Audit Services in UAE

Due diligence audit, also known as financial due diligence, refers to a series of investigations conducted during the acquisition process to assess the target company's assets and liabilities, operational and financial conditions, legal relationships, as well as the opportunities and potential risks it faces.

Due diligence audits differ from financial statement audits in terms of nature, scope, and methodology:

1. Different purposes: The goal of due diligence is to provide investors with a comprehensive understanding of the target company's various aspects before making investment decisions; whereas financial statement audits aim to verify whether a company's financial statements comply with accounting standards and fairly reflect its financial condition, cash flows, and operational results.

2. Different scopes: Due diligence covers a broader range, including business, legal, financial, and other aspects, and is not limited to reviewing historical data but also focuses on future projections and risk assessments. In contrast, financial statement audits are primarily confined to examining historical data and financial statements.

3. Different methods: Due diligence is mainly conducted through interviews, inquiries, and statistical analysis, while financial statement audits follow auditing standards and employ methods such as confirmation, reverse verification, sequential verification, sampling, and analysis.

The tax audit conducted by the UAE Federal Tax Authority (FTA) is an important process aimed at ensuring that businesses and individuals comply with tax laws and fulfill their tax obligations. The UAE FTA (Federal Tax Authority) tax audit refers to the examination of tax records by the UAE Federal Tax Authority for businesses engaged in commercial activities in the UAE, to ensure all companies pay the correct taxes as required. The purpose of the audit is to maintain fairness and transparency in the tax system, preventing tax fraud and evasion.

Audit Process and Required Materials

1. Audit Preparation: Businesses need to ensure that accounting records and commercial ledgers are standardized, convert audit standard document formats, and conduct a comprehensive review of previously submitted tax returns to ensure accuracy.

2. Required Materials: Include financial statements, accounting records, internal control documents, bank statements and confirmation letters, contracts and agreements, capital expenditure and investment records, purchase and sales records, payroll and salary records, asset lists, and tax documents.

The main contents of UAE enterprise audits include the following aspects:

1. Tax return review: Thoroughly examine the company's tax returns to ensure accurate tax rate calculations for all taxable transactions, especially import/export goods tax records.

2. Accounting data verification: Compare the company's financial books with tax return data to resolve potential discrepancies in advance and ensure data consistency.

3. Record retention system: Properly retain all relevant tax invoices, customs documents, and financial records, which will serve as key evidence during audits.

4. Auditor appointment: UAE law requires limited liability companies to appoint one or more auditors annually to review company accounts, check balance sheets and profit/loss statements, examine transactions with related parties, and verify compliance with UAE company law and articles of association.

5. Communication and coordination: Maintain smooth communication with FTA auditors and promptly respond to audit requirements to ensure efficient progress.

Through these audit measures, companies can ensure tax and financial compliance and effectively avoid potential tax risks from regulatory violations.

The timing for UAE enterprises to conduct audits primarily depends on the company's registration type and fiscal year. Below are the specific scenarios:

1. UAE local enterprises: Within 3 months of the company's establishment, the enterprise must submit tax registration. Within 3 months after the end of each fiscal year, the enterprise must submit a tax audit.

2. Non-resident legal entities: For non-resident legal entities before March 1, 2024, if they have a permanent establishment in the UAE, they must submit a tax audit application within 9 months of the permanent establishment's existence. For non-resident legal entities with nexus in the UAE, they must submit a tax audit application within 3 months from the effective date of the decision.

For non-resident legal entities on or after March 1, 2024, if they have a permanent establishment in the UAE, they must submit a tax audit application within 6 months of the permanent establishment's existence. For non-resident legal entities with nexus in the UAE, they must also submit a tax audit application within 3 months from the effective date of the decision.