EXTERNAL AUDIT SERVICES FOR DMCC REGISTERED BUSINESSES
The Dubai Multi Commodities Centre (DMCC) was established by the Dubai government in the year 2002. DMCC is a free trade zone and it was built to provide an infrastructure and platform to aid international commodities trading and to make Dubai a major component in the world commodities trading market. The infrastructure of the Centre is designed in the way to provide an environment that supports the requirements of businesses involved in commodities trading and service providers that support those commodity-based businesses. DMCC supports businesses that are involved in trading of diamonds, energy, colored stones, gold, tea, precious metals and several other valuable and marketable commodities. The industries that provide support to businesses involved in commodities trading include insurance, finance and logistics.
DMCC is also the developer and licensing authority for the Jumeirah Lake Towers (JLT) free zone. JLT is one of the fastest growing free zones in the Dubai and the UAE. Due to excellent infrastructure and facilities, the center is now home to more than 13,000 companies ranging from global business giants and major local industry participants to medium sized entities and start-up businesses. Some of the most attractive features for businesses operating in the free zone center are as follows:
- Safe and secured vault facilities
- Assaying facilities
- Shipment facilities
- Package delivery services
- Preferential rates – bullion freight
- Handling facilities for consignments
- Security and surveillance services on a 24/7 basis
- The Jewellery and Gemplex complex to aid the manufacturing of precious metal jewellery.
Types of Companies in DMCC/JLT:
The following types of companies can set up their business operations in DMCC/JLT free zone:
- Free Zone Company (FZCO)
- Branch or subsidiary of an international company
- Branch or subsidiary of a local company
Incentives for Businesses Operating in DMCC/JLT Free Zone:
In addition to an excellent infrastructure and environment meant especially for commodities trading, the companies operating in DMCC/JLT free zone can also benefit from the following incentives:
- Ownership of properties is allowed. Residential, commercial or freehold property is available for lease or sale at reasonable rates
- The Free Zone offers 100% foreign ownership for businesses
- Total exemption from personal and corporate taxes
- No restrictions on transfer of funds
- No restrictions on repatriation of capital
- The Free zone is located very close to the Jebel Ali Port which makes shipment and trans- shipment of commodities much more easier and quicker.
External Audit is Mandatory as per DMCC Laws and Regulations:
All the businesses operating in DMCC are required by the DMCC authority to conduct external audits of their business operations and annual financial statements. External Audit requirement is an important part of the license renewal process. Companies are required by the authority to present their External Audit Report when submitting the renewal application for their business license each year. Apart from above, the External Audit requirement basically encourages businesses to operate their activities within the rules and regulations established by the DMCC authority. DMCC has a responsibility to provide its clients with an environment that is not only suitable for business but is also safe from corruption and inappropriate business practices. In order to perform audit of companies operating in this free zone the audit firms must hold a valid license approved by the UAE ministry of economy and in addition to this the firms must also be registered with DMCC.
Essential Information/Documents requested by Auditors:
The free zone auditors normally require below information/documents for a DMCC registered company audit:
1) Company’s business license
2) Share Certificates
3) Copies of passport of the company’s Shareholders
4) Lease Agreement / Tenancy Contract
5) Trial Balance
6) Management Accounts (if prepared by the company’s management)
7) Ledgers of the company’s different account heads
8) Bank statements
9) Bank confirmations
10) Supporting Evidences of the company’s transactions
11) Schedule of Gratuity payments
12) Accruals and prepayments schedules
13) Fixed assets schedule
14) List of all the customers and suppliers of the company.
Who can perform External Audit of Companies operating in DMCC/JLT?
Only the Audit Firms that hold a valid Auditing license from the UAE government and are registered with the DMCC can perform external audits of companies operating in the DMCC free zone. Approved Auditors in DMCC are also considered as approved Auditors in JLT free zone and therefore can perform External Audits of companies registered in JLT Free zone as well.
In the year 2014, some changes were made to the UAE laws regarding the requirements relating to the registered auditors. The purpose of these changes was to make the process of audit more transparent and free from any kind of auditor’s bias. In order to remain certified the audit firms are required to provide evidence of their employees being provided with continuous educational and training programme. According to the revised laws and regulations relating to audit process the companies in the UAE are required to change auditors every four years.
Benefits of having an External Audit in Dubai Multi Commodities Centre:
1) Audit is a mandatory requirement to renew company license in DMCC. It therefore assists companies to comply with this essential requirement from the free zone authority.
2) An independent Financial Statements Audit provides indication on whether the company’s financials are prepared in compliance with relevant accounting standards and provides a true and fair view of the company’s financial standing.
3) An independent External Audit Report with a favorable audit opinion provides the company with protection against any legal action taken against the company either by its shareholders or other stakeholders.
4) It also gives confidence to investors that are interested in investing in the companies operating in DMCC/JLT free zone.
5) It provides assurance to the authorities that the company is conducting its activities in accordance with the rules and regulations applicable in the DMCC and that the company is not involved in any kind of wrongdoing or inappropriate activity.
Important Requirements for DMCC/JLT Auditors:
1) In order for an external audit process to be transparent in the eyes of the general public & DMCC authorities the auditor not only needs to be independent but also needs to be seen as independent.
2) External Auditors need to be completely independent of the company whose financial statements and operations they are examining as part of the external audit process.
3) The auditors should have no relation with the business entity being audited apart from that of an independent service provider.
4) The Auditors performing external audit of a company must have no personal stake in the results of the external audit and the impact of the results on the sustainability and profitability of the company’s business activities. There are restrictions with regards to non-audit services an audit firm can provide to its existing audit clients. Auditors are restricted to be involved in Company’s bookkeeping, internal audits, financial information systems or other management functions. These restrictions combine with the applicable auditing standards assure transparency of the entire external audit process.
Key Responsibilities of DMCC Auditors:
Below are some of the key responsibilities of all the approved auditors with DMCC/JLT:
1) Auditors have to impartial and independent.
2) They must have no personal interest in the results of the external audit.
3) The audit firm must not be involved in the company being audited in any way other than providing the company with external audit services.
4) The Auditors must have required knowledge and skills to complete all the tasks that are required of them during the external audit process.
5) They must be competent enough to discharge its duties as an external auditor of a company. This means that the auditors must be aware of the rules and regulations of DMCC/JLT free zone as well as UAE in accordance with which they are required to perform an external audit.
6) The auditors are also required to have a complete understanding of all the accounting and auditing standards that are applicable to the company.
How Nadeem & Umendra Chartered Accountants can Assist your Company?
Nadeem & Umendra Chartered Accountants is one of the well reputed and recognized audit firms in Dubai and in other emirates of the UAE. We have a team of highly trained and experienced Accounting and Auditing professionals who are well aware of all the DMCC requirements in terms of external audit. We are not only one of the best DMCC Approved Audit Firms providing cost effective, professional and value adding auditing services, we are also registered with other Free Zones as well as with all the leading banks and financial institutions operating in the UAE.