may be subject to additional regulations, however all UAE mainland companies are required to have their financial records and accounts audited annually by a registered statutory auditor.
- Businesses must submit their statutory audit reports as part of the application process for business license renewal.
- When requesting loans or capital investments from banks and financial organizations, companies frequently need to provide their statutory audit reports.
- Public companies must make their statutory audit reports available to shareholders, the public, and other organizations in order to give them information about their present financial situation.
- The statutory audit report acts as a central point of reference for evaluating the quality and dependability of the company's financial statements and transactions during share transfers.
- By providing a thorough overview of the firm to the public and other stakeholders, the statutory audit report aids in the development of the organization's credibility and trust.
Processes in a Statutory Audit
- Engagement of a Licensed Statutory Auditor: Engaging a Licensed Statutory Auditor is the first stage.
- Confirmation of Audit Acceptance: The company's statutory auditor confirms that they have agreed to audit the financial records and statements.
- Comprehensive Departmental Review: To ensure compliance with industry standards, the auditor and their team carefully examine the operations of several company departments.
- Evaluation of Control Systems: The auditor evaluates the efficiency of the company's control systems and practices. To learn more about previous results and corrective measures, they can also look back at previous audit reports.
- Thorough Examination of Financial Records: The auditor thoroughly reviews all financial records and statements supplied by the company, including bank statements, information on fixed assets, trade payables, and receivables, among other things.
- Preparation of a Detailed Audit Report: The auditor creates a thorough report based on their findings. This report is provided to the business management and has a number of uses.
Statutory Vs. Internal Audits
A company's shareholders have the power to choose the internal auditor, while the management chooses the statutory auditor. The company's yearly financial statements are normally completed before the statutory audit begins. Internal auditing, on the other hand, is a continual and ongoing procedure in Dubai.
Statutory audits are required by law and must follow certain guidelines. Internal audits, on the other hand, serve primarily management needs and are exempt from such severe regulatory obligations. Employees of the organization or outside audit companies in Dubai are both capable of performing internal audits.
While there are no specific guidelines for internal audits, it is advisable to work with statutory and internal auditing professional audit firms in the UAE to ensure accuracy and adherence to best practices.
Why Choose Us?
Our unwavering commitment to assisting our clients in maintaining accurate and error-free financial records is the cornerstone of BMS's reputation. Our dedicated team of experts is ready to assist you with a range of accounting and auditing difficulties. Our strategy is centered on offering customized services that are totally tailored to each client's unique needs.
We take pride in being the company you choose for all of your statutory audit requirements. We have experience guiding clients through the challenges of statutory audits. If you have any queries or require additional information, don't be hesitant to get in touch with us. Your financial prosperity is very important to us.