Why is An Audit Mandatory for Companies in the UAE


Why is An Audit Mandatory for Companies in the UAE

An audit is the inspection of all account books by an auditor as well as the physical check of all inventories in a company. It is done to provide a form of credibility to the financial statements of a company so that shareholders and investors can trust what the books say.

In the United Arab Emirates (UAE), all companies are required to keep a book of account for 5 years and have it audited every year.

As a company owner you might be wondering if it is mandatory that your company has an audit book or how necessary it is to employ an auditor. 

You have come to the right place! 

This article will outline the benefits of having an audit performed on a company’s financial records and why it is mandatory in the UAE.

Audit Service in Dubai

Why An Audit Is Mandatory

An audit is mandatory for companies registered in mainland Dubai and UAE. This is because these companies must comply with the regulatory standards which encompasses the Commercial Company Law, Federal Law No. 2 of 2015, Article 27, Chapter 2 which states:

  • that all companies must appoint a registered and licenced auditor to audit their book of accounts, 
  • that corporations are required to prepare annual financial records that comprise a balance sheet as well as a profit and loss statement, 
  • that all companies must provide a clear and accurate idea of profits and losses, the company must use the International Accounting Standards and Practices when creating its periodic and annual reports.

Secondly, an audit is a legal requirement which is mandatory for companies in the free zone, foreign companies, companies undergoing liquidation, and some government authorities like insurance departments, ministerial and municipality departments usually request for a company’s audited financial records.

Lastly, it serves as a third party requirement because lenders such as banks or other loan firms usually insist that companies have their books of accounts audited by a recognized and approved auditing firm. More so, other institutions like supplies or dealers request for the companies audited financial records before having a deal with them. 

Now that we have seen the importance of an audit, let’s have a look at some of its benefits.

Benefits Of Having An Audit

The benefits of having your companies financial records properly audited includes:

Decision Making

Making the right judgments could be hampered by accounting errors. The management will benefit from having audited accounts since they will ensure that all transactions are accurately recorded in compliance with international financial reporting standards and that the company’s financial data and operational performance are accurate.

Updated Records

Companies that maintain audited accounts automatically retain accurate bookkeeping records, ensuring that every single transaction is recorded on a regular basis, and ensure that they do so in compliance with accepted accounting standards and procedures.

Reduces Risks

External auditors must confirm the existence of internal controls in an organisation as part of their audit. They can spot any potential weaknesses in the internal control framework and make suggestions for how to strengthen security to prevent employee fraud, lowering the possibility of losses for the company. This is crucial when there are multiple owners/shareholders of the business or when the owner or shareholders cannot be found to confirm and authorise all business transactions.

Brings In More Investors

An investor’s decision-making depends on the data in the audited financial accounts. If accounts are audited, they offer some certainty and comfort regarding the company’s financial status.

If audited records are available, it will be simpler for management to entice investors or raise funds. Additionally, if a company has taken or wants to take a bank loan, it must provide audited statements to the bank.

Financial Integrity and Reliability

A company’s financial accounts must be verified for correctness and dependability through audits. The financial transactions, records, and statements of the company are examined by independent auditing firms in Dubai to see if they accurately depict the company’s financial status. This procedure aids in finding any anomalies, flaws, or inconsistencies so that businesses can fix them and have correct financial records.

Observance of International Standards

The UAE is quickly becoming a major international business centre, drawing in foreign capital and multinational corporations. The UAE government has mandated audits for businesses to guarantee compliance with global financial reporting standards in order to be in line with best practices around the world. This criteria raises the country’s potential for international investment and puts the UAE in line with other advanced countries.

Quality Control Measures

Registered auditors assist in reducing errors in the produced accounts. The financial statements may gain additional value as a result of the quality control measures.

Long-term Benefits to the Companies

The audit report created offers long-term benefits like updated operations, accounting controls, etc. that will improve the company’s growth choices and build a reputation.

Offers Solutions

The answers that auditing provides to a company do not just stem from hazy information or broad assumptions. Auditors gather information and make observations during their examinations that they might use as the basis for their judgments and recommendations to business owners.

In the UAE, auditors will first look at a company’s financial accounts, systems, operations, etc. before contacting other sources (such banks) to gather information and expert opinions to solve any problem that may have come up


The mandatory effect of having an audit in a company enforced by the UAE government has shown to be highly beneficial. 

An audit guarantees adherence to legal requirements, advance financial correctness and dependability, stop fraud, raise investor trust, enhance corporate governance, conform to international standards amongst others. Companies in the UAE show their dedication to openness, trust, and financial integrity by accepting audits from top auditing services in the UAE like RSN Finance

If you need to hire professional, experienced and licensed auditors in Dubai, we are all you need!  Contact us today!

RSN Consultancy Accounting & bookkeeping firm

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