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Read more informationThe law which governs the auditing of companies in the United Arab Emirates (UAE) is Federal Law Number 2 of 2015 regarding the Commercial Companies Law hereinafter referred to as the Companies Law or the Law. This article will examine the procedure of auditing under the Companies Law. It will also assist the readers to identify the process of appointing an auditor in the company, as also the rights and duties of the concerned auditor. The article in respect of mandatory audits for commercial companies in UAE applies to all the public or private joint stock company (PJSc) or the limited liability company (LLC), sole proprietorship, other types of companies.
Audit Requirements:
The Law under Article 27 obliges every joint stock company as well as a limited liability company (LLC) to appoint one or more auditors in order to audit the accounts of the company every fiscal year. It further allows other type of companies including sole proprietorship to appoint an auditor in accordance with the provisions of the Law. The companies established under the Law must prepare financial accounts annually or yearly and must adhere to the International Accounting Standards and Practice while preparing the reports whereby, providing a clear view of company’s profits and losses.
The partners or shareholders of the company are allowed to obtain a copy of the last audited accounts or the audit report or statements of its holding or subsidiary company. The company must provide the statements within ten (10) days from the date of the request. Article 94 of the Law stipulates the agenda of the annual general assembly, wherein the quorum must discuss the auditor’s report, the financial statements of the company as also the remuneration of the auditor.
Every LLC must have one or more auditors who must be elected at the general assembly of the partners of the firm every year. The provisions for public/ private joint stock company applies to LLC. In accordance with Article 175 of the Companies Law, the auditor can request the board of directors to convene the board meeting. Wherein, the general assembly should be convened within at least fifteen (15) days from the date of the invitation sent by the auditor.
Appointment of Auditor:
Every public joint stock company/ LLC shall have one or more auditors nominated by the board of directors and simultaneously approved by the general assembly. The assembly can appoint the auditor/auditors for one renewable year, whereas, such term should not exceed three (3) successive years thus, the auditors must undertake his duties for the next annual general assembly. The owner of the company may, during the incorporation of the company, appoint an auditor with prior approval of the competent authority to perform his duties until the first general assembly. The assembly must ascertain the fees for the auditor, provided that the remuneration must reflect in the accounts of the company. The board of directors should issue a decision pertaining to the following conditions which the auditor must adhere to:
Rights and Duties of the Auditor
Auditor Report and its Contents
Pursuant to Article 245 of the Law, the auditor shall issue a report on the accounts so audited. If the company appoints more than one auditor, the auditors should distribute their duties and must prepare a separate report on the task assigned and must also prepare one combined report for which they will be jointly liable. The report must bear the name and signature of the auditor. The report should specifically highlight whether or not the accounts are in consonance with the provisions of the Law and whether the accounts depicts the true financial position of the company.
The auditor report should reflect the following particulars basis that the report was prepared in accordance with the provisions of the law:
Glossary: