Audit & Assurance
Annual audit is an event which provides management an opportunity to get updated insight about their business to be factored in their financial plan for decision making. Audit enhances the credibility of the financial statements and hence, the quality of audit itself is of vital importance. We follow risk-based audit approach in compliance with International Standard on Auditing (ISA) by using the latest Audit Software Tools. With our advance technological tools, we ensure smooth exchange of information, real time update, and proactive issue resolution. We continuously evaluate our methodology to perform our audit assignment effectively and efficiently.
Our approaches are more personalized and involves of senior managers & partner with deep industry and technical experience.
Our local team provide the following services:
- Financial statement audits & reviews (general purpose & special purpose)
- Audit related services like agreed upon procedures: Stock Audit, Revenue Audit etc.
- Attestations & certifications
- Other regulatory audits as specified by the regulators like RERA etc.
Though it is mandatorily required by different regulatory authority, but it is an advantage to the auditee itself. An independent examination of the books of accounts by professional and reputed public accounting firm will add value to the organization. Such value addition may be in the form early alarm for probable red flags like ineffective internal control mechanism, management biases, management override, identification of risk areas etc. as audit process require to evaluate internal control. Audit also encompass verification of various regulatory compliances & requirements; hence it might also highlight non-compliances, non-adherence to specific rules, standards etc. It is mandatorily required to get your books audit under the following scenarios like if it is the requirement of that free zone or jurisdiction, listed companies, joint stock companies, liquidation, commercial and private borrowings, credit evaluation by suppliers, during disputes or arbitration and above all on Suo Motto to bring transparency into the system to protect the interest of the shareholder.
It involves audit of the financial statements of the entity. Financial statements reflect the position of entity based on historical transactions with few exceptions to it. Financial statement comprises of statement of financial position which generally reflects the financial situation as on particular date, statement of profit & loss and other comprehensive income or statement of comprehensive income which broadly covers all financial operational transactions during a particular period covered and statement of cashflows which the shows the flow of cash from three broad categories – operating activities, financing activities and investing activities.
For many reasons client need special purpose financial statements or financial statements prepared in accordance with special purpose framework, that is intended to be used or presented to the limited group of people like management purpose use only. Special-purpose financial statements may also be prepared for tax reporting, bank reporting, and industry-specific reporting. That user (small group of people) requires such reporting to provide them with useful information which may be lacking or diluted in general purpose financial statement due to its rule-based approach. ISA 800 (Revised) governs the audit for such special purpose framework audits.
Review of the financial statement is different than audit in the sense that the public accountant / auditor is required to issue Limited Assurance report. A review engagement provides a moderate level of assurance that the information subject to review is free from material misstatements, this is expressed in the form of negative reports. Further the process of verification is generally less extensive than what is expected in audit.
Financial statement compilation:
A compilation engagement is a service to assist the management in the preparing and presentation of financial data in the form of financial statements. The accountant should possess a greater knowledge of the operations of the business, its industry and relevant IAS, IFRS or GAAP applicable to the industry & entity in a country in order to compile the financial statements.
The accountant prepares a compilation report that states that he/she has not audited the financial statements, and therefore, it should not be viewed as an assurance that the financial statements have complied with the financial accounting framework or as an opinion on the accuracy of the financial statements. Unlike an audit or review report, a compilation report comprises a simple note or para.
Audit related services:
It involves performing certain set of procedures agreed with the management depending upon the type of information needed. It may be applicable to any specific item of the financial statement or multiple items. Most commonly, agreed upon procedure reports prepared to serve the third party by providing them with factual findings on after performing the agreed procedures.
In general, most of the Property / Facility / Mall management or Real Estate entity requires retailers to pay rent based on revenue of the entity for the period covered agreement. Revenue Audit report provides the information about the revenue of the entity procedures performed to confirm the stated figures.
We understand that Developer require auditor to perform the procedures as per the financial, compliance and operational scope defined by Real Estate Regulatory Authority (RERA) for the payment and receipts of off plan sale of Projects in accordance with the Guarantee Account Law No. (8) of 2007, as well as the Guarantee Account Regulations (e.g., law No. 8 of 2007, law No. 13 of 2008, law No. 9 of 2009 and its regulation No. 6 of 2010 …etc.). in order to fulfill the requirements of the management and RERA. The detailed procedure, and format of reporting are in accordance with the Scope document prepared by RERA.
