Audit Glossary

Annual audit report submission

In the UAE, audit report submission refers to the formal process by which a company provides its audited financial statements to the relevant authorities, such as free zone authorities (JAFZA, DMCC, DAFZA) or Federal Tax Authority or the Ministry of Economy, to demonstrate compliance with legal and regulatory requirements.

Financial Statements

Financial statements are formal records that summarize a company’s financial performance and position over a specific period, usually a financial year. In the UAE, they typically include the balance sheet, income statement (profit & loss), cash flow statement, and notes to accounts. These statements are prepared in accordance with International Financial Reporting Standards (IFRS) and are used for audits, statutory compliance, management decisions, and reporting to authorities. Accurate financial statements are essential for maintaining transparency, securing investor confidence, and fulfilling regulatory obligations.

Pre-Audit Financial Statements

Pre-audit financial statements are the company’s financial statements prepared before the official audit. In the UAE, firms like Gupta Accountants prepare these statements in accordance with International Financial Reporting Standards (IFRS) to ensure accuracy, completeness, and compliance with regulatory requirements. These statements allow management and auditors to review, identify discrepancies, and make necessary adjustments before the official audit. Pre-audit financial statements help streamline the audit process, reduce errors, and ensure timely statutory compliance.

Independent Auditors’ Report

An Independent Auditors’ Report is a formal document issued by a licensed auditor after examining a company’s financial statements. It provides the auditor’s opinion on whether the financial statements present a true and fair view of the company’s financial position in accordance with International Financial Reporting Standards (IFRS) and UAE regulations. The report is used by shareholders, management, regulators, and other stakeholders to assess the accuracy, reliability, and compliance of the company’s financial reporting. It is a key requirement for annual audits, statutory compliance, and in some cases for the license renewal.

Statement of Profit / (Loss) Account

The Statement of Profit and Loss, also called the Income Statement, is a financial report that summarizes a company’s revenues, expenses, and profits or losses over a specific period, usually a financial year. In the UAE, this statement is prepared according to International Financial Reporting Standards (IFRS) and is a key component of a company’s financial statements. It helps shareholders, management, and regulators evaluate the company’s financial performance, make informed decisions, and fulfill auditing and statutory compliance requirements.

Statement of Financial Position

The Statement of Financial Position, also known as the Balance Sheet, is a financial report that shows a company’s assets, liabilities, and shareholders’ equity at a specific point in time. In the UAE, it is prepared in accordance with International Financial Reporting Standards (IFRS) and forms a key part of a company’s financial statements. This statement helps shareholders, management, auditors, and regulators assess the company’s financial health, liquidity, and capital structure.

Statement of Cash Flow

The Statement of Cash Flow is a financial report that shows the inflows and outflows of cash within a company over a specific period, usually a financial year. In the UAE, it is prepared according to International Financial Reporting Standards (IFRS) and is part of a company’s financial statements. This statement provides insights into the company’s operating, investing, and financing activities, helping shareholders, management, and auditors assess liquidity, cash management, and the ability to meet obligations.

Statement of Changes in Equity

The Statement of Changes in Equity is a financial report that shows the movements in a company’s equity during a specific period, usually a financial year. In the UAE, it is prepared according to International Financial Reporting Standards (IFRS) and is part of a company’s financial statements. This statement details changes due to share capital issuance, dividend distribution, retained earnings, and other comprehensive income, helping shareholders, management, and auditors understand how the company’s ownership value has changed over time.

Notes to the Financial Statements

Notes to the financial statements are detailed explanations and disclosures that accompany a company’s main financial statements. In the UAE, prepared according to International Financial Reporting Standards (IFRS), these notes provide additional context on accounting policies, contingent liabilities, commitments, related-party transactions, and other significant financial information. They help shareholders, auditors, and regulators fully understand the numbers presented in the balance sheet, income statement, cash flow statement, and statement of changes in equity.

