Audit costs for UAE SMEs tend to fall within the range of AED 15,000 to 40,000 per annum. What are they paying for? Clearly not the auditor's expertise and time dedicated to reviewing the accounts in detail to assess whether the financial management of the business has been done properly. Instead the auditors will be spending a lot of time looking for missing invoices, adjusting figures to rectify a bank reconciliation that has been lost, and a whole host of other time consuming exercises. Receiving and storing receipts so they are available for audit is another example of wasted time for clients. Equally unnecessary is the repeated asking of the same questions, because the answer was not provided when it should have been the first time it was asked.

All time that an auditor has to spend on relatively trivial issues has to be billed to you. And in a post Corporate Tax era of UAE where all audits are bound to have CT compliance, VAT compliance and IFRS reporting, we expect that such unbilled time will increasingly pile up.

This guide is about the money you lose and how to get it back. Not by trying to cut corners during an audit. But by being prepared. Here's how.

Why Audits Cost More Than They Should for UAE SMEs

Audit fees are not fixed and are charged on a basis of time. The time required to complete the audit report is directly related to the condition of accounts and records at the commencement of the audit. Generally poor condition of accounts and records and a high number of re-submissions to accountants to obtain approval for audit instructions from management is a major reason that audit fees are considerably higher than that expected by owners of SMEs in the UAE.

Our complexity layer is increasing. Talking about an audit in the UAE in 2026, many years ahead of the usual annual audit. The purpose of which will be VAT return reconciliation to accounts, Corporate Tax (CT) registration and the verification of CT compliance. We are talking here about IFRS standards which have to be applied on your financial statements. This includes IFRS 16 for leases, IFRS 15 for revenue recognition and IFRS 9 for financial instruments. Time is money. Every single missing entry between accounts and audit requirements will therefore be charged as billable time.

The truth is, that most founders won't fully appreciate the chaos of their accounts books until the day they receive the auditor's invoice. The purpose of this guide is to ensure that you have sight of the state of your accounts books before damage is done and to give you sufficient time to correct accounting issues.

The Pre-Audit Checklist, 12 Things to Have Ready Before Day One

This section will walk you through the bulk bookmark, print out, and assign steps to prepare you for the audit. Start here at least 6 weeks before your audit is due to begin. The items listed below are the ones which are most commonly referred to as time wasters during audits in the UAE, and therefore are the areas you will need to ensure you have addressed well before the audit team arrives.

1. Reconciled bank statements for all 12 months 

Banks, accounts and entries are fully reconciled to the General Ledger. The rules for the System are: All banks, all accounts, and all entries must be fully reconciled in the General Ledger in order to provide a full audit trail. Starting and stopping at bank reconciliation will achieve nothing and is also what the auditors always look at and usually stop at.

2. VAT return copies matched to your books 

It is essential that the return to the FTA is the same as the accounts. For each quarter, all the VAT201 documents should be collated and the output tax, input tax and net payable amounts recorded. Any differences must be fully explained, which will undoubtedly add to the time and cost of the engagement.

3. Corporate Tax registration proof and TRN

You will need your CT registration certificate and Tax Registration Number. If you have not yet registered for CT, this is the most urgent thing you can do before your audit. Read our article on CT registration penalties to understand the consequences of missing the 31 October deadline.

4. Chart of accounts updated and consistent

Clean your Chart of Accounts out before the end of the year so as not to frustrate auditors with unnecessary reclassifications. We have just audited a couple of accounts books in the mid-year period where: The Chart of Accounts has changed in some way since 30th June (for example some accounts have been reclassified, some have been renamed and there is always a handful of accounts left in the "uncategorised" category); or A large number of accounts contain a high level of miscellaneous entries that require a significant amount of time to manually reclassify when auditing.

5. Fixed asset register with depreciation schedule 

Asset identification: Identify all types of fixed assets (i.e. real and personal property) such as property, plant and equipment, furniture, computers, autos and leasehold improvements. List the date acquired, cost, useful life and depreciation method and the net book value. This should be linked to your financial statements. Having an up-to-date fixed asset register in place is one of the top five audit delays.

6. All invoices above AED 1,000 accessible digitally

Free Trade Agreement (FTA), Tax Invoices The Free Trade Agreement between the UAE and Europe requires that tax invoices/receipts are retained for 5 years. In addition to the requirements mentioned in our previous note, all invoices exceeding AED 1,000 must be stored electronically in a searchable folder/file so that they are readily available in case of an audit. A good cloud documentation system can save a lot of headaches and reimbursement claims during audits.