This review does not constitute a statutory audit, so an audit opinion not to be issued. The review will be done as per International Standard on Related Services applicable to agreed-upon procedures engagements only.
Earlier, auditor perform audit procedure as per scope defined by RERA to provide report on Factual Findings for the above-mentioned Projects. However, as the time passes RERA evolved with different audit approaches. In current scenario auditor is required to submit their audit findings directly on the portal itself without any need report submission.
It is the responsibility of the developer and/or account trustee to prepare the relevant information and facts in accordance with Guarantee Account Rules & Regulation (e.g., law No. 8 of 2007, law No. 13 of 2008, law No. 9 of 2009 and its regulation No. 6 of 2010 …etc.) and for such controls as management deems necessary to prepare these information and facts that are free from material misstatement, whether due to fraud or error.
Apart from performing RERA, we can also assist your management team in getting align with the compliance requirements which involves reviewing the process flow of information, reviewing supporting documents, discussions on the differences between your system and RERA TAS, guiding the management in corrections and revisions required for the alignment, sample review of reports generated from the software.
Stock and receivables audit
Stock and receivables audit focuses on the inventory and receivable portion of the financial statements. It broadly covers entire inventory and receivables cycle of the entity. Most of the time bankers, private lenders require the borrower to produce stock and receivable statement, if they have working capital loans with them or those portions of the asset hypothecated (or having floating charge) with them. Mostly, private entities are not required to release financial information on shorter frequency say quarterly or half yearly and hence, it causes delay in passing of financial performance information to the lender. Stock audit being performed anytime during the year, provides the valuable information to the lender on real time or with shorter span. Since, the focus of the audit is on certain items of the financial statement user expects deeper information and accuracy.
Management also benefits from such audit exercise as it highlights in efficiencies in inventory and receivables management. The scope of the audit designed to identifies the internal control weakness, quality of the assets, values, insurance, existence, possession and ownership.
Compliance audit in most cases required by the internal management of the entity to ensure if they have been complying with local laws and regulation or abiding a contract its terms or even internal policies and standard setup by the top management. The purpose of the compliance audit is varying it may be to ensure same level of service to the customers by ensuring and maintaining same standards, lowering the risk of penalty by taking precautionary action to check if any regulatory incompliance, sometimes it is also required to ensure compliance against various service level agreement, certifications etc. Sometime Grantor of the fund, certifying body, franchiser etc. appoints and directs independent auditors to verify the compliances with the terms of the grant, funding, certification, affiliation etc. and report to them. To the auditee compliance audit to reduce the spread or volume of the noncompliance. It may also be helpful for the auditee to identify the reasons for non-compliances and to fix the same.
Investigating a fraud is an effort to find out the reasons, loopholes, impact and loss of value (monetary and non-monetary) to the organization. Fraud investigation involves work to be done beyond the auditing procedures which are primarily governed by ISA. Fraud Investigators require necessary skills, experience and mindset to deep dive into the cases to unearth the fraud. Fraud can be of multiple or any type may be unique in itself the purpose is to gain illicitly. Few examples of fraud are Cash embezzlement, theft of inventory and assets, forging cheque, accounting fraud, bribery, compromising data etc.
A strong internal control and good corporate governance are the key to create hurdle in seeding of potential fraud. Entity must have mechanism of instances reporting, exceptional reporting which might act as a red flag before the fraud actually took place.
We have team of trained and experienced professionals who are capable of performing fraud investigations, led by our team leader qualified from Certified Fraud Examiner (CFE) from USA and Certified Internal Control Auditor (CICA) from USA.
System Audit or IT Audit
An IT audit involves analyzing and assessing IT infrastructure of an organization with the objective to report on the security issues, compliances, regulations etc. The broad purpose of the IT audit is to identify the risky areas or area where IT infrastructure is exposed which may cause data leakage, manipulation, hacking cracking, cyber-attacks etc. Expert IT Auditor may also assist and add value to the organization on by consulting on various fronts like data storage, data optimization, change process, security compliance and in abiding regulation. The IT audit extends to software, hardware network, communication channels etc. As the time passes our dependency on the IT systems significantly increased; For almost all organizations IT gains important chapter in their Business Continuity Plan (BCP) and Disaster recovery plan (DRP). Scope of IT audits can be different and can be tailor made. It may include Systems & applications; Information processing facilities, Management of IT and enterprise architecture; System development etc.
