Statutory Audit

A statutory audit is more than a year-end financial exercise. For many UAE companies, it is a legal or regulatory requirement that provides independent assurance over the company’s financial statements and helps shareholders, regulators, banks, and other stakeholders rely on the reported financial information.

Our statutory audit services in the UAE provide an independent examination of financial statements in accordance with applicable UAE requirements and recognised professional auditing standards.

We assess whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework and issue an independent auditor’s report based on the audit evidence obtained.

Whether your company is an LLC, joint stock company, Qualifying Free Zone Person, UAE Tax Group, or another business subject to an audit requirement, the audit scope should be determined by your legal form, jurisdiction, tax position, and regulatory obligations.

What Is a Statutory Audit in the UAE?

A statutory audit is an independent examination of a company’s financial statements when an audit is required by law, regulation, licensing rules, or another applicable authority.

The auditor performs procedures to obtain sufficient appropriate audit evidence and forms an independent opinion on whether the financial statements are presented fairly, in all material respects, under the applicable financial reporting framework.

A statutory audit commonly covers financial statements such as:

• Statement of financial position
• Statement of profit or loss
• Statement of cash flows
• Statement of changes in equity
• Related notes and disclosures
• Supporting accounting records relevant to the audit

The audit does not guarantee that every transaction is correct. Instead, it is designed to provide reasonable assurance that the financial statements as a whole are free from material misstatement, whether caused by fraud or error.

Is a Statutory Audit Mandatory for UAE Companies?

For several company types, yes.

Under Article 27 of the UAE Commercial Companies Law, every joint stock company and limited liability company must have one or more auditors carry out an annual audit of its accounts. The law also requires companies to prepare annual financial accounts and apply international accounting standards and principles so that the accounts give a clear and accurate picture of the company’s financial performance.

For LLCs specifically, the Commercial Companies Law also requires one or more auditors to be appointed annually by the General Assembly of Partners.

However, statutory audit obligations in the UAE do not come from only one source.

A business may also need audited financial statements because of:

• UAE Corporate Tax requirements
• Free zone regulations
• Licensing authority requirements
• Securities or financial-services regulation
• Shareholder or constitutional-document requirements
• Bank or financing arrangements
• Group reporting obligations
• Other sector-specific regulations

This is why audit requirements should be assessed according to the individual company rather than using a single revenue threshold for every UAE business.

Which UAE Businesses Require Audited Financial Statements?

Audit requirements can arise under different legal and regulatory frameworks.

Business / Situation	General Audit Position
UAE Limited Liability Company	Annual statutory audit required under the Commercial Companies Law
Joint Stock Company	Annual statutory audit required under the Commercial Companies Law
Taxable Person with revenue exceeding AED 50 million	Audited financial statements required for UAE Corporate Tax purposes, subject to the applicable rules
Qualifying Free Zone Person	Audited financial statements required for Corporate Tax purposes regardless of revenue
UAE Tax Group	Required to prepare and maintain audited special-purpose aggregated financial statements under the current Corporate Tax rules
Free Zone Company	Requirements depend on the free zone, legal form and Corporate Tax position
Regulated Entity	May have additional audit requirements imposed by its regulator
Company seeking financing or investment	Lender or investor may separately require audited financial statements

These requirements can overlap.

For example, an LLC may have a statutory audit obligation under the Commercial Companies Law even if its revenue is below the AED 50 million Corporate Tax audit threshold.

What Are the UAE Corporate Tax Audit Requirements in 2026?

Corporate Tax rules create a separate requirement for certain businesses to prepare and maintain audited financial statements.

Under Ministerial Decision No. 84 of 2025, which applies to relevant Tax Periods commencing on or after 1 January 2025, audited financial statements are required for:

• A Taxable Person that is not a Tax Group and derives revenue exceeding AED 50 million during the relevant Tax Period
• A Qualifying Free Zone Person, regardless of revenue
• A Tax Group, which must prepare and maintain audited special-purpose aggregated financial statements in accordance with the applicable requirements

For a Non-Resident Person, the AED 50 million threshold is determined using relevant revenue attributable to Permanent Establishments and/or nexus in the UAE under the Decision.

These Corporate Tax audit requirements are separate from statutory audit requirements imposed under the Commercial Companies Law or by a licensing authority.