Increase/Decrease in Share Capital

This refers to adjusting a company’s registered capital—the total value of its shares. Increasing share capital means issuing additional shares to raise funds or expand operations. Decreasing share capital involves reducing the value or number of shares, often to restructure finances or cover losses. In the UAE, such changes require shareholder approval and registration with the relevant authority, such as DED for mainland companies or JAFZA/DMCC for free zone entities.

Auditor

An auditor is a licensed professional or firm authorized to examine a company’s financial statements, records, and internal controls to ensure accuracy, compliance with IFRS and UAE regulations, and reliability of financial reporting. Auditors issue an audit report reflecting their opinion on the company’s financial position. In the UAE, auditors must be approved by relevant authorities such as the Ministry of Economy or free zone regulators like JAFZA, DMCC, or DAFZA. They play a key role in statutory audits, license renewals, and corporate compliance.

Financial Year

A financial year (also called fiscal year) is a 12-month period used by a company to record and report its financial transactions, prepare financial statements, and calculate taxes. In the UAE, a company’s financial year is typically aligned with its licensing requirements and can start on any date, subject to approval by authorities such as the Ministry of Economy or free zone regulators (e.g., JAFZA, DMCC, DAFZA). The financial year forms the basis for audits, statutory reporting, and license renewal, and companies must maintain accurate accounts for this period.

First Financial Year

The first financial year is the initial reporting period after a company’s incorporation in the UAE. It may be shorter than, equal to, or slightly longer than 12 months, typically ranging from 6 months up to 18 months, depending on the company’s start date and approval from authorities such as JAFZA, DMCC, DAFZA, or the Ministry of Economy. This period forms the basis for audited financial statements, statutory compliance, and license renewal, after which subsequent financial years are normally 12 months long.

FZE (Free Zone Establishment) Company

An FZE, or Free Zone Establishment, is a single-shareholder company registered in a UAE free zone. It is a legal entity with limited liability, meaning the shareholder’s responsibility is limited to their capital contribution. FZE companies are commonly used for small to medium-sized businesses and benefit from 100% foreign ownership, tax exemptions, and simplified regulatory procedures. They are required to maintain proper accounts, submit annual audits, and comply with free zone regulations to operate legally and maintain their license.

FZCO (Free Zone Company)

An FZCO, or Free Zone Company, is a multi-shareholder company registered in a UAE free zone. It is a legal entity with limited liability, meaning shareholders are responsible only for their capital contributions. FZCOs are typically used by small to medium-sized businesses and enjoy benefits such as 100% foreign ownership, tax exemptions, and simplified regulatory procedures. They are required to maintain proper accounting records, prepare financial statements, submit annual audits, and comply with free zone regulations to operate legally and maintain their license.

Memorandum and Articles of Association (MAA)

The Memorandum and Articles of Association (MAA) are the legal documents that define a company’s structure, purpose, and internal regulations. The Memorandum of Association outlines the company’s name, objectives, share capital, and shareholder details. The Articles of Association set out the rules for managing the company, including the powers of directors, rights of shareholders, and procedures for meetings and decision-making. In the UAE, the MAA is required for company registration and serves as the foundation for corporate governance, legal compliance, and operational management.

Dividend Distribution

Dividend distribution refers to the payment of a portion of a company’s profits to its shareholders in proportion to their shareholding. In the UAE, companies may declare dividends after preparing financial statements and obtaining board approval, ensuring compliance with applicable laws and regulations. Dividends can be paid in cash or in-kind and are usually distributed from net profits after deducting taxes, reserves, and statutory obligations. Proper documentation, such as board resolutions and shareholder approvals, is required to legally distribute dividends.

Directors

Directors are individuals appointed to manage and oversee the operations of a company in the UAE. They are responsible for making strategic decisions, ensuring compliance with laws and regulations, maintaining accurate financial records, and safeguarding shareholder interests. Directors may serve on the board of a company and are legally accountable for the company’s performance and governance. Their powers, duties, and responsibilities are typically outlined in the Memorandum and Articles of Association (MAA) or other corporate governance documents.