Preparation for the audit
Usually, SME or alike businesses require the external accountants / public accountants to help them in gauging the expectation of external auditors (like VAT Audit, Excise Audit, Customs Audit, Special Purpose Audit etc.) to make things read and getting it done. Expectation of the auditor best known to another expert auditor; hence such familiarity helps expert to relieve management from any stress. Management use to outsource expert services who are capable of handling in the best possible way. Taking an example of VAT Audit which can be conducted by Federal Tax Authority (FTA), UAE. We can help assist you in getting things ready by preparing reconciliation, organizing information useful for smooth audit by understating VAT operating model, reviewing filed VAT returns, VAT calculations, adequacy of documentations for claiming VAT inputs etc. Thereby, advising management to rectify mistake before the start of audit or to file VDS to avoid penalties. This type of assignment is not limited to VAT regulations but can be done for other regulations or for specific task.
How we work:
We have established diligent client onboarding compliance process to ensure the proper KYC of our customers with whom we are dealing. Once you show interest, we ask you to fill client registration form based on which we perform client due diligence process as required by the law before on boarding you. After getting clearance we will then provide you the detailed proposal covering the scope of work, fees, timelines and our expectation from you in terms service.
Independency is the key and hence, before onboarding any client we ensure that there is no conflict of interest exist on accepting the audit assignment.
Planning and risk assessment phase:
Team leader along with subordinate’s staff arranges planning meeting to discuss client specific information’s like trends in the industry in which it operates, structure of the entity, identifying risk prone areas, development of execution and deliverable plan. These brainstorming sessions headed senior members of the firm sets a direction to the team. It emphasizes on the scope and expectation from the team members. Planning for the delegation of duty take place at this stage. In addition to annual independence declaration, our team member ensures their independency from the client and service line by reconfirming / signing assignment specific independence to the management before taking up the assignment.
Planning also involves analytical procedure; expectation being made at this stage based on management accounts and information gather from industry analysis and trend in the market. Analytical procedure is the one of the key elements in Auditing it highlights the variances from expectation & industry trend. It involves typical Vertical Analysis (Time Series) and Horizontal Analysis (Common Size Analysis). Time Series analysis helps in identifying the shift or trend that had took place over the year while Horizontal Analysis helps in identifying how much weight does each factor contributes to the total value of the organization. Hybrid version of both analysis out speak all changes occur during the period of analysis in the best way.
Our risk assessment tools give risk library to identify potential risk area and as guidance for quality audit service. Our risk assessment procedure includes identification of factors like fraud risk, business risk, control risk and overall risk to the entity.
Understanding the entity and its control mechanism is the key for driving the audit in the right direction. It helps engagement team to assess and implement audit methodologies, placing degree of reliance, extent of work to be performed etc. Risk responses like test of controls, implementation of walk-through procedure, testing of entity level controls to be done during this phase.
Audit plans, procedure and risk responses
Based on the initial assessment on internal control and risk environment, engagement team customizes their audit procedure to mitigate audit risk. We have both predesigned audit templates that guide the auditor to navigate through out the audit; further based on professional judgement auditors are allowed to extend their audit procedure to reduce the audit risk to acceptable lower level.
We use CaseWare an audit documentation tool, it is a perfect & secure technological platform to plan practice auditing activities and prioritize findings. CaseWare assists in managing complete paperwork effectively & Efficiently. The audit strategy with key milestones. We monitor the engagement with periodical meetings with the management and take necessary action in order to ensure that the engagement management and delivery is as per the plan and expectation. With the help of CaseWare Audit tool, we conduct more intelligent audit process – making sure every activity we undertake makes sense and fits within your engagement. With CaseWare Cloud, you will gain unprecedented visibility into your engagements. With innovative web-based tools, you can easily monitor your engagement quality and find ways to increase efficiency and productivity. All your engagement needs will be in one centralized location, with no need for servers. With CaseWare Online platform, team members can work remotely and simultaneously on the same Working Papers file and data will update in real time. There are many other features in CaseWare like Offering a full time and billing system out of the box, CaseWare Cloud lets us track time, bill clients and perform analysis from any web-enabled device. All these development and future developments increased the transparency and convenience to auditor and auditee.