Do Qualifying Free Zone Persons Need an Audit?

Yes, if a Free Zone Person wants to meet the conditions applicable to a Qualifying Free Zone Person, audited financial statements are an important part of the Corporate Tax framework.

Ministerial Decision No. 84 of 2025 requires a Qualifying Free Zone Person to prepare and maintain audited financial statements regardless of its revenue level.

The updated UAE Free Zone Corporate Tax framework also continues to include audited financial statements among the conditions relevant to Qualifying Free Zone Person status.

This means a small Qualifying Free Zone Person should not assume that it is exempt from audit simply because its annual revenue is below AED 50 million.

The company’s specific free zone may also impose its own financial statement filing or audit requirements.

What Accounting Standards Apply to UAE Statutory Audits?

The applicable financial reporting framework depends on the company and the purpose of the financial statements.

The UAE Commercial Companies Law requires companies within its scope to apply international accounting standards and principles in preparing periodic and annual accounts.

For UAE Corporate Tax purposes, the Ministry of Finance has confirmed that IFRS is the accepted accounting standard for larger businesses with revenue above AED 50 million, while businesses with revenue not exceeding AED 50 million may use IFRS for SMEs, subject to the applicable requirements.

The auditor therefore needs to understand both the company’s financial reporting framework and the legal or regulatory reason for which the audited financial statements are being prepared.

Who Can Perform a Statutory Audit in the UAE?

A statutory audit should be performed by an appropriately authorised audit professional or audit firm.

Federal Decree-Law No. 41 of 2023 regulates the accounting and auditing professions in the UAE. It provides that a natural or legal person may not practise the profession or provide its professional services in the UAE without the required licences.

The Ministry of Economy is responsible for matters including professional licensing, standards and oversight of practitioners under this framework.

Businesses should therefore check that the auditor they appoint is appropriately authorised for the relevant statutory or regulatory audit requirement.

What Does a Statutory Auditor Examine?

A financial statement audit is risk-based. It does not involve checking every transaction individually.

The auditor identifies areas where material misstatements could occur and designs appropriate audit procedures.

Revenue

Revenue is often a significant audit area because incorrect timing, classification, or recognition can materially affect financial results.

Audit procedures may consider:

• Revenue recognition policies
• Sales transactions
• Cut-off around year-end
• Customer agreements
• Credit notes
• Significant or unusual revenue entries

Cash and Bank Balances

The auditor assesses recorded cash and bank balances and may perform procedures involving:

• Bank reconciliations
• Bank confirmations where appropriate
• Outstanding reconciling items
• Restricted cash
• Significant year-end transactions

Trade Receivables

Receivables may be assessed for:

• Existence
• Recoverability
• Ageing
• Credit losses
• Customer balances
• Cut-off
• Relevant disclosures

Trade Payables

Audit work may assess whether liabilities have been completely and accurately recorded.

Areas can include:

• Supplier balances
• Unrecorded liabilities
• Purchase cut-off
• Accrued expenses
• Supplier reconciliations

Inventory

For businesses holding inventory, the audit may address:

• Inventory existence
• Valuation
• Obsolescence
• Costing
• Cut-off
• Stock records
• Inventory count procedures

Property, Plant and Equipment

The auditor may assess:

• Asset additions
• Disposals
• Capitalisation
• Depreciation
• Useful lives
• Impairment indicators
• Fixed asset registers

Payroll and Employee Costs

Payroll audit procedures can include evaluation of:

• Salary expenses
• Employee-related liabilities
• Payroll records
• Accrued benefits
• End-of-service obligations
• Reconciliation with accounting records

Related-Party Transactions

Related-party transactions can require particular attention because of their nature and disclosure requirements.

The audit may assess:

• Identification of related parties
• Related-party balances
• Transactions between group entities
• Required disclosures
• Significant unusual transactions

Provisions and Estimates

Financial statements may contain estimates involving management judgement.

Examples include:

• Expected credit losses
• Inventory provisions
• Impairment
• Employee benefit obligations
• Legal provisions
• Other accounting estimates

The auditor evaluates whether significant estimates and related disclosures are reasonable within the applicable financial reporting framework.

How Does the Statutory Audit Process Work?

A properly managed statutory audit follows a structured process from initial planning through the final auditor’s report.

