Why Audit Is Important in Business UAE

Given the consistent development and existing limitations to the UAE's business industry, the value of audit to the economy and the sustaining business relations for both financial and non-financial stakeholders is clear regardless if it is a startup based out of Dubai, or a multinational located in Abu Dhabi.

What is an Audit?

To a business, an audit means an independent evaluation of the business's financial statements, records and processes, in order to provide an assurance that the financial reporting is true and fair, in compliance with the relevant accounting standards, such as the IFRS. In the United Arab Emirates (UAE) free zones, such as JAFZA and DMCC, and in the UAE mainland, the UAE Commercial Companies Law makes an audit compulsory for most companies.

1. Keeping It Legal

It's no secret that audits aren't the most exciting part of a business, but if you're running a business in the UAE, you have to do them to remain compliant with the law. Audits are required by law in the UAE, and the type of business you run will determine how you need to do them. Companies in foreign ownership structures, or companies that have free zone ownership, are legally required to submit reports on their financial statements. Having to do audits keeps you from legal problems and keeps your license and your ability to operate legally with the government intact. Keeping your business operations legal is the most important reason to do audits, but there are others as well. Audits keep you from financial problems as well, as they are becoming a requirement for things like registering for corporate taxes, renewing your business license, and even getting business-related visas.

2. Building Relationships

Trust is the most important part of a business relationship, and once a business has a reputation of being trustworthy, they will never struggle to find business partners. Audited financial statements are professional enough to instill trust in any new or potential business partners. Companies in the UAE take business audits very seriously, and if a foreign party wants to invest in a business, they will expect complete financial transparency. Audits will provide a company the trust and reputation they need to attract large investors.

3. Improved Internal Controls and Better Risk Management

Most people think an audit is just a bunch of number crunching. However, there is a lot of process and internal controls that go into an audit. An auditor evaluates your business systems, finds weaknesses, and recommends improvements.

This process improves your risk management by showing where things can go wrong and where fraud can take place. If your business gets internal audits on a regular basis, you will improve internal controls, be more efficient, and protect your business's assets. This will more accurately report your business's financial condition, and will fail operationally less, fraud will be less likely, and reporting will be more accurate.

4. Better Decision Making

Decision making is a lot easier when management has accurate financial information at their disposal. Financial statements that have been audited provide a reliable overview of performance, cash flow, and overall financial position. This helps leaders manage, budget and plan expense decisions and do so with confidence.

If you don’t have this assurance in audits, decisions may be based on wrong data, leading to avoidable mistakes.

5. Helping to Obtain Financing

Most banks and other financial institutions will require audited financials before they will extend a loan to a business. An audit helps lenders determine a business's credit risk by substantiating revenue, profitability, and financial reliability.

In the UAE’s competitive financing market, having accounts that have been audited can fast-track loan approvals and even capture better terms. Whether you are securing working capital or expanding your operations, an audit is an integral factor in financing success.

6. Improving Corporate Governance

In the present-day global market, robust corporate governance is an indisputable competitive advantage. Governance is improved when there is an audit that accounts for all of the processes, and has been done with regard to the overall structure, and factually mapped all activity to improve accountability and transparency. The result of the audits will provide an independent report that confirms that the evaluation of the financial reporting structure is correct.

Improved governance leads to better confidence from investors, an uplift in the goodwill of the business, and better positioning for the company to achieve sustained growth, especially in the highly competitive UAE market.

Conclusion

More than being a legal obligation, audits are designed with a view to attaining transparency and a positive performance. The confidence of investors is built, internal controls are strengthened and the audits conducted in the UAE will mitigate the risk from the businesses.

If you have not integrated an audit function into your growth plan thus far, it is essential that you do it as a priority. When you engage seasoned auditors in Dubai or Abu Dhabi, you build a trust that will be valuable for all the opportunities for business growth, and for developmental investments and sustained success.