To gain a better understanding of the financial position of a company, it is important to evaluate the effectiveness of its business practices. To improve the company’s financial position, it is necessary to do an objective evaluation of its business functions. Audit firms in the UAE will examine the company’s business practices and make a report on any potential risks to its financial health.
All major companies in Dubai, UAE have either an internal audit department or contract the services of auditors to do their internal auditing. The big question is whether small and medium enterprises (SMEs) should outsource internal audit services to UAE specialists In the UAE, the importance of internal auditing does not depend on the size of the company. Internal auditing in UAE is just as important for SMEs as it is for multinational companies (MNCs).
Internal Audita
Internal audit is a sovereign, objective assertion and consulting movement designed to add value and improve the operations of a business. Internal Audit assists a business to achieve its objective by bringing a systematic, disciplined approach to appraise and advance the efficiency of risk management, control and governance process and compliance with applicable laws and regulations.
Who Needs Internal Audit
All companies operating in the mainland UAE such as banks, investors, government authorities etc., need an internal Audit. They are required by authorities to have their financial accounts audited, and these companies must keep their financial records for at least five years. Companies in the free zones do not get audited because they are not required to submit their audit report. It should be noted; however, that audit reports may be required for immigration purposes.
Why Internal Audit is Important for business
The primary objective of internal auditing is to provide unbiased assurance to a company, ensuring the effectiveness of its internal controls, governance, risk management, and overall operational management. The survival and progress of any business hinge on the competence of its internal auditors. Through internal auditing, companies can proactively avert fraudulent activities.
By implementing a robust system of internal controls and routinely evaluating the organization’s operations, it becomes feasible to detect and prevent fraud. Regularly analyzing the organization’s activities in conjunction with maintaining stringent internal control mechanisms can effectively expose and counteract financial fraud and other potential accounting irregularities.
Purpose and Scope of Internal Audit in UAE
- Re-evaluation of each control and analysis in terms of costs and benefits
- Reassessment of the existing system of controls to determine whether it is in synchronization with the structure of the organization.
- Reassessment of the steadiness and sincerity of financial and operating information and the means used to recognize measures and to categorize and report such information.
- Reconsideration of the means of preservation of assets and authenticate the existence of such assets
- Identify the weaknesses within the processes of the company
Institute an effectual internal control environment
Types of Internal Audits
- Compliance Audit
A Compliance audit helps to ensure that all processes and transactions conducted in the company are all following the rules and regulations of the jurisdiction so that the organization faces no hassel in the future.
- Operational Audit
Operational Audit focuses on the internal controls of the company’s systems, and procedures of conducting transactions. Its primary purpose is to improve productivity and operation effectivity and effectiveness.
- Financial Audit
Financial Audit objectively examines and evaluates the organization’s financial statements to ensure that the company’s financial records are accurate and true representations of all the transactions.
- Information Technology Audit
Information Technology Audit in Dubai is an examination of the controls by the management on IT applications, databases, operating systems, and the infrastructure. These exclusive reviews are focused mainly on Information Technology.
Summing It Up
Internal auditing aims to assess and improve the effectiveness of an organization’s governance, risk management, and control processes. Its ultimate goal is to support management in carrying out their responsibilities through objective analysis, recommendations, and observations on various aspects of business operations. The purpose of internal auditing is to assist in improving the overall performance of an organization.
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