Engagement and Independence Assessment

Before audit work begins, the auditor assesses the engagement, independence requirements, and potential conflicts of interest.

The responsibilities of management and the auditor are defined through the engagement process.

Understanding the Business

The audit team develops an understanding of:

• Business activities
• Industry
• Ownership
• Revenue streams
• Accounting systems
• Internal processes
• Regulatory environment
• Significant financial risks

This helps determine where material financial statement risks may exist.

Audit Planning and Risk Assessment

The auditor identifies significant financial statement areas and determines the nature, timing, and extent of audit procedures.

The audit is planned around materiality and risk, rather than checking every transaction.

Review of Internal Controls

Relevant controls may be considered to understand how financial information is initiated, processed, recorded and reported.

The extent of control testing depends on the audit approach and circumstances.

Substantive Audit Procedures

The audit team performs procedures designed to obtain evidence concerning financial statement balances, transactions and disclosures.

Depending on the audit, these may include:

• Inspection of documentation
• Recalculations
• Analytical procedures
• External confirmations
• Observation
• Reperformance
• Management enquiries
• Testing of selected transactions and balances

Evaluation of Audit Findings

Identified differences and control observations are assessed according to their nature, size and potential effect on the financial statements.

Management may be asked to investigate or correct material accounting issues.

Financial Statement Review

The financial statements and notes are assessed against the applicable financial reporting framework.

The auditor considers whether the financial statements are appropriately presented and whether required disclosures have been included.

Management Representations

Management is responsible for the financial statements and may be required to provide written representations relevant to the audit.

Auditor’s Report

After completing the required procedures and evaluating the evidence obtained, the auditor issues the independent auditor’s report.

What Is the Difference Between a Statutory Audit and an Accounting Review?

These services should not be confused.

Area	Statutory Audit	Accounting / Pre-Audit Review
Purpose	Provide an independent audit opinion	Identify accounting issues and improve readiness
Assurance level	Reasonable assurance	Usually no assurance for advisory reviews; limited assurance only for qualifying formal review engagements
Legal requirement	May be legally or regulatorily mandatory	Usually voluntary unless required for a particular purpose
Audit opinion	Yes	No statutory audit opinion
Testing	Extensive risk-based audit procedures	More limited procedures based on agreed scope
External confirmations	May be used where appropriate	Usually not a core feature of an advisory accounting review
Can satisfy statutory audit requirement?	Yes, when properly performed by an appropriately authorised auditor	No
Typical use	Statutory compliance and independent assurance	Audit readiness, accounting clean-up and management assessment

A pre-audit review can make the audit process more efficient, but it cannot replace a statutory audit where an audit is required.

What Is the Difference Between Statutory Audit and Internal Audit?

Both are important, but they have different objectives.

Area	Statutory / External Audit	Internal Audit
Primary objective	Express an independent opinion on financial statements	Evaluate internal processes, risks, controls and governance
Main users	Shareholders and other relevant external stakeholders	Management and those charged with governance
Financial statement opinion	Yes	No
Frequency	Usually annual	Can operate throughout the year
Scope	Primarily financial statements and relevant risks	Operational, financial, compliance, technology and other risks
Independence	Independent external auditor	Organisationally independent internal function or outsourced provider
Statutory audit replacement	N/A	Internal audit does not replace a required statutory external audit

What Documents Are Usually Required for a UAE Statutory Audit?

The exact audit request depends on the company’s business and financial statements, but commonly requested information includes:

• Trial balance
• General ledger
• Final or draft financial statements
• Bank statements
• Bank reconciliations
• Accounts receivable ageing
• Accounts payable ageing
• Customer and supplier information
• Inventory records
• Fixed asset register
• Payroll summaries
• Employee benefit calculations
• Loan and financing agreements
• Lease agreements
• Major customer and supplier contracts
• Related-party schedules
• Corporate documents
• Tax-related records
• VAT information
• Corporate Tax information
• Board or shareholder resolutions relevant to financial reporting
• Supporting schedules for significant balances

Preparing these records before audit fieldwork can reduce unnecessary delays.

How Long Must UAE Companies Keep Accounting Records?

Under the Commercial Companies Law, companies are required to keep accounting records at their headquarters for at least five years following the end of the relevant financial year. Electronic copies may be maintained subject to the applicable requirements.

