With the increasing growth of companies and changing business rules, maintaining financial records that are clear and correct has become very important in the United Arab Emirates (UAE). A financial statement audit is not just a legal requirement but also a smart way to build trust with banks, investors, and government authorities.
Whether your company is in one of the free zones or the mainland or registered in a special business area like DIFC, in any case, having your financial records audited assures the accuracy of your accounts in accordance with International Financial Reporting Standards (IFRS) and applicable UAE regulations, though specific requirements vary by jurisdiction.
This article will explain what a financial statement audit in the UAE is and when it is required, how it works, and how FAR Consulting Middle East helps you stay compliant.
What is a financial statement audit in the UAE?
A financial statement audit is an examination performed by licensed auditors in order to examine the financial reports and records of a company. This helps to make sure everything is correct, complete, and follows the rules.
The UAE requires mainland companies, including public joint-stock companies and specific other entities, to maintain proper accounting records and undergo annual financial statement audits. The auditing requirement exists under Federal Decree-Law No. 32 of 2021 for Commercial Companies. This requirement applies to all mainland LLCs and PJSCs, regardless of company size or revenue.
The auditor examines whether or not the company is compliant with IFRS (or other applicable standards in jurisdictions like DIFC) and whether the financial statements provide a true and fair view of the company’s position.
Importance of Financial Statements Audit in UAE
Getting your financial statements audited is important for many reasons:
- To secure bank loans
- To attract investors
- To renew free-zone licenses
- During mergers or exits
- To comply with UAE Corporate Tax Law
An audited financial statement builds trust and shows that your company is being managed honestly and properly.
The Major Steps Involved in a Financial Statement Audit in UAE
The audit of financial statements in the UAE has a structured approach and follows all applicable laws in the country as well as international standards. This audit makes sure that a company’s financial records are correct, complete, and conform to IFRS and the UAE laws such as Federal Decree-Law No. 47 of 2022 (Corporate Tax Law) and Commercial Companies Law No. 32 of 2021.
The following are the major activities involved in a financial statement audit in the UAE:
Step 1: Appointment of Licensed Auditor
This is the first stage in which your company appoints the auditor licensed by the Ministry of Economy or relevant free zone authority, depending on jurisdiction. An engagement letter is signed between your business and the
that includes:
- What the auditor will do
- What documents will be reviewed
- Timeframe for completion of the audit
It’s an important step in starting the process of audited financial reports.
Step 2:Audit Planning and Risk Assessment
In this phase, auditors collect information about your company. They:
- Review your industry and business activities
- Examine the accounting system in use
- Make observations in areas that might be subject to error or fraud.
It allows auditors to prepare the audit properly, focusing particularly on areas of risk and exposing the audit efficiently.
Step 3. The Internal Controls Review
This step examines how your company manages its daily cash transactions, including:
- How transactions are recorded
- Who approves payments
- Tracking of expenses
The aim is to determine if the company has adequate systems in place to prevent and be aware of unintended error or fraud. Lapses in control may invite scrutiny at a deeper level.
Step 4: Substantive Testing of Transactions and Balances
This is one of the main steps in the financial statement audit in the UAE. The auditor will:
- Verify sales by checking bank statements and invoices
- Examine the expenses and sales
- Trace accounting entries to actual documents
Hence, this will give assurance that the numbers in your audited financial statements are correct and accurate.
Step 5. Lead Sheet Preparation
It is a sheet that summarizes the balances in various accounts such as cash, sales, expenses, etc. The sheets ensure an orderly flow of information for linking with your final financial statements by the auditors. This process ensures that all information is adequately tracked and understood during the course of the audit.
Step 6. Reporting Audit Findings
After the completion of the examination of financial records, the auditor will:
- Focus on errors, omissions, and weak points in the internal system
- Communicate these points with the management of the company
- Make suggestions on how to improve or fix the controls in place
Step 7. Issuing the Final Audit Report
When the auditor finalizes the review, he prepares a report on that audit in a well-defined way. According to that report, the auditor can opine on his findings as well as recommendations suggested by him:
- Give an audit opinion which can be unqualified, qualified, adverse, or disclaimer.
- Highlight issues requiring concern or improvement.
- Provide the report to the management and, if needed, to the corresponding authorities, such as Federal Tax Authority (FTA).
