Business health check up: how to get ready for annual audit in the UAE
Season of annual financial audits in UAE is officially open and it’s not a surprise for you as a business owner that you will be expected to submit your company’s Audited Financial Statement for the past financial year which ended on December 31, 2019, before March 31, 2020.
To help you get ready for the year-end audit we have collected examples of questions that auditor may ask and main phases of the audit.
Why Annual Audit is the Best Health Check Up for Your Business
Having regular check-ups with a doctor has become a norm for all of us to diagnose potential health risks. Though when it comes to business many SMEs and start-ups don’t pay enough attention to their financial health as long as they have net income and new clients.
Let’s face the truth that in business prevention is much better than any cure. Here is where Annual Audit plays its crucial role to estimate whether your business structure is healthy and sound.
Qualified external Auditors in their turn, as good doctors, diagnose and treat your company to help you avoid financial problems in future via determining the accuracy of the Financial Statements furnished by the company and ensuring that the business is compliant with the International Accounting Standards (IAS).
Questions Auditor May Ask Before the Audit Starts
What were the past year comments and recommendations from the Auditor?
Are there any significant changes in the company operations this year?
Are there any areas that require exceptional consideration because of high business or financial risks?
What are the company’s revenue recognition approaches?
Are there any major transactions that will influence the financial statement?
Should the Auditor know about any other changes which can affect the final audit report?
Main Phases of an Audit Process
Step 1
Planning
At the planning stage, the Auditor is collecting the full list of required documentation that can help him in the further analysis – previous Audit Reports, copies of official company documents, bank statements, details of assets of the company, contracts with suppliers and customers, etc.
The Auditor will start the evaluation of how the company operates and should take into account the internal procedures of the company to plan the Audit processes accordingly.
Step 2
Testing the Internal Financial Controls
The Auditor will perform several tests to check if key controls are operating proficiently, and are properly outlined.
Step 3
Evaluating the Company’s Recording of Transactions
The following phase is to check the effectiveness of the techniques utilized for recording all transactions conducted by the business. Auditor checks that account balances are correct, as well as transactions and disclosures.
The Auditor will choose a sample transaction and check sample documentation for confirmation of consistency and compliance with fixed procedures. Through these analyses, the Auditor will evaluate whether the organization has a suitable level of operational effectiveness, and decide whether organization targets are accomplished.
Step 4
Analysing the Financial Records
The Auditor then takes a close look at all financial records to identify the accuracy of the reports and to ensure that the financial records are free of errors.
The Auditor will start to talk with representatives in various departments of the company to understand its general practices and procedures. The Auditor ought to unmistakably distinguish the areas that are not compliant, or that are less effective than they should be.
Step 5
Producing an Audit Report
After rigorous analysis of all financial and legal documents, Auditors proceed to create a report which outlines the Auditor’s findings from going through the financial details of the company.
At first, the Auditor needs to present a draft report that will contain all review test results, conclusions, proposals, strategies the organization needs to take after, and so forth. The customer is encouraged to give remarks and propose a plan of action alongside the time span for changes. These comments will be added to the final audit report and delivered to the Company Management.
Be Prepared for Annual Audit
The best way to get ready for your annual audit is to be proactive now!
Ensure that your Accounting team is aware of the upcoming audit and is ready.
Conduct reconciliations of your accounts regularly.
Provide all data in an accurate and comprehensive way, better in digital format or utilize Accounting software.
Ensure that you have all the supporting documents for company income and expenses.
Be ready to share with the Auditor Accounts Receivable Ledger, Accounts Payable Ledger, Purchase Ledger, Sales Ledger, Income Statement, Asset Register and much more.
Take actions now to ensure the audit process goes smooth, easy and fast, as a proper preparation will save you money and your precious time. Request our professional assistance and advice in preparations for Annual Audit Report or get ready by structuring your accounts yourself using our “Accounts, Compliance and Internal Control” guide with 20 Excel Templates which will help to keep the company’s records organized.