Manager on the Trade License

The manager on the trade license is the individual officially listed on a UAE company’s trade license as responsible for managing the company’s operations and representing the business to authorities. This person may have signing authority, administrative powers, and accountability for regulatory compliance. Listing a manager on the trade license is a legal requirement for many company types, and their name appears in official records, allowing them to act on behalf of the company in dealings with government authorities, banks, and other entities.

Maintenance of Records

Maintenance of records refers to the requirement for companies in the UAE to keep accurate and up-to-date financial, accounting, and statutory records. This includes books of accounts, invoices, contracts, bank statements, payroll records, and other documentation necessary for auditing, regulatory compliance, and corporate governance. Proper maintenance ensures that companies can prepare financial statements, undergo audits, comply with free zone or mainland regulations, and respond to inspections or legal requirements. Records are generally required to be retained for a specified period as per UAE laws and free zone regulations.

Share Ownership

Share ownership refers to the legal possession of shares in a company, giving the shareholder a proportional stake in the company’s capital. Shareholders with ownership rights may receive dividends, vote on company matters, and participate in decision-making during general meetings. In the UAE, share ownership is documented in the company’s share register and trade license, and the rights and responsibilities of shareholders are governed by the Memorandum and Articles of Association (MAA) and applicable corporate laws.

Report Approved On

“Report Approved On” refers to the official date on which a company’s financial statements or audit report is formally approved by the board of directors or authorized management in the UAE. This date signifies that the financial information has been reviewed, verified, and accepted as accurate and complete, and it is used as a reference for statutory filing, audits, and compliance with regulatory authorities. The approval ensures that the company’s financial statements are ready for submission to regulators, shareholders, and other stakeholders.

Bankers in the Audit Report

In an audit report, bankers refer to the financial institutions with which a company maintains accounts or conducts significant transactions, as disclosed in the report. In the UAE, auditors include information about bankers to provide transparency on the company’s banking relationships, credit facilities, and financial stability.

Office Address in the Audit Report

The office address in the audit report refers to the official registered address of the company as stated in the audit report. In the UAE, this address is typically the location registered with the relevant authority, such as a free zone or the Department of Economic Development (DED) for mainland companies.

Opinion in the Audit Report

The opinion in the audit report is the formal statement issued by an independent auditor expressing their professional view on whether a company’s financial statements present a true and fair view in accordance with International Financial Reporting Standards (IFRS) and UAE regulations. The auditor’s opinion can be unqualified (clean), qualified, adverse, or disclaimer, reflecting the accuracy, reliability, and compliance of the financial statements. This opinion helps shareholders, management, and regulators assess the credibility of the company’s financial reporting and supports informed decision-making and statutory compliance.

Basis for Opinion

The Basis for Opinion section in an audit report explains the reasoning, procedures, and evidence the auditor used to form their professional opinion on a company’s financial statements. In the UAE, prepared according to International Standards on Auditing (ISA), this section details how the auditor examined accounts, assessed internal controls, and evaluated compliance with IFRS and regulatory requirements.

Significant Accounting Policies

Significant accounting policies are the principles, methods, and practices a company adopts when preparing its financial statements. In the UAE, these policies are disclosed in the notes to the financial statements and provide transparency about how the company recognizes revenue, values assets and liabilities, measures depreciation, and treats provisions or contingencies.

Responsibilities of Management in the Audit Report

The Responsibilities of Management section in an audit report outlines the duties and obligations of the company’s management regarding the preparation and presentation of financial statements. In the UAE, management is responsible for maintaining accurate accounting records, implementing effective internal controls, ensuring compliance with IFRS and regulatory requirements, and providing complete and truthful information to the auditors. This section clarifies that the auditor’s role is to express an independent opinion, while ultimate responsibility for the financial statements rests with management.

Auditor’s Responsibilities in the Audit Report

The Auditor’s Responsibilities section in an audit report explains the duties of the auditor in examining a company’s financial statements. In the UAE, auditors are responsible for planning and performing the audit to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. This section clarifies that the auditor’s role is to express an independent opinion based on evidence gathered, while management remains responsible for the preparation and accuracy of the financial statements.

