JAFZA Approved Audit Firm in Dubai

Businesses registered in JAFZA require an annual audit report to be completed by one of the JAFZA approved auditors. This is a mandatory requirement for all the companies registered in Jebel Ali Free Zone Authority (JAFZA). Failure to do so may result in penalties being issued against the company, including license cancellation.

As a JAFZA approved audit firm in Dubai, Vertix Auditing is well positioned to assist you in financial audits, VAT and corporate tax, and any other business advisory your company may be looking for.

KEY POINTS

Jebel Ali Free Zone Authority (JAFZA), a UAE-based economic free zone, was established in 1985 and currently houses more than 10,000 companies including many Fortune 500 companies.
JAFZA provides a wide range of benefits, including 100% foreign ownership, no corporate tax on income which qualifies for exemption, world class infrastructure, and easy company setup, etc.
Businesses registered in JAFZA must have a financial audit conducted by a JAFZA registered audit firm, at least once each year. This is required for license renewal and independent assessment of the company’s financial statements to ensure it is not breaching any applicable laws and regulations of the free zone.

Overview of Jebel Ali Free Zone Authority (JAFZA)

Jebel Ali Free Zone Authority (JAFZA) is one of the longest-standing economic free zones in the UAE. The authority supports a wide variety of businesses, and plays a significant role in the UAE’s quest to develop sustainable growth, as well as encourage international investment into the country.

JAFZA is committed to supplying the best service to the thousands of businesses operating within it, while maintaining high standards of regulatory compliance with the local laws in the UAE. JAFZA was established with just nineteen companies, and now comprises of a large-scale industrial and trade ecosystem.

Some key highlights about JAFZA are:

It is the largest customs-bonded free zone in the Middle East.
More than ten thousand to eleven thousand companies (representing over 150 countries), including many Fortune Global 500 companies, operate in JAFZA.
JAFZA provides employment to over 130,000 people.
JAFZA makes up approximately 23 – 24% of Dubai’s foreign direct investments, and also a significant portion of the Emirate’s GDP.
JAFZA is strategically located adjacent to Jebel Ali Port and near Al Maktoum International Airport, which allows for a great advantage of logistics, trade, and connectivity for its clients.

Why is an External Audit Required in JAFZA?

As one of the autonomous economic zones in the UAE, JAFZA, has created a very favorable climate for conducting business operations and also provides incentives for establishing new companies throughout the area of operation. The renewal of business licenses is required annually for all the companies operating in the free zone. However, a mandatory component of license renewal is that your company’s financial records must be audited by a licensed accounting firm from the JAFZA approved auditors list.

The independent review of the financial records provides assurance to the responsible governing authority that no fraud or other improper financial dealings are taking place, and that the business has not misrepresented its financial position in its financial reports. Such provisions of law and regulation have been established by the free zone authorities to protect UAE citizens, local & global businesses, and shareholders.

Types of Business Licenses in JAFZA

There are four main categories of business licenses available in JAFZA:

1 – Trading License: Allows companies to import, export, wholesale, distribute and sell physical goods.

2 – Service License: Permits a company to provide consulting services, professional services, IT services, marketing services and other knowledge based services as long as they do not hold inventory.

3 – Industrial License: Permits a company to manufacture, process, assemble or produce products as well as all related trading and services.

4 – Logistics License: The logistics license allows a company to perform specialized logistics functions such as; warehousing, transportation, freight forwarding, customs clearance, inventory management, and distribution.

What Do JAFZA Regulations Say About Financial Audits?

All the companies operating in Jebel Ali Free Zone have to appoint an auditor from the JAFZA approved auditors list as per Article 51 of Implementing Regulation Number 1/99.

More specifically, only auditors whose professional licenses were currently valid with the Economic Department are qualified to prepare and deliver the annual audit report on the financial statements of the company. The designated auditor will also be required to submit the annual audit report to the shareholders of the company.

Clause 49 of the regulations states that the annual financial report of the company is required to be signed by either the directors of the company, or their authorized representative. A minimum of one director of the company has to sign the balance sheet; this is considered the official accounting position of the company.

Clause 50 of the regulations requires that a copy of the annual accounts, including the auditors’ report, shall be submitted to the FZCO Department no later than three (3) months after the end of the financial year of the company. Extensions under special circumstances may be allowed by the competent authorities.

What are the Responsibilities of a JAFZA Approved Auditor?

The responsibility of a JAFZA approved auditor is to provide an objective assessment of the company’s financial records and to verify their compliance with all the applicable JAFZA regulations. Their primary duties include:

They are responsible for conducting an annual external statutory audit of the company’s financial records objectively and independantly.
They are responsible for verifying that the company’s financial records are prepared according to International Financial Reporting Standards (IFRS), International Standards on Auditing (ISAs), and any other specific requirements of the free zone.
Provide an audit opinion on the company’s financial statements which should accurately reflect the company’s financial position, performance, and cash flow.
Ensure that the company’s business operations and activities comply with the authorized activities set out in the JAFZA trade license (i.e. no unauthorized activities).
They are responsible for reviewing the company’s regulatory and tax compliance (e.g. JAFZA, UAE Federal Laws, etc.).
Ensure that VAT filing and corporate tax filing as per the accounting records reconcile with the FTA portal.
They are responsible for identifying and reporting any irregularities (discrepancies, fraud, creative accounting, money laundering risks, etc.)

