Examining the Complete Overview of External Audit Process for DMCC Companies in UAE

Examining-the-Complete-Overview-of-External-Audit-Process-for-DMCC-Companies-in-UAE

Sustaining reputation and financial transparency is critical in the fast-paced world of business, especially if it is running in the UAE. This is where financial statement accuracy and dependability are ensured through audits. UAE has granted Free Zones for businesses to run without any interruption and get benefits including 100% foreign ownership, zero import duties, and first-rate infrastructure. Companies operating within the Dubai Multi Commodities Centre (DMCC) are legally required to comply with audit standards to gain all benefits.

Among the required requirements for DMCC member companies is the filing of audited financial statements. This is where you need to hire DMCC-approved auditors in UAE who can offer you complete assistance for external audits.

Scroll down to learn more about the external audit and its process for companies registered with the DMCC free zone:

What is an External Audit?

An external audit is a process of identifying and auditing the financial statements of the company to know if the accounting procedure followed is transparent. Additionally, an auditor verifies that the company complies with accounting guidelines. An independent auditor who assesses financial statements and other accounts provides openness and confidence in the correctness of the accounts to the company’s stakeholders, including banks, licensing authorities, and shareholders.

In an external audit, a company’s procedures are also examined in addition to its books. As a result, it aids in locating mistakes, opportunities, hazards, and inefficiencies.

The UAE government has set a company law under Federal Law No.2 of 2015 for commercial companies. Some of the highlights of companies’ law are-

  • During the end of the fiscal year, all organizations operating in the United Arab Emirates are obliged to retain their books at their headquarters for a minimum of five years.
  • Businesses specified by law must compile financial statements on an annual basis by International Accounting Standards.
  • Companies operating in free zones and on Dubai’s mainland are subject to distinct auditing requirements. Freezone businesses must abide by the laws of their respective jurisdictions. Upon license renewal, several free zone agencies, including DAFZA, DIFC, DSO, and DDA, demand audit reports.

About DMCC

Dubai Multi Commodity Centre (DMCC) was established in 2002 by the UAE government and is the most preferred free zone for companies to set up their business. It allows different business options to be set independently, including dealing with stones, pearls, and diamonds. This is why companies need to undergo the External Auditing Process. It provides a complete insight into the financial condition of the company. Moreover, it examines software, financial processes, and the company’s methods.

How do you prepare for an external financial audit in DMCC?

Businesses that are registered in the DMCC Freezone are obliged to work with DMCC-approved auditors in the UAE to produce and submit audit reports with the necessary paperwork. UAE Commercial Companies Law and DMCCA Company Regulations outline the audit requirements for DMCC companies.

Once the audit is done, the DMCC will review the complete report as per the company’s law set. Moreover, once prepared, the audit report must be delivered to DMCC within 90 days.

The company will receive a certificate of compliance from the DMCC if the audit report and financial statements are approved. This certificate of conformity attests to the company’s compliance with the DMCC standards and its completion of the annual audit requirements.


Examining the Complete Overview of External Audit Process for DMCC Companies in UAE

What are the Documents required for the Company’s External Audit?

A DMCC-acclaimed auditor named BMS asks the management for pertinent papers during the audit. During an audit, the following paperwork must be gathered:

  • The license of the company
  • Passport copies of Shareholders
  • Lease Agreement / Tenancy Contract
  • Share Certificates
  • Bank statements.
  • Bank confirmation.
  • Trial Balance
  • Memorandum of Association (MoA)
  • Articles of Association (AoA)
  • Updated trade license
  • VAT and Excise tax registration details
  • Documents for invoices, bills, etc.
  • Account ledgers of major accounting heads
  • List of customers and suppliers
  • Management Accounts
  • Depreciation and fixed asset schedule

External Audit Services in UAE

What is the Importance of External Audit?

Submitting an external audit to the DMCC is essential to present the financial condition of the company. A company’s cash flow, performance, and economic status are all reflected in these statements, which help investors, shareholders, and other stakeholders make wise decisions. Furthermore, conformity with national and international reporting standards, including the International Financial Reporting Standards (IFRS), is guaranteed by audited financial statements.
Besides, there are other reasons to conduct external audits. These are-

  • To adhere to the DMCC guidelines
  • To renew their trade license
  • To comprehend the state of the company’s finances
  • Boosting the trust of the shareholders
  • Enhancing internal procedures and controls

What if the Company doesn’t conduct an External Audit?

It is mandatory, and part of the company set up in DMCC. Each of the companies in the DMCC Free Zone needs to have an external audit of at least 5 years. Not following the law can attract a fine of up to AED 5000. Additionally, your company may face license suspension or even cancellation for your company. The audit criteria must be strictly adhered to prevent such serious consequences.

What are the Benefits of an External Audit of the Company in DMCC Free Zones?

Since the UAE attracts businesses to set up in the DMCC Free Zone, there are many benefits companies can have. Some of these are-

Providing Credibility

The government authorizes a UAE-based external audit company to carry out external audits. The audited financial statements give the correctness of the company’s financial records credibility and weight. The public, shareholders, government agencies, and investors can all access the audited financials as trustworthy sources of information that support decision-making.

Shareholders Gain Confidence

Investors and shareholders want to avoid putting their money into high-risk companies. Analysing the company’s finances is the only approach to managing risk. Accurate financial statements are essential for winning over current and potential investors. Frequent external audits by a licensed audit company in Dubai or any other emirate guarantee that the financial information of the business is accurate and suitable for presentation to an outside party hoping to become an investor.

There are stringent rules and restrictions when doing business in the United Arab Emirates. When compared to industry norms, an external audit makes sure your business complies with governmental regulations. Value-added tax, the Economic Substance Regulations (ESR), and CIGA are compliance requirements that companies must meet in the UAE.

Conclusion

Since you now have a complete guide about external audits for doing business in DMCC under Free Zone, hiring a DMCC-approved auditor will help you get the best result. Hiring a certified financial auditing team will help you follow the proper rules.

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