Report on Other Legal and Regulatory Requirements

The Report on Other Legal and Regulatory Requirements is a section in the audit report that addresses compliance with laws, regulations, and specific requirements applicable to the company in the UAE. This may include free zone regulations, mainland corporate laws, license conditions, and other statutory obligations. Auditors provide statements on whether the company has fulfilled these legal and regulatory obligations, helping shareholders, regulators, and other stakeholders understand the company’s overall compliance beyond its financial statements.

Ministry of Economy – Registration No. of the Audit Firm

The Ministry of Economy Registration Number of an audit firm is a unique identifier issued by the UAE Ministry of Economy when the firm is officially licensed to provide auditing services. This number confirms that the audit firm is legally recognized, authorized to conduct statutory audits, and compliant with UAE regulations.

IFRS (International Financial Reporting Standards)

IFRS are a set of globally recognized accounting standards issued by the International Accounting Standards Board (IASB). In the UAE, companies are required to prepare their financial statements in accordance with IFRS to ensure accuracy, transparency, and comparability across businesses. IFRS provides guidelines on revenue recognition, asset valuation, liabilities, financial disclosures, and presentation of financial statements.

Principal Activity in the Audit Report

The principal activity in an audit report refers to the main business operation or core activity of the company as recognized in its trade license or official registration. In the UAE, auditors include the principal activity in the report to identify the nature of the company’s business, provide context for financial reporting, and ensure compliance with regulatory requirements.

International Accounting Standards Board (IASB)

The International Accounting Standards Board (IASB) is an independent, global standard-setting body responsible for developing and issuing International Financial Reporting Standards (IFRS). The IASB’s mission is to promote transparency, consistency, and comparability in financial reporting worldwide. In the UAE, companies follow IASB-issued IFRS to ensure that their financial statements are accurate, reliable, and compliant with international accounting practices, which is essential for audits, regulatory compliance, and investor confidence.

International Financial Reporting Interpretations Committee (IFRIC)

The International Financial Reporting Interpretations Committee (IFRIC) is a committee under the International Accounting Standards Board (IASB) that provides guidance and interpretations on the application of IFRS. Its purpose is to resolve accounting issues, reduce diversity in practice, and ensure consistent financial reporting worldwide. In the UAE, IFRIC interpretations help companies and auditors apply IFRS correctly, maintain compliance with international standards, and prepare accurate financial statements for statutory audits and regulatory submissions.

Historical Cost Basis

Historical cost basis is an accounting method in which assets and liabilities are recorded at their original purchase price at the time of acquisition, rather than their current market value. In the UAE, companies often use the historical cost basis for financial statements prepared under IFRS, especially for property, equipment, and inventory.

Fair Value

Fair value is the estimated price at which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. In the UAE, IFRS allows companies to measure certain assets and liabilities at fair value instead of historical cost, providing a more current and realistic view of financial position. Companies must also disclose the methods, assumptions, and valuation techniques used to determine fair value in the financial statements.

Reporting Currency

Reporting currency is the currency in which a company prepares and presents its financial statements. In the UAE, companies typically use the United Arab Emirates Dirham (AED) as their reporting currency, especially for statutory reporting and audits.

Functional Currency

Functional currency is the currency of the primary economic environment in which a company operates—essentially, the currency in which it generates and spends cash. In the UAE, a company’s functional currency is usually the United Arab Emirates Dirham (AED), but it can be another currency if the company’s main operations are conducted in a different economic environment. The functional currency is used for recording transactions, preparing financial statements, and translating foreign currency transactions in accordance with IFRS, ensuring consistency and accurate reporting for shareholders, auditors, and regulators.

Changes in Accounting Policies and Disclosures

Changes in accounting policies and disclosures refer to modifications in the principles, methods, or practices a company uses to prepare its financial statements. In the UAE, such changes must comply with IFRS requirements and be clearly disclosed in the notes to the financial statements. These disclosures explain the nature, reason, and financial impact of the changes, helping shareholders, auditors, and regulators understand how the company’s financial reporting has been affected.