Who Must Maintain Audited Financial Statements?
According to Ministerial Decision No. 84 of 2025 on Audited Financial Statements, all of the following shall prepare and maintain audited financial statements:
- A Taxable Person that derives Revenue exceeding AED 50 million during the relevant Tax Period.
- A Qualifying Free Zone Person.
- A Tax Group shall prepare and maintain audited special purpose financial statements.
- A Qualifying Free Zone Person engaged in the activity of distribution of goods or materials in or from a Designated Zone.
Are Financial Statement Audits Effective?
Yes, audits are highly effective tools in:
- Enhancing financial credibility
- Detecting and preventing fraud
- Improving internal control mechanisms
- Facilitating tax compliance and regulatory reporting
A well-conducted audit strengthens the financial confidence that investors, lenders, and regulators have in the business.
How FAR Consulting Middle East Can Help with Financial Statement Audits in the UAE
At FAR Consulting Middle East, our certified auditors offer top-notch audit and assurance services in accordance with the UAE’s legal framework. Our certified auditors assist clients with the following:
- Ensuring compliance with UAE Commercial Companies Law and IFRS
- Preparing complete and accurate audited financial statements
- Aiding in corporate tax readiness
- Providing support in license renewals and bank submissions
- Internal audits and forensic reviews
With in-depth local knowledge and international standards, FAR consulting middle east ensures financial transparency and business growth.
FAQs
Q1. What is a balance sheet and audit report?
A balance sheet is a part of the financial statements that shows what your company owns (assets), owes (liabilities), and the value left (equity) at a certain time. It helps people understand how strong your business is financially. An audit report is the written opinion of the auditor. It says if your financial records—including the balance sheet—are correct and follow all the proper standards.
Q2. What is the audited balance sheet?
An audited balance sheet means a balance sheet that has been examined by a qualified external auditor and found to be correct and true in all respects. Most of the time, it’s required when companies apply for loans, renewal of license, or allowing investment.
Q3. What is an opening balance sheet audit?
An opening balance sheet audit is performed when a company starts operating or undergoes significant changes like a merger or restructuring. This audit confirms that the opening numbers in accounts were accurate. Thus, it gives a correct starting point for all future financial records.
Q4. When is an audited balance sheet required?
According to UAE law, companies that need to submit audited financial statements include:
- All mainland LLCs and PJSCs must undergo an annual audit
- Free zone companies, depending on the rules of each free zone (like DMCC, DAFZA, RAKEZ)
- Taxable Persons deriving Revenue exceeding AED 50 million during the relevant Tax Period are required to maintain audited Financial Statements, as required by the Federal Tax Authority (FTA) for corporate tax purposes.
- Qualifying Free Zone Persons (QFZPs)
- Members of tax groups (mandatory regardless of size or income)
Note: The Economic Substance Regulations (ESR) now apply only to financial years from 1 January 2019 to 31 December 2022. No ESR notification or report is required for financial years beginning on or after 1 January 2023.
Q5. What is the objective of an audit of financial statements?
The main purposes of a financial audit are to:
- Certify that your accounts accurately and fairly depict your company’s financial status.
- Determine whether material misstatement(s) or fraud exist.
- Ensure compliance with IFRS in your reporting.
The auditor provides your company with recommendations about better financial management practices and record-keeping methods.
Q6. What is a financial statements audit?
An independent audit review of financial statements exists to verify the accuracy of these statements and their compliance with regulations.
Q7. Are financial statement audits effective?
Yes, financial statement audits create transparency while detecting fraud, which leads to better decision-making.
Q8. What are the major steps in a financial statement audit?
The financial statement audit process includes appointment of licensed auditor, audit planning and risk assessment, along with internal control testing, substantive procedures, lead sheet preparation, and reporting.
Q9. What is the lead sheet for an audit?
A lead sheet is a simple document used during audit work to group and summarize account balances from your company’s general ledger. It assists auditors in keeping the audit organized and linking all numbers to the appropriate section of the financial statement.
Need expert help with your audit? FAR Consulting Middle East offers audit services under UAE law. Our certified auditors check if the financial statement is represented fairly, legally compliant, and suitable to investors. Contact us today to best ensure that your business has met all regulatory and tax obligations.
