Most UAE companies need a statutory audit every year, and many need it for more than one reason: company law, their free zone and, since corporate tax, the FTA. Below: who must have one, how to prepare so the report is signed on time, and what the auditor does at each stage.
What an Annual Statutory Audit Is
A statutory audit is an independent examination of a company’s annual financial statements by a licensed external auditor with no financial or business interest in the company. The result is the auditor’s report: an opinion on whether the financial statements present fairly, in all material respects, the company’s financial position and results under the applicable accounting framework, usually IFRS or IFRS for SMEs.
“Statutory” means the audit is required by law, a licensing authority or a regulator, rather than chosen voluntarily.
Who Must Have a Statutory Audit in the UAE
Company law
Under Federal Decree-Law No. 32 of 2021 on Commercial Companies, companies such as LLCs and private and public joint stock companies must appoint an auditor and have their annual accounts audited. Public joint stock companies must use an audit firm that also meets the Securities and Commodities Authority’s requirements.
Free zone licensing
Most free zones require companies to submit audited financial statements each year, usually within a set period after year end or at licence renewal. This applies in zones such as DMCC, JAFZA, DAFZA, RAKEZ and the Dubai Development Authority free zones, independently of corporate tax. DIFC and ADGM have their own rules, including limited exemptions for small private companies.
Which auditor can sign depends on the zone. DMCC, DAFZA and RAKEZ keep approved auditor lists, DIFC and ADGM keep their own registers, and zones such as JAFZA and the DDA free zones accept an auditor licensed by the Ministry of Economy and Tourism. For details by zone, see audit requirements in the UAE.
Corporate tax
Under Ministerial Decision No. 84 of 2025, for tax periods starting on or after 1 January 2025, these must prepare and keep audited financial statements:
- A taxable person outside a tax group with revenue above AED 50 million in the tax period
- Every Qualifying Free Zone Person, whatever its revenue. A QFZP with AED 1 million of revenue needs an audit just as much as one with AED 200 million.
- Every tax group, which prepares audited special purpose aggregated financial statements, whatever its revenue. Under the earlier 2023 rules, tax groups needed an audit only above AED 50 million.
These requirements add to company law and free zone obligations. They do not replace them. A tax group member that no longer needs standalone audited statements for corporate tax may still need its own audit for its free zone.
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The Legal Basis
- Federal Decree-Law No. 32 of 2021 on Commercial Companies: requires companies to keep accounts and appoint an auditor.
- Federal Decree-Law No. 47 of 2022 on Corporate Tax: taxable income starts from accounting profit in the financial statements, so the audited figures become the base of the tax return.
- Ministerial Decision No. 84 of 2025: sets who needs audited financial statements for corporate tax.
- Ministerial Decision No. 114 of 2023: requires IFRS for corporate tax, with IFRS for SMEs allowed where revenue is AED 50 million or less.
- Free zone regulations: each zone’s company regulations set its own filing deadline and auditor requirements.
How to Prepare for a Statutory Audit
Most audit delays start with the books, not the auditor. If records are current and reconciled, testing can start straight away. If they have to be rebuilt at year end, the deadline is at risk before fieldwork begins.
Step 1: Keep records current through the year
- Tax invoices issued and received, filed by period
- Bank statements for every account, reconciled to the ledger each month
- Purchase orders, contracts and delivery notes for significant transactions
- A fixed asset register with costs, depreciation and disposals
- Payroll records and WPS reports
- Loan agreements, financing documents and guarantees
- Board minutes and shareholder resolutions
Keep records for at least 7 years after the end of the tax period for corporate tax, 5 years for VAT, and 15 years for VAT records relating to real estate.
Step 2: Prepare draft financial statements
Prepare draft statements under IFRS, or IFRS for SMEs where eligible, before the audit starts:
- Statement of financial position
- Statement of profit or loss and other comprehensive income
- Statement of changes in equity
- Statement of cash flows
- Notes, including accounting policies
Support every material balance with a schedule: receivables ageing, inventory valuation, fixed asset movement, loan reconciliation and related party balances. This lets the auditor start testing on day one. For what each statement contains, see audited financial statements in the UAE.
Step 3: Talk to the auditor before year end
- Agree the timeline, working back from your free zone or licence renewal deadline
- Flag significant transactions: acquisitions, disposals, restructurings and related party deals
- Flag any change in accounting policies
- Flag judgement areas such as impairment or fair value
- Arrange a year-end stock count the auditor can attend, if inventory is material
Step 4: Fix known issues before fieldwork
- Reconcile revenue in the accounts to the VAT returns filed for the year. Unexplained differences are a standard audit focus.
- Agree related party balances with the other party and check that the transactions are disclosed and priced at arm’s length.
- Review goodwill and intangible assets for impairment.
- Write down slow-moving or damaged stock to its realisable value.
- If the company has losses or negative equity, prepare a going concern assessment and, where needed, a financial support letter from the shareholders.
Records behind or incomplete?
Bringing the books up to date before the audit is faster and cheaper than reconstructing them during fieldwork. Our backlog accounting team can close the gaps first, so the audit starts on a clean trial balance.
How the Statutory Audit Is Carried Out
Planning and risk assessment
The auditor learns how the business operates, sets materiality and identifies where material misstatement is most likely. Higher-risk areas get more testing.
Internal controls
The auditor assesses whether key controls are designed well and working. Where they are, the auditor can rely on them and test fewer transactions. Where they are weak or missing, more detailed testing is needed.
Substantive testing
This is the core fieldwork: analytical review against prior years and expectations, sample testing of transactions for amount, approval and cut-off, and confirmations sent directly to banks, customers and suppliers.
Findings and the audit opinion
The auditor discusses errors and control weaknesses with management before the report is final. Management can correct errors or provide further evidence.
If a material misstatement is not corrected, the auditor issues a qualified or adverse opinion, depending on how pervasive it is. If the auditor cannot obtain enough evidence, for example because records are missing, the result is a qualified opinion or a disclaimer of opinion. For what each opinion means, see types of audit report.
What a Clean Audit Gives You
The obvious result is compliance: your licence renews on time and your corporate tax file is complete. The practical value goes further. Banks usually ask for audited statements before granting or renewing facilities, and investors and partners rely on them. The management letter tells you which controls to fix. And a tax return built on audited figures is easier to support if the FTA asks questions.
How to Choose the Right Audit Firm
- Ministry licence: the firm and the signing partner must be licensed by the Ministry of Economy and Tourism.
- Zone approval: if your zone keeps an approved list or register, the firm must be on it.
- UAE expertise: the team should know IFRS, corporate tax, VAT and the rules for your industry and structure.
- Who does the work: ask who will lead the fieldwork and who will sign the report.
- Engagement letter: scope, fee, timeline and responsibilities agreed in writing before work starts.
For a comparison of firms in Dubai and how to verify them, see top audit firms in Dubai.
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