DMCC Audit

A DMCC Audit is the mandatory annual financial audit required for all companies registered under the Dubai Multi Commodities Centre (DMCC) Free Zone. The audit must be conducted by a DMCC-approved auditor to verify that the company’s financial statements are true, fair, and comply with International Financial Reporting Standards (IFRS) and DMCC regulations. Audited financial statements must be submitted to the DMCC Authority, typically within 90 days of the financial year-end, for ongoing compliance and trade license renewal.

JAFZA Audit

A JAFZA Audit refers to the mandatory annual financial audit required for all companies registered in the Jebel Ali Free Zone Authority (JAFZA) in Dubai, UAE. The audit must be conducted by an approved JAFZA auditor to ensure the company’s financial statements are accurate, transparent, and prepared in accordance with International Financial Reporting Standards (IFRS) and JAFZA regulations.

DDA Audit

A DDA Audit is the mandatory annual financial audit for companies registered under the Dubai Development Authority (DDA) in the UAE. The audit must be conducted by a DDA-approved auditor to ensure that the company’s financial statements are accurate, comply with International Financial Reporting Standards (IFRS), and meet DDA regulatory requirements.

SAIF Zone Audit

A SAIF Zone Audit is the mandatory annual financial audit for companies registered in the Sharjah Airport International Free Zone (SAIF Zone), UAE. The audit must be performed by a SAIF Zone-approved auditor to ensure that the company’s financial statements are accurate, comply with International Financial Reporting Standards (IFRS), and meet SAIF Zone regulations.

DAFZA Audit

A DAFZA Audit is the mandatory annual financial audit for companies registered in the Dubai Airport Freezone Authority (DAFZA), UAE. The audit must be conducted by a DAFZA-approved auditor to ensure that the company’s financial statements are accurate, comply with International Financial Reporting Standards (IFRS), and meet DAFZA regulations.

DIFC Audit

A DIFC Audit is the mandatory annual financial audit for companies registered in the Dubai International Financial Centre (DIFC), UAE. The audit must be conducted by a DIFC-approved auditor to ensure that the company’s financial statements are accurate, transparent, and compliant with International Financial Reporting Standards (IFRS) as well as DIFC regulations.

Free Zone Audit

A Free Zone Audit is the mandatory annual financial audit required for companies registered in any UAE Free Zone (such as DMCC, JAFZA, DAFZA, DIFC, SAIF Zone, or DDA). The audit must be performed by an auditor approved by the respective free zone authority to ensure that the company’s financial statements are accurate, transparent, and comply with International Financial Reporting Standards (IFRS) as well as free zone regulations.

Audit License

An Audit License is an official authorization issued by the relevant UAE regulatory authority or free zone, allowing an individual or firm to perform statutory audits and provide audit services for companies. The license confirms that the auditor or audit firm meets all professional qualifications, regulatory requirements, and compliance standards required to conduct audits in the UAE.

Approved Auditors

Approved Auditors are individual auditors or audit firms officially authorized by a UAE regulatory authority or free zone to conduct statutory audits of companies. Approval ensures that the auditors meet all professional qualifications, licensing requirements, and regulatory standards necessary to provide accurate, reliable, and compliant audit services. Each UAE free zone or authority (such as DMCC, JAFZA, DAFZA, DIFC, SAIF Zone, or DDA) maintains a list of approved auditors that companies must use for their mandatory audits.

Mandatory Audit

A Mandatory Audit is a legally required annual financial audit that companies in the UAE must conduct to ensure their financial statements are accurate, transparent, and compliant with International Financial Reporting Standards (IFRS) and the regulations of their respective jurisdiction or free zone. 

Mandatory Audit

A Mandatory Audit is a legally required annual financial audit that companies in the UAE must conduct to ensure their financial statements are accurate, transparent, and compliant with International Financial Reporting Standards (IFRS) and the regulations of their respective jurisdiction or free zone. 

