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Audit Requirements in UAE: Is Auditing in the UAE Mandatory for All Businesses?

Discover the essential audit requirements in the UAE with our comprehensive guide. Uncover key insights into the regulatory landscape, compliance standards, and best practices for a seamless audit process in the United Arab Emirates.

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All companies, regardless of their global presence, are obligated to undergo auditing. The audit requirement in UAE is contingent upon the jurisdiction, as illustrated by the United Arab Emirates (UAE), where companies must undergo auditing, except in Freezones. The necessity for auditing in Freezones is determined by the legal framework established by the relevant authorities and the governing rules and regulations.

Even companies not mandated to undergo audits are strongly encouraged to engage in the auditing process to safeguard against potential adverse issues within the company. It is crucial to note that only authorized audit firms are permitted to conduct audits for businesses. Therefore, it is essential to identify and engage one of the top authorized audit firms to avail auditing services.

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Audit Requirements in UAE

In accordance with the Commercial Companies Federal Law, No. 32 of 2021, mainland UAE companies are obligated to undergo financial account auditing. To comply with regulatory requirements, these companies must retain their financial records for a minimum of five years.

Contrarily, companies operating in free zones are not inherently subjected to auditing and are not required to submit an audit report. However, certain entities within free zones, such as free zone companies (FZCO) and free zone establishments (FZE), are mandated to undergo mandatory auditing.

In cases where a free zone is not compelled to submit an audit report, the responsibility falls on the company itself to prepare one. The company's audit report may be requested for immigration purposes at any future point. With the increasing activity of the tax system in the UAE, companies are recognizing the growing necessity of maintaining comprehensive accounting records and conducting audits. This proactive approach allows companies to gain valuable insights into areas requiring attention and facilitates strategic planning for the future.

Is auditing a requirement for companies in the UAE?

While auditing of accounts is obligatory for Free Zone companies (FZCO) and Free Zone establishments (FZE), it may not be mandatory for certain local or foreign companies. Regardless, it remains crucial for all companies to uphold their accounting reports and documents, as these serve as the basis for finalizing any potential audit.

According to the commercial companies law, auditing of accounts is compulsory for mainland companies. Every company is required to engage an authorized and licensed auditor to conduct the audit of their books of accounts. However, it's worth noting that not all companies are obligated to adhere strictly to these requirements.

Legal Obligations

  • Certain free zone companies, including those under Dubai Multi Commodities Centre (DMCC), Dubai World Central (DWC), Dubai Airport Free Zone (DAFZA), Jebel Ali Free Zone (JAFZA), Dubai Silicon Oasis (DSO), and Dubai International Financial Center (DIFC), are mandated to submit audited financial statements to the respective authorities.
  • Foreign companies must annually submit audit reports and audited financial statements for their registered branches in the UAE.
  • Companies undergoing liquidation are required to prepare the liquidator's audit report, necessitating audited financial statements.
  • Government authorities, such as ministerial departments, municipalities, and insurance authorities, also insist on companies submitting their audited financial statements.

Management Objectives

  • Several UAE companies conduct audits of their financial records to gain insights into their financial standing, evaluate business progress, and assess the overall performance of the entity.
  • While some companies may employ bookkeepers for daily activity updates, auditors play a crucial role in finalizing the books of accounts and offering essential inputs for management decision-making.
  • Business owners often seek guidance on the net worth of their enterprises, prompting them to undergo annual audits to present a clear and comprehensive business picture to shareholders.

Third-Party Mandates

  • Financial institutions, including non-banking entities and banks, require companies to undergo audits conducted by a professional audit firm.
  • Dealers and suppliers similarly request companies to furnish audited financial statements, ensuring the financial creditworthiness of the companies before engaging in transactions with them.

Audit Comparison: Mainland vs. Free Zone

Understanding the differences between the mainland and the free zone is essential to grasp the auditing requirements in the UAE. The mainland refers to areas outside the free zone, and companies operating in the mainland are considered onshore companies. These companies obtain licenses from the Department of Economic Development or a relevant UAE department, allowing them to conduct business without restrictions both within and outside the UAE.

While there are numerous advantages to having a mainland-based company, foreign individuals must secure a local sponsor, who must be a UAE national and own a minimum of 51% of the business.

On the flip side, a free zone operates within its jurisdiction in the UAE, with its own set of rules and regulations. Companies in free zones have the flexibility to conduct business within or outside the UAE.

Launching a business in a free zone comes with various benefits, especially for foreign individuals who can enjoy 100% ownership without the need for a local sponsor. Throughout the UAE, industry-specific free zones cater to the specific needs of various sectors. It's important to note that companies in free zones are not obligated to submit an audit report to the authorities, although having one is crucial for accurate compliance with tax regulations.

Dubai, UAE boasts numerous auditing firms that assist individuals and companies with their audit reports. Auditing involves the critical assessment of whether operational, financial, and strategic goals align with established principles. Consequently, having an evaluation of a company's processes and goals is vital for ensuring compliance and successful business operations.


It is evident that audited financial statements and books of accounts are obligatory in the mainland and certain free zones in the UAE. Companies are required to engage licensed auditors for this purpose, and failure to present audit reports may result in penalties imposed by authorities. Inspire Tax Consultancy offers a comprehensive range of auditing services tailored to client's business needs, ensuring compliance with the latest regulations. Our dedicated auditors are committed to delivering top-notch auditing services in the UAE, backed by extensive industry experience.

Whether your business is situated in the mainland or a free zone, Inspire Tax Consultancy has your auditing requirements covered. Feel free to consult our expert teams for assistance with auditing services or any queries related to internal or external auditing. If you are seeking approved auditors in the UAE, do not hesitate to contact Inspire Tax Consultancy for professional and reliable services.

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