Amid technological disruption, regulatory changes and evolving service-delivery models, the accounting and auditing sector in the UAE finds itself at the crossroads, where auditors are not just adapting but charting a path towards innovative practices to stay in sync with today’s complex and ever-evolving world of commerce.
“Auditing and accounting are no longer the conventional fields they once were. The modern landscape has evolved considerably due to various factors, including stringent regulations, which have made audits more rigorous,” says Yashika Chadha, Senior Audit Manager at Dubai-based audit and accounting firm TRC Pamco.
“Regulatory authorities worldwide have amplified their scrutiny, mandating enhanced transparency and robustness in financial reporting. The aim is to eliminate fraudulent practices and increase accountability, thereby fortifying investor trust in the corporate landscape,” Chadha adds.
Meanwhile, the launch of corporate taxation in the UAE in June has significantly altered the auditing landscape, where accuracy and transparent financial reporting have become paramount. As businesses come to terms with the new reality, they are recognising the need to develop sustainable processes around compliance and build a tax efficient financing structure.
“Corporate taxation has elevated the significance of maintaining proper books of accounts as well as auditing them. Companies are now required to maintain transparent financial records, paving the way for more rigorous audits,” says Balaram Reddy Vuchidi, Managing Partner, Spectrum Auditing.
“Auditors play a crucial role in ensuring compliance with tax regulations and safeguarding financial integrity,” he points out.
In recent years, several trends have shaped the realm of auditing and accounting in the UAE.
“The adoption of International Financial Reporting Standards (IFRS) in the corporate tax law has made the audit of the books of accounts a mandatory requirement for all free zone companies to be recognised as the Qualifying Free Zone Person and benefit from a preferential CT rate of zero per cent. Other trends driving the sector include increased demand for forensic auditing and a growing focus on risk assessment and management,” Vuchidi explains.
As businesses navigate the complexities of new tax laws, accounting firms in the UAE experience a surging demand for professional auditing services.
Witnessing a strong demand for comprehensive financial reporting, accounting firm Spicer Pegler has expanded its services to provide tax advisory and compliance support, facilitating a smoother transition for businesses. “The shift to corporate taxation has raised the importance of accurate financial reporting and tax compliance,” says Mazahir Kaizar, Managing Director.
Tax regulations can be complex and require comprehensive knowledge of applicable tax laws. Auditors serve as trusted advisors to businesses navigating the nuances of the UAE corporate tax regime, ensuring that companies correctly interpret the laws and apply these regulations.
“Taxpayers in the UAE will be required to submit audited financial statements which will be used as a base to calculate their taxable income. To align and comply with the UAE tax regime, it is essential that companies maintain books of accounts in line with internationally accepted accounting standards (IFRS in the UAE) and audit financial statements in compliance with International Standards on Auditing (ISA),” says James Mathew, CEO and Managing Partner, UHY James, a Dubai-based chartered accountancy and management consulting firm.
“It is important to note that the introduction of corporate tax provisions, including the interest limitation and carried forward losses rules, would create new line items on the balance sheet such as deferred tax asset (DTA) and deferred tax liability (DTL). These new accounting heads will influence auditing procedures in the UAE going forward,” Mathew points out.
Accurate auditing doesn’t just ensure tax compliance; it also provides critical insights into a company’s financial health, helping businesses assess and mitigate future risks.
Staying up to speed
As the UAE’s business landscape continues to transform, so too must the practices and accounting processes. Auditors are increasingly harnessing the power of advanced data analytics, cloud-based tech, AI, and blockchain to ensure the accuracy of financial data, and also to meet changing needs and expectations of businesses. Furthermore, automation of repetitive, tedious tasks allows auditors and accounting professionals to focus more on meticulous analysis, improving efficiency and accuracy of financial reporting.
“AI and automation allow auditors to analyse vast datasets and detect anomalies more effectively. The time saved by auditors by using the latest technology can be utilised for further value addition to the auditing process,” says Vuchidi.
Thriving in the ever-evolving business environment demands a commitment to continuous skill development.
“It’s imperative to embrace technological innovations like data analytics and AI to elevate the efficiency of audits. Moreover, specialising in emerging fields such as sustainability reporting and cybersecurity is paramount,” says Kaizar from Spicer Pegler, adding, “Building a robust professional network for the exchange of knowledge is essential. Above all, with adaptability and a proactive attitude, we can successfully navigate the evolving industry terrain.”
Companies looking to engage auditors must prioritise those who are tech-savvy, adapt to international accounting norms, and keep abreast of regulatory changes, says Chadha from TRC Pamco.
“Auditors must continuously adapt to market shifts by updating their skill sets and embracing technology as an indispensable tool. By doing so, they don’t merely ensure compliance but also contribute to a company’s long-term financial resilience and credibility.” ■
Demand for measuring non-financial performance
With the growing focus on environmental, social and governance (ESG) factors, many auditors in the UAE have started incorporating sustainability audits in their services.
“Auditors play a vital role in assessing and verifying sustainability reports, ensuring adherence to standards and accurate representation of ESG efforts. They evaluate data reliability, internal controls, and reporting consistency, providing stakeholders with assurance and fostering transparency and accountability in the pursuit of sustainable development in the UAE,” explains Mohammed Dexter (in picture), Partner (Sharjah), Spicer Pegler.
At the moment, the ESG reporting is a mandatory requirement for listed companies in the UAE and it may become a mandatory requirement for other companies as well, says Balaram Reddy Vuchidi, Managing Partner, Spectrum Auditing. “This necessitates a broader skill set for auditors, encompassing environmental and social considerations.”
Demand for cybersecurity audits is also growing significantly as organisations recognise the importance of protecting their digital assets, systems and sensitive financial data.
“Auditors can address challenges and opportunities by conducting comprehensive audits, assess regional cybersecurity risks, while ensuring compliance with data protection regulations, and promoting advanced technologies. We also emphasise employee training and incident response preparedness. Our goal is to assist UAE firms in safeguarding data integrity and security in an evolving digital landscape,” adds Dexter.