What are the Benefits of External Audit?

Trade license renewal and protection from penalties by the free zone.
If you qualify to be a Qualifying Free Zone Person (QFZP), audit is mandatory to maintain the QFZP status.
External audit helps in establishing robust internal financial controls, identifying and correcting potential errors, fraud, or inefficiencies early on; and providing management with strategic insights regarding better decision making and operational efficiencies.
Shareholders/owners have confidence in the accuracy of their company’s financial statements prepared in accordance with International Financial Reporting Standards (IFRS) and International Accounting Standards (IASs).
Audited reports are also viewed as credible by banks, investors, and other financiers and thus facilitate the availability of loans, funding, or partnership opportunities. Business partners, suppliers, and customers also benefit from greater levels of trust and lower risk in doing business.
In general, the audit results in credibility, reduced risk, and sustained economic growth for companies operating in a highly competitive trading environment of Dubai.

Required Documents for JAFZA Audit

There are a number of supporting documents required by JAFZA approved audit firms to conduct the audit. Some of the most important documents and information are listed below:

Trade License Copy: A current valid trade license to ensure that you are legally permitted to operate the business.
Incorporation Certificate: Proof that your company was established.
Memorandum of Association and Articles of Association: Your business incorporation papers to confirm shareholding, distribution of profits/losses, etc.
Bank Statements: Provide bank statements for all your local and international banks. These bank statements will be used to select sample transactions for auditor’s verification. You will also need to provide bank reconciliation statement for some of the months selected by the auditors.
Trial Balance and General Ledger: A full set of your company’s accounting records should be available to show every transaction made during the financial year. Trial balance and general ledger usually fulfill this requirement.
Invoices and Supporting Bills/Vouchers: Examples include sales invoices, purchase invoices, expense receipts, contracts, etc. as well as proof that the invoice was paid and the receipt was issued.
Bank, Customer, Supplier Confirmations: A bank confirmation letter is issued by bank directly to auditors confirming the account is active, year-end bank balance and any loans or bank facilities. Similarly, customer and supplier confirmations are obtained from some high value customers and suppliers to confirm our year end balances reconcile with theirs.
Lease/Tenancy Contract: For each warehouse and/or office space rented by your company, you will need to provide a lease/tenancy contract.
VAT and Excise Tax Records (if registered): VAT and Excise Tax registration certificates, VAT returns, input/output tax invoices, payment proofs, and any other compliance documentation.
Payroll and Employee Information (if applicable): This is required to validate your employees’ wages and salaries and to ensure that your company has complied with the WPS regulations. Auditors will also request gratuity calculation to ensure you have calculated it correctly and booked the relevant provision.

Why Choose Vertix for Your JAFZA Audit?

Vertix Auditing is one of the leading audit firms in Dubai having extensive experience performing audits for companies operating in Dubai’s major free zones, including JAFZA. We charge a reasonable and fair audit fee on the basis of each company’s unique financial and business position. Our auditors understand the importance of integrity, accuracy, and efficiency when providing audit services, ensuring that audit of your financial statements is completed in a timely manner and at a high level of quality. Through this process, our auditors identify potential areas for improvement in your internal controls and recommend strategies to overcome control weaknesses.

Author: The content of this page has been produced by Vertix Auditing Team based on their extensive experience auditing a wide range of IFZA-registered companies accross different sectors in the UAE.

Frequently Asked Questions

Do startups in JAFZA need to do an audit?

Yes. In most cases, you are going to have to keep some form of records and file an audited financial statement (at a minimum) each year.

Where can I find the JAFZA approved auditors list?

Usually all the free zones, including JAFZA, maintain an online list of auditors that it has accredited and authorized to conduct audits. Please check the official website of JAFZA (https://www.jafza.ae/) to access that list.

If a company registered in JAFZA fails to submit their audit report, what may occur?

The potential penalties for failure to comply include fines, delayed license renewals, suspension of your business license, or in extreme circumstances your company may be blacklisted.

What audit costs would I incur in accordance with JAFZA regulations?

Audit fee usually falls in the range of AED 5,000 to AED 50,000. Audit fee will vary depending on a number of factors, such as the size of your company, number of transactions you conducted during the year, nature of your business, level of complexity in the accounting records, etc. You can use our AUDIT FEE CALCULATOR to get an instant estimate.

What are some of the qualifications that a firm must meet to be JAFZA-approved auditor?

An audit firm must be licensed to perform audits in the UAE. The firm must have one or more certified auditors who hold certifications issued by recognized organizations (such as ACCA, CA, or CPA). Additionally, the firm must operate in compliance IFRS and ISAs.

AUDIT – TAX – ADVISORY

JAFZA Approved Auditors in Dubai