7. Payroll records and WPS transfer proof

Payroll is one of the most audited areas for any UAE SME. Therefore, it is vital that all monthly payroll summaries, WPS transfer confirmations, and individual employee records are readily available. In addition, if there have been any changes to staff this year it is also important to have all joining and leaving records readily available.

8. Intercompany transaction documentation (if applicable) 

One common red flag that accountants and auditors often see are unreconciled intercompany accounts. Most companies have accounts with their affiliates, parent, subsidiaries or sister companies. All of these intercompany accounts need to be supported by a contract or loan document and should reconcile to $0. If they don't, a disclosure with an explanation should be provided in the notes. These unreconciled accounts are not only a red flag, but they can cause a ton of extra time explaining them during audit/accounting time.

9. Loan agreements and outstanding balance summaries

All external loans, bank facilities, shareholder loans, director loans, third party financing should be fully supported with signed terms and conditions and reconciled balance summaries showing opening balance, drawings, repayments, interest and closing balance. The closing balance on the reconciliation should be in line with the balance shown on the Lender Statement.

10. Shareholder/director loan accounts reconciled 

This is one of the areas that tend to attract the most attention during an audit of a UAE SME. All cash movements to and from the Shareholders and the Company, advances, expenses and informal loans should be fully recorded, accounted for and fully disclosed and reconciled. High or unjustified Director's Loan Accounts can be particularly time-consuming to audit.

11. Year-end accruals and prepayments list

At the year end all un-invoiced expenditure that has to be accounted for (accruals) and un-paid expenses that have to be accounted for (prepayments) have to be identified and recorded. This is detailed in the table on the right and the auditor will check that the amount entered is correct. Missing accruals will be less for liabilities on the balance sheet and so less Corporation Tax will be payable. Missing prepayments are expensed in the accounts and so will reduce taxable trading profits and therefore increase the Corporation Tax payable.

12. Prior year audit report and management letter

Before the audit even begins, take a look at last year's audit report and management letter (if available). There may be a number of issues from the management letter which have not been addressed and will have to be re-included in the audit (and may be more contentious this time round). These will be listed as 'repeat findings' and could cause more delay in the audit. They may also need to be dealt with in greater detail, and so could increase the scope of the audit.

This should be done by your Bookkeeper/Finance Team at least 6 weeks prior to the commencement of the audit. Please note that if you engage an external Bookkeeper, you may not need to do this exercise as our standard year end close process for clients includes this work.

How Cloud Accounting Saves You Money at Audit Time

The case for cloud accounting has never been more practical than at year-end. Trying to get through an audit with traditional desktop accounting software in the run up to year end is a particularly inefficient use of time as all too often accountants have to spend their time reconciling accounts as they are no longer up to date, untidy and difficult to open. Cloud accounting software is always live, and this means your accounts are always up to date, clean and easy to access.

This has a direct impact on the cost of an audit. If we are able to read only access to a cloud accounting system and it's in good order (i.e. it's not just a folder of PDFs and Excel worksheets), then the time to extract samples, confirm transactions and prepare account reconciliations is dramatically reduced. And if the audit time reduces, then the audit cost can also be reduced. Often by a considerable margin.

The bank reconciliation function in AccountantsOffice can be used to automatically correct accounts to rectify classification errors and to ensure that all transactions are accounted for. This may occur before the auditor has an opportunity to review the process and results. The bank reconciliation function is considered a control but is not part of audit fieldwork.

Real-time finance and accounting is so much more than just your spreadsheet. It's your life. Your stakeholders want to be able to get an up-to-the minute view of the business at a click of a button. Your finance team should be delivering value to your organisation, not sitting in endless meetings trying to answer questions that have already been answered in real-time.

Auditor access controls enable direct system access. No longer will you need to send reports and evidence to auditors and stakeholders. Versions and back and forth communication are reduced, saving you time.

Audit trails in the cloud document every transaction at the second, minute, hour, day, week, month and year level. This provides a full record of every event that occurs within the cloud system.

This is the Finanshels model for SMEs in the UAE. Our business is built around real time accounting, accounts reconciliation and year end audit processes that are highly efficient for accountants and which are competitively priced for SMEs. We have found that our pricing for auditing SMEs accounts can be significantly lower and more manageable, which we believe to be a big advantage. Something that SMEs will feel is far from healthy.

Common UAE Audit Red Flags That Inflate Costs

The following are some of the areas the auditor will likely spend the most time auditing, will require more audit procedures and fieldwork, more questions and also will likely charge the most for their time in these areas. Knowing these areas ahead of time may enable you to address some of the auditor's concerns prior to their arrival.

