A financial audit of a company is a meticulous evaluation and examination of the various kinds of financial statements that a company has maintained to ensure that the transactions presented by the company are fair and authentic. The audit is done to assure that the financial statements of a company are in accordance with the International Financial Reporting Standards (IFRS). Financial audits can be carried out by an internal auditor, however, to enhance credibility in the marketplace, external audits are preferred.
Types of financial statements
A balance sheet is a type of financial statement that elaborately demonstrates a company’s assets (valuable things that a company owns), liabilities (sum of money that a company owes to others), and shareholder’s equity (the net worth of the company). This financial statement shows what a company owns and how much it owes to others at a particular point in time.
An income statement also referred to as a profit and loss statement (PLS) is a report that shows how much revenue a company has generated over a period of time. Hence, it illustrates a company’s financial performance by providing the net profit or net loss of a company.
Cash Flow statement
While an income statement shows whether a company generated revenue or not, a cash flow statement clearly demonstrates the movement of cash in terms of inflows and outflows. Since a company needs cash in hand for investing in assets and other expenditures, a cash flow statement comes in handy to track the company’s cash.
Change in equity statements
A change in equity statement indicates a company’s capital per share, attained revenue and accumulated wealth in a given time period (usually 12 months). This statement shows whether the company has made profit over time and whether it can survive in the marketplace.
Why are financial audits important for SMEs in the UAE?
- Federal Commercial Companies Law: According to Article 27 of the UAE Federal Law No. 2 of 2015 on commercial companies, all businesses whether a Joint Stock Company or a Limited Liability Company must have certified auditors to conduct annual financial audits to give a clear picture of a company’s net profit or loss. Hence, conducting a financial audit doesn’t only ensure law abidance but also present a transparent view of the areas that a company needs to work on.
- Federal VAT Law: The FTA’s issued VAT law asks the company to maintain a proper record of all the financial statements such as ledger account, issued and received invoices etc. in order for the companies to ensure VAT compliance. Thereupon, audit financial statements and reports can authenticate the accuracy of your tax filing.
- Survival in the UAE marketplace: An external financial audit increases the reliability of a small business in the marketplace and provides assurance for shareholders which can bring in new investments. The auditor’s input could also be pragmatic regarding how a company can prevent fraud, improve its pain points, and generate revenue by fair means.
Why ACCBOOKS Accounting & Bookkeeping is your best option as a financial auditor?
ACCBOOKS is a dedicated, UAE-based team of professional and certified internal auditors that can provide your business with fair and transparent financial audit services to ensure that your business is free of any sort of misdealings, your financial statements are in compliance with the IFRS, and that your business excels in the marketplace authentically.
The aces of forensic accounting, ACCBOOKS can easily catch onto any misstatements or unfair activities in your business’s finance which may be sabotaging your business from the inside as well as damaging your business’s rapport in the eyes of shareholders and federal authorities.
ACCBOOKS services are not only limited to financial auditing but its team of licensed accountants and bookkeepers can help your business in maintenance of financial statements since the beginning for an error-free and impeccable financial record.