Rules and Regulation Associated With External Audit of Companies in JAFZA
Financial audit, be it internal or external, is essential to enhance and strengthen the financial well-being of the company. This ensures that the company is not misleading shareholders, investors, stakeholders, or banks about its financial standing. And for this, an independent, certified, authorized and high-quality external audit is mandatory to gauge the financial statements of the company in accordance with GAAP, IFRS, or other accounting standards.
External audits not only facilitate improving business reporting but also bring transparency, credibility, and relevance to the reporting system with the aim to increase operational efficiency.
Jabel Ali Free Zone Area has its own rules and regulations regarding audits, which needs to be followed by all the members operating in Free Zone Area.
Rules and Regulations
- According to Clause (51) under the Implementing Regulations Act no 1/99, it is necessary for JAFZA companies to assign and appoint a registered auditor to conduct and prepare an audit report of the annual financial accounts.
- International financial accounting standards also include clause (49), which states that directors or company leaders must approve and sign the balance sheet, profit and loss account, and cash flow statement of the company after being audited by the external audit.
- As per Clause (50), JAFZA members are bound to present a copy of their annual financial statements along with an auditor report, no more than 3 months from the end of the fiscal year. However, in special cases, permission could be granted to extend the deadline which is subject to approval from Free Zone higher authority.
Needless to say that auditing service must only be delivered by the auditors holding a license from the Economic Development of UAE. In addition to that, there are certain other rules from JAFZA authority which an auditor should keep in mind while developing the content of the audit report. It includes the following:
- Reports must show the auditor professional opinion on the financial health of the company and identify any gaps, problems, or loopholes in financial reporting.
- Highlight any misleading, illegal, or fraudulent activity in the annual account and ensure that company is not concealing any important information.
- Complete assessment of business processes and reporting procedures in the light of implementing regulation applicable in the Free Zone Area.
In order to prepare a fair and accurate audit report, auditors carried out different steps before establishing an opinion on financial statements, including planning, client understanding, risk assessment, control test, and final report.
Being a Free Zone member gives companies few exemptions from certain rules and regulations that are otherwise applicable in other parts of the United Arab Emirates.
- The benefit of not paying any corporate tax.
- Total exemption from personal tax.
- There are no restrictions on the currency employed by the company to run the business.
- Allowed JAFZA companies to have 100 percent foreign ownership.
- No restriction and limitation on the repatriation of business capital.
- Allowed to recruit, hire, and train foreign employees.
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