Accounting is essential in the UAE manufacturing industry due to the wide range of activities and operations involved in sales. A well-structured accounting system for manufacturing companies in UAE is essential in:
- Tracking income and expenses in production. Preparation SOA for suppliers
- Assistance with salary processing and maintaining payroll files
- Monthly expenses report reconciliation and extraction
- Based on the incurred costs, make suggestions for price-fixing.
- A perpetual inventory system can reduce overstock and bottlenecks.
- To avoid fraud and other errors, implement internal control procedures
What is an internal audit in a manufacturing company?
A manufacturing audit is a thorough inspection of a manufacturing process to determine if it is performing. Although a manufacturing audit may only cover a limited number of units, it covers all manufacturing processes.
Due to the variety of risks, the audits performed by the audit firm in Dubai can help business owners strengthen their internal controls. Although the internal auditing process is almost identical for all businesses, it’s important to pay more attention to any additional procedures. You should be familiar with procedures like inventory observation, price testing and control testing. This will allow you to prepare for the audit.
Read also: Reasons Why Businesses are Audited in UAE
Audit Procedure in UAE for a manufacturing company
1. Inventory Observation
The audit services in UAE will observe the inventory counting procedures of the company as a standard procedure. The UAE auditors will conduct their own independent checks of your inventory during the first stage of the audit. To counter accounting frauds that result from falsifications of inventory records, inventory observation is necessary.
When observing inventory in your manufacturing company in Dubai, finance auditing specialists use mainly two methods: sheet-to-floor and floor-to-sheet. They use the floor-to-sheet technique to select items from the warehouse and verify that they are included in the record. The ‘sheet-to floor’ technique is where company audit services select items from the record to verify that they are in the warehouse. The ‘sheet to floor’ technique is used to verify the existence of inventory.
2. Price Testing
After confirming the inventory quantity with the inventory observation, audit services in UAE test the inventory cost. The inventory is shown in the financial statements at either the market price or the lowest cost as per generally accepted accounting standards. The auditor will verify the cost of materials, overhead, and labor.
Price testing is performed by the auditor who selects items from the company’s inventory and verifies that the inventory costs are accurately recorded in financial statements. The UAE auditor will review original documentation, such as time cards and invoices, to perform price testing. The best Dubai audit firms will assist you in complying with accepted accounting standards and preparing for an inventory audit.
3. Reserve Inventory
Many manufacturing companies may have inventory that is at risk of becoming obsolete or perishable. Food manufacturers with perishable inventory are particularly vulnerable. Statutory audit teams will perform inventory reserve testing to verify that the inventory’s market value is not higher than the price tested.
Auditors will also evaluate the risk of outdated inventory during internal controls testing. Auditors may have counted food spoilage or boxes that were not in use during inventory observation. This could force them to conduct aggressive inventory reserve testing. Manufacturers may choose to hire top audit firm in Dubai, UAE, for a stress-free audit of their inventory.
4. Analyze the Results
The auditor will begin to analyze the results after conducting extensive testing of the quantity and price of inventory. This is where Dubai auditors can determine if there are any anomalies in your company’s financial statements or losses that have been suffered by your company.
Many large companies employ multiple auditors around the globe and allow each auditor to analyze and compare the results. Although it may work, hiring multiple auditors is not a good option. However, using the best Dubai audit firms is a better choice than hiring them all. After the analysis has been completed, the auditor will submit the report to your company’s management. The audit report includes recommendations that can be used to improve your company’s financial management.
What Manufacturing Companies Should Do To Ease The Audit Process?
Due to the large amounts of investment and operating costs, audits are a constant challenge in the manufacturing industry. Costs, perishable inventory, and other factors all add to the complexity of auditing. The complexity of an audit process only increases. Companies must be able to effectively address these issues in order to comply with generally accepted accounting standards. It is highly recommended to hire the services of reputed Dubai auditors such as Audit firms in Dubai, in order to avoid fraud and scandals.
What Can Audit Services in UAE do for you?
Expert Audit Firms in Dubai – Farahat & Co are available to assist you as an accounting or auditing team in the timely management, analysis, and finalization of financial statements. Our experts can help you choose the best accounting software for your company and recommend cloud-based systems that will make it easy to access.