Do you know why firms look for auditing services in the UAE? There are many crucial reasons for doing an audit. The majority of them can be boiled down to three main reasons: regulatory purposes, statutory purposes, or a review of operational performance. But what do these audits represent, and how do they apply to your small business that is running in the UAE? Even a company that gets hr outsourcing services, business process outsourcing, bpo services, payroll outsourcing services, accounting outsourcing, digital marketing services, etc. needs a perfect audit. Here, we take a closer look at each of them to comprehend the major differences:

Regulatory Audit

A regulatory audit guarantees that a firm is in compliance with several rules, regulations, and standards put forward by local authorities and regulatory agencies. Compliance with the following is one of them:

• • Federal Legislation and Regulations

These consist of federal statutes such as labor regulations, corporate governance norms, and intellectual property laws. According to Federal Decree Law No. 26 of 2020, limited liability companies (LLCs) in the United Arab Emirates are required to comply with the latest governance and compliance criteria by December 31, 2021. Another example is the Bankruptcy Law, which sets an arrangement for restructuring and insolvency procedures for companies that are facing economic hardship or have no way to pay their debts.

• • Industry-Specific Rules and Regulations

Certain industries are governed by particular rules. In this regard, the Economic Substance Regulations (ESR) oblige business entities that have relevant operations in the United Arab Emirates to show economic substance. In a similar vein the Accountability and Audit Authority (ADAA) Resolution No. (1) of 2017 dictates that all ADAA subject firms and their material subsidiaries adhere to the resolution and abide by the International Standards on Auditing (ISA) for audits contracted after August 2017.

Statutory Audit

A statutory audit is a review and evaluation of a government organization or an entity’s financial records and statements. The objective is to boost transparency and foster credibility among stakeholders in the financial condition of the business.

• • Independent Audit Firms

Statutory audits must be executed by an auditing firm that is freely registered and has been approved by the UAE Ministry of Economy and other appropriate bodies.

• • Annual Financial Statements

Annual financial statements are needed across the nation, and the statutory auditor’s duty is to check and offer an opinion on their openness and compliance with accounting principles.

• • Reporting to authorities

The audit report is sent to the firm’s shareholders and the appropriate authorities by the auditor.

Performance Audit

A performance audit checks a firm’s operations, processes, and management for economy, effectiveness, and efficiency. Internal auditors or external audit firms with experience in performance auditing typically take on these types of audits. A performance audit should have the following features:

• Objectives and Scope

The performance audit is tailored to the company’s specific requirements and may include topics such as internal control effectiveness, process improvement, cost management, and risk assessment.

• Internal Control Assessment

The audit assesses internal control mechanisms and finds any errors that could lead to inefficiencies or possible dangers.

• Recommendations

The audit report has concrete recommendations for improvement, permitting the firm to make better performance and come to its strategic objectives.

Differentiate the Features in Each of the Three Cases

• • Purpose

Statutory audits make sure financial accuracy, regulatory audits promise conformity with laws and norms, and performance audits analyze organizational operating efficiency.

• • Focus

Statutory audits are concerned with the accuracy of financial accounts, whereas regulatory audits are concerned with compliance with laws and regulations. In contrast, performance audits focus on functional efficiency and competence.

• • Outcome

Statutory audits check that financial statements are free of substantial misrepresentation; regulatory audits make sure that laws are strictly followed; and performance audits produce suggestions for making a better organizational production.

Small Business Perspectives

Comprehending the nuances of regulatory, statutory, and performance auditing is crucial for financial success and compliance as a small business running in the nation. These audits are the key to ensuring legal compliance and increasing performance, permitting you to stay ahead of the competition. We all know that a small business that gets business outsourcing services, payroll outsourcing services, finance and accounting outsourcing etc. needs a perfect audit.

HTIC Global provides first-rate support and guidance in keeping precise and error-free financial records. Our professionals are always available to assist you with accounting and auditing issues, offering customized services adapted to your specific needs. Contact us today for expert advice on all of your audit needs.