An external audit is an unbiased review of a company’s books of accounts by an auditor to determine if the financial statements are accurate and true. An auditor also examines whether the company adheres to accounting regulations and procedures. An independent auditor who reviews accounting records, such as the financial statements, provides readiness and assurance to the company’s stakeholders (shareholders, regulatory authorities, banks, and so on). Because an external auditor is fully unaffiliated and independent to the firm, it boosts the credibility and trust in the company and its financial reports.

External audits cover not only the accounting records but also the processes that a firm follows. As a result, it aids in the identification of inefficiencies, faults, opportunities, and risk factors. External audits are normally not required, but governments may compel them if the firm falls into particular categories (for example, if it is a publicly listed corporation). 

The law that controls company auditing in the United Arab Emirates is Federal Law No. 2 of 2015 valuing Commercial Companies Law. Also known as Companies Law.

The following are some attributes of the Companies Law: 

1. Beginning with the conclusion of the fiscal year, every organization in the UAE is obligated to retain its books in its headquarters for at least 5 years.
2. The companies named in the statute are obligated to compile yearly financial statements and must adhere to International Accounting Standards in doing so.
3. Audit requirements differ between companies in mainland Dubai or the UAE and those in free zones. Companies operating in free zones must adhere to the laws of their respective governing bodies. Many free zone authorities, including DAFZA, DIFC, DSO, and DDA, demand audit reports upon license renewal.
4. In the UAE, public sector firms are required to undertake a Statutory Audit on a regular basis.
5. The “UAE Corporate Tax Law,” also known as “Federal Decree-Law No. 47 of 2022 on Taxation of Companies and Businesses,” was recently issued in the UAE and specifies the requirement for audited financial statements. 

External auditing in the UAE is critical for avoiding penalties and boosting a company’s credibility, profitability, and efficiency. As a result, it is critical to understand your company environment and determine when and how an external audit would be necessary, as well as to pick the right external auditor for your needs.