This should not be confused with tax record-retention periods.

Corporate Tax and VAT legislation can impose separate tax-related record-retention requirements. Businesses should therefore follow the longest retention period applicable to the particular records rather than assuming that one five-year period covers every legal or tax obligation.

Why Is Audit Readiness Important?

A statutory audit becomes more difficult when accounting issues are left unresolved until audit fieldwork begins.

Common audit-readiness problems include:

• Unreconciled bank accounts
• Unsupported receivable or payable balances
• Missing invoices
• Incomplete fixed asset registers
• Incorrect inventory records
• Unreconciled related-party balances
• Missing contracts
• Incorrect opening balances
• Incomplete financial statement disclosures
• Unresolved accounting adjustments

Resolving these matters before the auditor requests evidence can make the year-end process more efficient.

What Types of Audit Opinions Can Be Issued?

The audit opinion depends on the auditor’s findings and whether sufficient appropriate audit evidence has been obtained.

Unmodified Opinion

An unmodified opinion indicates that the auditor concludes that the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework.

It is sometimes informally called a “clean” audit opinion.

Qualified Opinion

A qualified opinion may arise when a material issue exists, but its effect is not considered pervasive to the financial statements, or when the auditor cannot obtain sufficient appropriate evidence regarding a material area and the possible effects are not pervasive.

Adverse Opinion

An adverse opinion may be issued when identified misstatements are both material and pervasive to the financial statements.

Disclaimer of Opinion

A disclaimer may arise when the auditor cannot obtain sufficient appropriate audit evidence, and the potential effects could be both material and pervasive.

The type of audit opinion cannot be promised before the audit is completed.

What Are Management’s Responsibilities During a Statutory Audit?

The statutory auditor provides independent assurance, but management remains responsible for the company’s financial information.

Management responsibilities generally include:

• Maintaining appropriate accounting records
• Preparing financial statements
• Selecting appropriate accounting policies
• Maintaining relevant internal controls
• Providing complete information to the auditor
• Providing access to documents and responsible personnel
• Assessing significant accounting estimates
• Addressing identified financial reporting issues
• Providing required representations

The auditor does not take over management’s responsibility for preparing the accounts.

Why Do Banks, Investors and Shareholders Use Audited Financial Statements?

Independent auditing increases the credibility of financial information.

Audited financial statements can help stakeholders evaluate:

• Revenue and profitability
• Assets and liabilities
• Cash flows
• Borrowings
• Working capital
• Financial trends
• Related-party exposures
• Significant accounting estimates
• Financial position at year-end

However, an audit opinion is not a guarantee that a company will remain profitable, repay financing, or succeed commercially.

Statutory Audit for Mainland and Free Zone Companies

The UAE does not have one identical audit rule for every business in every jurisdiction.

Mainland Companies

Mainland companies should assess requirements under the UAE Commercial Companies Law, their legal form, licensing conditions, and any industry-specific regulations.

For example, LLCs and joint stock companies are subject to annual audit requirements under the Commercial Companies Law.

Free Zone Companies

Free zone companies need to consider:

• Rules of the relevant free zone
• Company legal form
• Licence requirements
• Corporate Tax status
• Qualifying Free Zone Person status
• Financial statement filing requirements

A Free Zone Person that is a Qualifying Free Zone Person is required to prepare and maintain audited financial statements for Corporate Tax purposes regardless of revenue.

Businesses should therefore check both their free-zone requirements and federal Corporate Tax obligations.

Our UAE Statutory Audit Approach

Our approach focuses on audit quality, clear communication, and efficient coordination throughout the engagement.

Clear Scope Before Audit Work Begins

We establish the expected reporting framework, audit period, required deliverables, and document requirements before substantive work starts.

Risk-Focused Audit Planning

Higher-risk financial areas receive appropriate attention rather than applying the same procedures mechanically to every account.

Structured Information Requests

Audit requirements are organised, so finance teams understand what documents and schedules are needed.

Clear Communication of Issues

Material accounting or documentation issues identified during the audit are communicated so management can investigate and respond.

Professional Financial Reporting Review

Financial statement presentation and disclosures are considered against the applicable reporting framework.

Independent Audit Reporting

The final audit opinion reflects the audit evidence obtained and the requirements of the applicable professional standards.

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