An external audit is an objective examination of the company’s books of accounts by an auditor to verify if the financial statements are honest and fair. An auditor also checks whether the business follows accounting rules and procedures. The company’s stakeholders (shareholders, licensing authorities, banks etc) receive transparency and confidence regarding the accuracy of the accounts from an independent auditor who evaluates the accounts such as financial statements. It increases the credibility and respect of the company and its financial reporting because an external auditor is an individual who is completely unrelated and independent to the company.

External audits include examining not only the books but also the processes followed by a company. Therefore, it helps in identifying inefficiencies, errors, opportunities, and risks. External audits are usually not mandatory but are a requirement by governments if the company falls under certain categories (eg: if it’s a listed company). 

In the United Arab Emirates, the law that governs the auditing of companies is Federal Law no. 2 of 2015 regarding Commercial Companies Law. Also commonly known as Companies Law. 

Below are a few highlights of the Companies Law: 

  1. Every organization in the UAE is required to keep its books in its headquarters for at least 5 years starting from the end of the financial year.

  2. The companies mentioned under the law are required to prepare financial statements annually and must follow International Accounting Standards while preparing

  3. Requirements for performing audits are different for Companies in mainland Dubai or UAE and in free zones. Freezone companies need to comply with their respective jurisdictions. Many authorities in free zone require audit reports upon license renewal such as DAFZA, DIFC, DSO and DDA.
  1. Public sector enterprises in the UAE are required to undergo a Statutory Audit on a regular basis.
  2. The “UAE Corporate Tax Law,” officially known as “Federal Decree-Law No. 47 of 2022 on Taxation of Companies and Businesses,” was just published in the UAE and states the need for audited financial accounts. 


External audit in the UAE plays a huge role in compliance to avoid penalties and in increasing the credibility, profitability, and efficiency of a business. Therefore, it’s important to know your business environment and identify when and how an external audit will be required, and to select an external auditor best suited to your requirements.

Thank you for taking the time to read our blog! We hope you found it informative and helpful.

If you have any questions or comments, please don’t hesitate to reach out to us. We always appreciate feedback and would love to hear from you.