Year-End Audits: A Comprehensive Guide for Businesses in the UAE

Disclaimer: This article is intended for general information only and does not constitute personal financial advice under UAE regulations governing financial blogs and advertisements.

Year-end audits in the UAE often become “stress tests.” This situation arises not because the business is unusual, but due to scattered evidence, undocumented approvals, and late reconciliations. The goal is simple: make your numbers traceable, your judgments explainable, and your files easy to follow. Below is a checklist designed for finance teams. Please note that this information does not constitute specific advice.

Importance of Year-End Audits

Year-end audits play a crucial role in ensuring the financial health of a business. They provide an opportunity to assess the accuracy of financial statements and compliance with regulations. A thorough audit can uncover discrepancies and areas for improvement, leading to better financial management and decision-making.

1) Close Discipline and Timelines

• Publish a Monthly Close Calendar: It is essential to establish a clear timeline for the monthly closing process. This calendar should include cut-off dates, accruals, intercompany transactions, and reporting deadlines.

• Lock Periods After Review: Once the review is complete, lock the periods and maintain a clear log of any post-close adjustments. This practice helps in maintaining the integrity of financial data.

  
  

2) Reconciliations That Auditors Rely On

• Bank Reconciliations: Ensure that bank reconciliations are completed for every account each month. Include aging reports and explanations for any discrepancies.

• Accounts Receivable/Accounts Payable Aging: Tie AR/AP aging to the ledger. Document any disputes and expected credit losses where relevant.

• Inventory Counts: Conduct regular inventory counts and provide valuation support, including methods used, obsolescence considerations, and cut-off procedures.

• Fixed Assets: Maintain a comprehensive register of fixed assets, including support for additions and disposals, depreciation reviews, and impairment indicators.

  
  

3) Revenue and Contract Support

• Maintain Signed Contracts/POs: Keep signed contracts and purchase orders on file. Document delivery evidence and create a clear revenue recognition memo for key streams, especially where milestones, bundles, or variable considerations exist.

• Related-Party Transactions: For any related-party transactions, ensure that agreements, pricing rationale, and approvals are well-documented.

  
  

4) Tax and Compliance Pack (UAE Context)

• VAT Compliance: Prepare VAT returns and reconcile them to sales and purchases ledgers. Ensure tax invoices are validated, and maintain exception logs.

• UAE Corporate Tax: Map the trial balance to the tax computation. Prepare schedules for non-deductible items and document any reliefs or exemptions applied.

• Economic Substance / UBO / Licensing Compliance: Where applicable, keep filings, evidence, and board resolutions to demonstrate compliance with local regulations.

  
  

5) Controls, Governance, and Evidence

• Document Key Accounting Judgments: Record important accounting judgments, such as provisions, accruals, capitalization versus expense decisions, and estimates.

• Approval Trails: Maintain clear approval trails for payments, credit notes, write-offs, and journal entries. This documentation is vital for audit purposes.

• PBC Folder Structure: Create a “Prepared By Client” (PBC) folder structure that aligns with the audit request list. This organization will facilitate easier access to necessary documents during the audit.

  
  

6) Management’s Review

• Perform Variance Analysis: Conduct variance analysis comparing month-on-month results and budgeted figures. Record explanations for any significant variances.

• Ensure Consistency: Verify that there is consistency between financial statements, management accounts, and narrative disclosures. This alignment is crucial for transparency and accuracy.

  
  

Practical Tip: Mock PBC Week

Run a “mock PBC week” 6–8 weeks before year-end. This exercise will test whether documents can be produced within 24–48 hours. It can help identify any gaps in documentation and ensure readiness for the audit.

Conclusion

Year-end audits are an essential process for businesses operating in the UAE. They provide a comprehensive overview of financial health and compliance. By following the outlined checklist, businesses can streamline their audit processes, reduce stress, and ensure accurate financial reporting.

Should you need any assistance, the My Best CFO Team will be glad to help. We aim to be the go-to financial services consulting firm for businesses in Dubai and beyond, helping them protect assets, ensure compliance, and drive significant financial improvements.