What are the requirements for Statutory Audit?
Statutory audit is a legally required audit to review an organization’s financial statements and records. The audit determines whether an organization provides an accurate depiction of its financial position by thoroughly examining financial information such as balance sheets, bank balances, bookkeeping records, and financial transactions. The companies subject to audit are usually the public listed firms, government organizations, banks & brokerage firms and others as required by the country’s laws. Statutory audits are audits as required by the statute. The statute can be enacted at the federal, state, municipality level or by the organisations’ management and board.
Under the new UAE Commercial Companies Law, Federal Law No. 2 of 2015, Article 27, Chapter 2 states that every company shall appoint auditors for auditing their accounts by a licensed auditor registered under the Ministry of Economy in the UAE.
Statutory Audit Requirements
The statutory audit may be significant for companies operating in the UAE. The below points explain the reasons for the requirements for Statutory audits:
- All the UAE mainland companies must audit their accounts from a licensed statutory auditor registered with the authorities. Certain Free Zones have different requirements.
- Companies in the UAE must submit the statutory audit report to authorities while renewing the business licenses.
- For any bank loans and capital requirements, companies are required to provide all statutory audit reports.
- In the case of a public company, a statutory audit of all finance and accounts is required to know the company’s financial status to all shareholders, exchanges, and the public in general.
- Statutory audit increases the company’s reputation as it settles any qualms about the company’s financial position. It also enhances the reliability of the company among the dealers and customers.
- In the case of the company’s share transfer, the statutory audit will be the central reference point determining the accuracy of the financial transactions, bank accounts and account books.
Records for Statutory Audit
The following documents must carry out the audit process by a licensed auditor registered with the Government authority. Companies must ensure these records are available to the statutory auditor.
- Details of all fixed assets.
- Bank Account statements with details of all the credit and debit transactions in the required period.
- Information regarding the secured and unsecured loans if any
- Trade payables and receivables
- Purchase details (local and imports)
- Sales details (local and exports)
- Inventory details
- Record of all the taxes, statutory dues and duties
- Administration and selling expenses incurred.
- Details of forex profits and expenditures
The company may need to provide any other accounts and financial records as requested by the statutory auditors. The audit process can take at least one month or more depending upon the company’s size and documents to be audited. The company bears all the expenses towards the statutory audit.