Unexplained cash transactions

Cash movements with no supporting documentation, narrative, or reconciled counterpart. It is mandatory to document all cash transactions above AED 500. A narration field has been created in the accounting system and all receipts should be linked to the journal entries for the entire year.

Revenue recognition gaps

This account may arise in a project based business. In these circumstances the revenue for contract accounting purposes is the amount billed to the customer (as per IFRS 15). Reassess your revenue recognition policy to IFRS 15. Ensure that advance calculations for percentage-of-completion for long-term contracts are available.

VAT input claims without docs

Input tax credits claimed without corresponding tax invoices meeting FTA requirements. MATCH VAT RETURN LINES TO TAX INVOICES. Take the time to match each line of your VAT return to the paper or electronic tax invoices it relates to. Don't do this during an audit, do it before.

Undisclosed related-party transactions

Deals that have to be disclosed involving connected parties. The deals that have to be disclosed between the business and a connected party can be complex. A connected party is typically an associate, someone with significant influence. An associate could be another company, an organisation or an individual. An associate could also be a trust where the business has given someone control. Another common example of an associate is where a number of individuals together hold control of the business. This needs to be a schedule of related party transactions, balances and terms. Auditors seem to request this all of the time. Prepare in advance and expect to spend a long time on this request.

Missing IFRS 16 lease schedules

Unless they fall under the exceptions below, leases must be recognised on the balance sheet as a right-of-use asset and a lease liability, unless an accounting exemption for shorter lease terms applies. However, there are specific Walk through the contracts in the accounts package to identify those that are leasing contracts and have a term longer than 12 months. This will involve the use of the IFRS 16 model to calculate the right-of-use asset and lease liability as these are now accounting obligations. All the Big Four firms have Lease templates.

Late CT registration

A compliance gap that auditors should be aware of has arisen from late Corporate Tax registrations caused by some businesses not accounting for the charge on past profits. As the Corporate Tax rate has only been levied on profits arising since 1 April 2023, affected businesses have not accounted for Corporate Tax on profits earned prior to that date. Still not registered? Register now! Read our guide to the new CT penalties and what you can do to avoid them.

With the CT registration point in focus: As we already mentioned in a previous post, in the case that your business has not yet registered for the UAE Corporate Tax this presents a huge compliance risk and audit cost. Auditors will flag the non registration and the time, effort and cost to correct this will be many times more than the cost of registering your business ahead of time.

How to Choose an Auditor That Won't Overcharge You

Not all audit proposals are created equal. Before you sign on the dotted line, i.e., commit to the term set out in the engagement letter, it is sensible to ask some questions and to mark for future reference anything that looks suspicious or unclear.

Ask before you sign:

• Is your fee for services a flat rate or are you paid by the hour? If it is an hourly rate, approximately what would be the range of the hourly rate and what would be the factors that could cause you to charge a higher rate.
• I think I just fell into a trap that a friend set for me. A friend was arguing that senior managers always do all the work while junior associates do none and he asked if
• What information will you need from us, and in what format?
• Have you audited businesses in our sector and of our size before?
• What is your standard audit turnaround time from the time that fieldwork is completed and ready for audit to the time that you are able to deliver a signed opinion?

Red flags in audit proposals:

• Low fixed fees with a very broad disclaimer about "further work that will be charged separately", a cost-plus contract disguised as a fixed fee.
• If the scope of work is not defined in the engagement letter, then anything that is not excluded is assumed to be within the scope of the engagement, and therefore, your risk.

The auditors who didn't really ask about the accounts system, CT status or VAT weren't really too bothered and we figured an average audit. Our auditor asked what our CT rate is and if we are VAT registered, so that seems to be the way they ask for it now with the other auditors.

Remember when choosing an auditor that a cheaper auditor will charge less for audited accounts if they are in good order. The condition of your accounting system has a far greater influence on the cost of an audit than the hourly rate charged by the auditor. Take the time to sort out your accounts and the choice of auditor will be much less of an issue.

Please refer to the following articles: Corporate Tax returns in the UAE Corporate Tax (CT) registration deadlines and penalties in the UAE

Your financial statements should impress your accountant and be affordable for you.

No, that is not a list of competing outcomes. Rather it is one outcome that has been achieved with the right input, organised books. Having accounts in balance and that all accounts, analyses and reports are matchable to all audit checklist items, and having an auditable finance team in place, will result in shorter audit engagements and lower audit fees, and a great deal less angst.

Would you like to know where all your accounts are held and approximately how long we would need to get your accounts ready for audit. Find out here how Finanshels can help. →