Most businesses in the UAE are required to have an annual audit, while some entities do so on a voluntary basis. As a yearly activity, the preparation is not yearly; entities must be ready beforehand to avoid hassle and panic at the eleventh hour. In 2025, there are advanced systems and packages available for firms; therefore, businesses must act proactively rather than reactively. In this blog, we provide a short guide for testing audit readiness in the UAE in 2025. Before moving further, let’s digest some basics.
What is an Audit?
An audit, in simple words, is an independent examination of financial data. According to IAASB, an audit is a systematic examination and verification of financial records, transactions, systems, and processes to ensure accuracy, compliance with laws and regulations, and adherence to established standards and policies. Audits are typically conducted by qualified professionals, known as auditors.
The Need to Test Audit Readiness
The important point here is homework. The homework should be done well before the arrival of the auditor. In this way, your business will reap the following benefits:
- Quicker audit completion
- Lesser risk of material misstatements due to errors
- Lesser risk of non-compliance
- Smooth running of the business.
Checklist for Testing Audit Readiness
Every business is different; however, there are some similarities in systems and processes. Let’s highlight some of the common particulars that most businesses must follow to prepare for an external audit.
1. Updated Books of Accounts
Clean books will most likely result in a clean result. Therefore, one must understand the importance of accurate bookkeeping. Most entities follow the following actions monthly for effective results:
- Account reconciliations, including bank accounts, cash, and so on.
- Verification of accounts receivable and accounts payable
- Adjusting and closing entries
- Ensuring all transactions are recorded
- Reviewing accruals and prepayments
- Reviewing account balances with prior periods
It is worth noting that the above list is just an example of duties; things vary with businesses and their respective circumstances.
For detailed information on the accounting checklist, check out our blog on the year-end accounting checklist.
2. Prepare and Organize Supporting Documentation
The presence of clean books of accounts does not fulfill the complete requirements. The audit will require documents to verify the figures depicted in the financial statements. These will include internal documents as well as external documents. For internal documentation, archiving and numbering the documents properly will result in easy provision of files to the auditor. You might need to prepare the following docs:
- Sales invoices
- Purchase invoices along with the purchase orders, agreements, and goods received notes.
- Tax documentation, such as corporate tax returns
- Fixed assets register, including the depreciation schedules
- Bank confirmations
- Supplier statements
- Payroll Documents
- Lease agreements
- Prior year’s documents, such as financial statements, audit reports, and so on.
The list above just gives an idea of what audit documentation looks like. There can be other files depending on the nature and circumstances of an entity.
3. Strong Internal Controls
A strong financial process is supported by stringent internal controls. The presence of internal controls in a company reduces the risk of manipulation of assets either through fraud or errors. These are the systems and procedures in place that ensure reliable financial reporting and compliance with laws. An entity can enhance its internal controls through the following actions:
- Proper workflows and approvals
- Segregation of duties
- Proper mechanism for access to critical accounts, documents, and files (physical and digital).
- Standard operating procedures for handling cash transactions
- Activating firewalls and other protective mechanisms for digital records.
During the audit process, an auditor can simply test the effectiveness of internal controls and rely on the figures.
4. Audit Schedules
The audit schedules usually depend on the needs and requirements of the auditor. However, depending on the previous audits and other circumstances, an entity can work beforehand to prepare audit schedules and save time. Common schedules include:
- Trial Balance
- General Ledger
- In-house financial statements
- Bank reconciliation statements
- Debtor’s age analysis
- In-house inventory count and valuation
- Amortization schedules
5. Pre-Audit Review
A good way to test audit readiness is to conduct an internal pre-audit review. In this way, you will be able to verify the effectiveness of the financial system, including the internal controls, and rectify the errors in advance. The review may include the following particulars:
- Variance analysis
- Prior years’ comparisons between key figures
- Reviewing policies for accounting estimates and accounting policies
- Comparison between financial and tax records
- Previous audit reports
- Common-size financial statements & ratio analysis
The review is subjective and depends on the management style, the entity, and the respective circumstances.
6. Other General Preparations
Our list above does not include everything; however, it covers particulars that most businesses need. Let’s highlight some other important areas that reflect true testing of audit readiness in the UAE.
- Review compliance and regulatory filings, including corporate tax returns, VAT filings, AML/CFT compliance documents, and any other industry-specific regulations.
- Prepare and train staff for audit queries and requirements. This will ensure the timely provision of documents and key information to the auditor.
- Ensure smooth and timely communication with the auditors. However, make arrangements where documented communication is necessary. A good way is to discuss the audit plan and set timelines.
- Take necessary post-audit steps such as discussion of the management letter, any discrepancies during the audit, improvements for next year, and so on.
Conclusion
Testing audit readiness ensures that a business is proactive in keeping up with its compliance and audit responsibilities. Preparations confirm the avoidance of year-end panic and the smooth running of a business. However, it is worth noting that preparing for an audit is, in fact, an ongoing process if an entity wants to keep everything smooth and compliant. Our checklist provides a general understanding of how to prepare for an audit and keep things aligned. For instance,
- The first and foremost particular is to keep clean books of accounts.
- Secondly, entities must ensure to keep the documentation is ready in time.
- Thirdly, firms must ensure the presence of strong internal controls.
- Fourthly, they must prepare audit schedules well in advance to save time.
- Fifthly, companies can perform a pre-audit review to highlight any areas of improvement and rectify errors beforehand.
- Lastly, businesses must perform general preparations to ensure a smooth audit process and smooth running of the business.