We just not only issue audit report along with audited financial statements; but we also present management letter wherever required. Management letter broadly covers the material issues or weakness in entity’s internal control mechanism that encountered during the course of audit. Management letter intends to provide insight to management and those charged with governance (TCWG) about the deficiencies that need to be addressed by them. These reports are designed to include useful recommendations that may help improve performance and avoid weaknesses that could lead to material loss or misstatement. It is TCWG and management obligation to take the actions needed to alleviate those weaknesses and should they fail to do so auditor shall not be held responsible if loss or misstatement occurs as a result.
This report is set out in three sections. The first section addresses observation from current year’s audit and recommendations thereon in each area. Listed matters have been discussed with management and their response is included appropriately. The second section is a summary of the matters previously mentioned in management reports that have not yet been implemented/resolved and with their current status. The third section is a summary of matters previously mentioned in management reports that have been addressed during the current financial year. Observations were categorized in to three categories – Low risk, Moderate Risk and High Risk. High risk includes those observations where there is a risk of a significant financial impact on the business that must be addressed immediately; Moderate risk includes those where there is a risk of moderate financial impact on the business; and Low risk includes observations are those that relate to minor control deficiencies or enhancements in control efficiency.
User of the Audited Financial Statement
There are many stakeholders of Audited Financial Statements of an Entity, those list includes organizations itself, government bodies, and financial institutions/lender who are directly or indirectly related to the Entity’s business.
In large Corporates and even in large family businesses, shareholders and management are isolated from each other, perhaps only getting together annually on an annual general meeting (AGM). Unfortunately, most of the shareholders not always fortunate or willing to even attend such meetings; and hence, prefer to cast vote through nomination of proxy for their voting shares so a company representative who represents their opinion can attend in their place for example an investment manager or fund manager may attend the AGM and can cast vote on behalf of asset owner or beneficiary investor or unit holder.
It is the primary duty of the management to prepare and product financial but unaudited financial statements prepared by the management may be prepared based estimation which may be subject management oversight biased or there possibility the management had done certain override the internal control of the organization for its own interest to please the shareholder; or financial statements prepared may have not properly adhered to the financial reporting framework like US GAAP, IFRS or other country’s GAAP.
Hence, shareholder rely on the professional work of accounting and audit firms to provide an unbiased opinion of these financial statements, and the assessment of internal controls. This provides a clear picture of how Management has performed during the year and audit increases the credibility of the financial information provided to the shareholders.
This list includes government bodies & departments, free zone authorities, banks & other financial institutions, potential investors, suppliers, customers and employees.
Licensing Authorities and regulatory requirements
Licensing authorities requires audited financial statement to ensure entity’s compliance with local laws and regulatory requirements in addition to the report on financial reporting framework. Commercial companies law also requires auditor to report certain information apart from attesting the financial statement results. Licensing authorities verifies the activity performed is in line with licensed activity or not; they also ensure the capital adequacy maintained by the entity; and also, to ensure the financial reports are in line with disclosed operations and as per the records of the Free zones (customs).
Business needs capital, short and long term, for its varying needs like for working capital requirements, for financing machines, for financing a project or buy outs of existing business or paying off existing debts or for restructuring its existing debts in response to changing economic conditions etc. Those lenders to evaluate the financial strength of the entity, its leverage capacity and repayment capabilities requires audited financial statements. Audited financial statements are the basic documents that any lender seeks against any loan application. In general, they require last three year audited financial statements to study the trends and its nexus with general market and industry trends.
An equity investor would be willing to know the growth potential of the investee entity by assessing its historical financial information and market outlook in the future. Equity investors have residual (last) right over the income/ accumulated income and assets of the entity and hence, it is imperative for the equity investor to assess if the free cashflow will be available to them. Analyst to starts its bottom-up analysis use historical financial statements. The quality of the financial information is the key for investor in making investment decisions.
Suppliers & Customers
Their concerns are manifold, such as knowing if a company is capable of paying its bills, and if they are capable of supplying their service or product as described by their business model. Supplier may also want to know the credit worthiness of the entity before extending any credit facilities. Hence, the demand for the audited financial statements is nothing new to them.
Their customers want to know that a product quality & warranty will still be valid if they ever need to make a claim; whether the supplier will be able to sustain in different market condition and will be able to deliver quality goods and services.
Sometime company’s, mainly new ventures, issues ESOP (Employee stock option plan) to retain its key employees and hence, the employee need to evaluate the value of option on or before exercise dates to take the decision. Employee also seek financial information of the entity before getting employed with them to know whether they will be able to get paid on time and how reputable the organization.