A corporation’s financial statements are essential to check the precision of its financial records. The UAE has updated its taxation system in light of the advantages of modernizing the tax system to make it appealing to foreign firms and investors.
Businesses might be required to conduct their own financial statement audit before corporate tax in Dubai takes effect.
Audit firms in Dubai provide quality financial statement audits. They assist with the corporation's tax preparation, audit, and compliance needs. The top audit firms in Dubai have a plethora of expertise in all facets of corporate tax advisory services. It includes company entity establishment and operation, income tax UAE filing, and consolidated reporting for large corporations.
UAE Corporate Tax Rate
According to the UAE Ministry of Finance, it will begin charging a federal corporate tax from June 1, 2023.
As per the ministry, the UAE's corporate tax policy "will be among the most competitive in the world," with a statutory tax rate of 9% for taxable income over 375,000 UAE dirhams and nil for taxable revenue up to that amount "to support small businesses and startups."
Corporations must be familiar with their financial statements and how they will affect their business operations in the UAE to get ready for the start of corporate tax commencing in Dubai.
Corporate Tax Advisory
Businesses in the UAE need to assess how corporate tax would affect their activities. Companies should make sure they abide by corporate tax law. Corporate tax advisors assist in navigating this and ease the company's move to the corporate tax system.
Read More : How to Determine the Business Profit That Will Be Subject to UAE Corporate Tax
Importance of Financial Statement Audit Report
A corporation tax compliance approach must include a comprehensive financial statement audit report. It is a crucial component of the corporate income tax UAE compliance strategy.
A financial statement audit helps in finding errors in financial statements. It determines whether the business operations comply with all rules and regulations.
Financial statements are of the following types:
- Balance sheet
- Income (profit/loss) statement
- Cash flow statements
- Statement of shareholders' equity
To confirm the correctness of a corporation's financial accounting and reporting, taxing authorities may request any of these financial statements.
Financial Statement Auditing Process
A typical business financial statement audit carries out the following process:
1. Planning and Risk Analysis
Recognizing the corporation and the environment within which it operates is a necessary first step. After that, this research is utilized to determine whether any potential risks could affect the financial statements.
2. Testing of Internal Controls
The validity of a set of controls used by an organization is evaluated in the second step. It focuses on issues including appropriate authorization, asset protection, and task division. To assess the level of control efficacy, a variety of tests may be run on a sample of transactions. The auditors will have to use additional processes to review the financial statements if the controls are defective or if there is a substantial possibility of a material misstatement.
3. Substantive Procedures
The third phase entails a variety of procedures. To obtain credible evidence, two different kinds of substantive processes are used:
- Analytical Procedures – These processes utilize the connections between different accounting and non-accounting information to hold up the claims.
- Test of detail – The audit team uses financial statements, assets and liabilities, transactions, and disclosures as supporting documents in this process to demonstrate the absence of major misleading statements.
To conduct substantive testing, the auditor collects proof using a combination of:
- Physical examination of the long-term and short-term assets
- Assessing accounting statements to support different transactions
- Analyzing the dealings with company associates, such as customers and suppliers
- Evaluating the company's financial components in light of external market data
- Determining whether any computations were made incorrectly
4. Completing Financial Statement Audit Report
The auditors create a certified report outlining their assessment of the company's reporting practices. They establish an overall opinion about the accounting records based on the outcomes of the control tests, professional judgments, and substantial pieces of evidence.
During all stages of the financial statement audit, the auditor communicates with representatives of the corporation. It may include senior managers and accountants. To dispel questions and obtain information, they question the manager's claims on specific transactions and reports.
Why Choose Farahat & Co?
Farahat & Co. is a reputable audit firm in Dubai and a Tax consultant in Dubai. We have a team of auditing experts and corporate tax advisors with extensive experience in providing audits and company tax services. As an experienced accounting firm in UAE, we can prepare financial statements following both IFRS and UAE GAAP Accounting Standards.
We have years of expertise working with clients in Dubai and know how to get them ready for this upcoming change. With the help of our services, you can guarantee that your company complies with all applicable corporate tax laws.
We offer corporate tax advisory services, which include:
- Corporate income tax law interpretation and compliance
- Preparation of annual financial statements
- Preparation of consolidated financial statements
- Preparation of annual accounts
- Preparation of interim accounts (before year-end)
If you would like more information about preparing your financial statements before corporate tax commences in UAE, please contact us today!
Read More : Introduction of Federal Corporate Tax in UAE .