Audit and Assurance

Audit and Assurance refers to the independent examination and evaluation of a company’s financial statements and operations to ensure accuracy, reliability, and compliance with International Financial Reporting Standards (IFRS) and UAE regulations.

Audit: Involves a detailed review of financial records to provide an opinion on whether the financial statements present a true and fair view of the company’s financial position.

Assurance: Provides confidence and credibility to stakeholders (like investors, regulators, and banks) that the company’s information is accurate, reliable, and complies with relevant standards.

Big 4

The Big 4 refers to the four largest professional services and accounting firms in the world, known for providing audit, assurance, tax, consulting, and advisory services. Globally and in the UAE, the Big 4 firms are: Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG.

These firms are renowned for auditing large corporations, including multinational companies and Free Zone entities, and are often used by businesses in the UAE for statutory audits to meet regulatory compliance.

Audit Requirements

Audit Requirements refer to the specific rules, regulations, and standards that companies must follow when conducting a financial audit in the UAE. These requirements vary depending on the company’s jurisdiction (mainland or free zone) and may include- Conducting the audit by a regulatory-approved auditor, Preparing financial statements in accordance with International Financial Reporting Standards (IFRS), Submitting audited financial statements to the relevant authority within the prescribed deadline, Maintaining proper books of accounts and records, Meeting audit requirements ensures regulatory compliance, accurate financial reporting, and eligibility for license renewal. Failure to comply may result in fines, penalties, or license suspension.

Audit Firms in Dubai

Audit Firms in Dubai are professional accounting and auditing companies licensed to provide audit, assurance, accounting, and advisory services to businesses in Dubai, including mainland and free zone companies. These firms conduct statutory audits, help ensure regulatory compliance, and assist with financial reporting according to IFRS.

Audit Firms in Sharjah

Audit Firms in Sharjah are professional accounting and auditing companies licensed to provide audit, assurance, accounting, and advisory services to businesses in Sharjah, including mainland and free zone companies such as those in SAIF Zone. These firms conduct statutory audits, ensure regulatory compliance, and help companies prepare financial statements according to IFRS.

Audit Firms in Ajman

Audit Firms in Ajman are licensed accounting and auditing companies that provide audit, assurance, accounting, and advisory services to businesses in Ajman, including mainland companies and free zone entities such as those in Ajman Free Zone (AFZ). These firms conduct statutory audits, ensure regulatory compliance, and help prepare financial statements in accordance with IFRS.

Audit Firms in Abu Dhabi

Audit Firms in Abu Dhabi are licensed accounting and auditing companies that provide audit, assurance, accounting, and advisory services to businesses in Abu Dhabi, including mainland companies and free zone entities such as those in Abu Dhabi Global Market (ADGM). These firms conduct statutory audits, ensure regulatory compliance, and prepare financial statements according to IFRS.

Audit Firms in Ras Al Khaimah (RAK)

Audit Firms in Ras Al Khaimah (RAK) are licensed accounting and auditing companies that provide audit, assurance, accounting, and advisory services to businesses in RAK, including mainland companies and free zone entities such as those in RAK Free Trade Zone (RAK FTZ). These firms conduct statutory audits, ensure regulatory compliance, and prepare financial statements in accordance with IFRS.

Audit Firms in Fujairah

Audit Firms in Fujairah are licensed accounting and auditing companies that provide audit, assurance, accounting, and advisory services to businesses in Fujairah, including mainland companies and free zone entities such as those in Fujairah Free Zone (FFZ). These firms conduct statutory audits, ensure regulatory compliance, and prepare financial statements in accordance with IFRS.

Audit Firms in Umm Al Quwain (UAQ)

Audit Firms in Umm Al Quwain (UAQ) are licensed accounting and auditing companies that provide audit, assurance, accounting, and advisory services to businesses in UAQ, including mainland companies and free zone entities such as those in UAQ Free Trade Zone. These firms conduct statutory audits, ensure regulatory compliance, and prepare financial statements in accordance with IFRS.