Audits are central for external stakeholders’ confidence, maintaining compliance and financial integrity in the UAE. Accurate and unqualified audits provide assurance to the financial reporting under IFRS standards and reliability to any external stakeholder from banks to potential investors. When audit gaps remain unaddressed, businesses face heightened risks, including qualified audit opinions, and reputational exposure.
This article outlines the most common audit findings in UAE businesses, their underlying causes, and structured measures to reinforce audit readiness for 2026.
Common Audit Findings in the UAE (2025 Review)
Audit reviews in 2025 revealed recurring weaknesses that compromise compliance, accuracy, and financial control. The most critical findings include:
1. Non-Reconciled VAT Accounts
Discrepancies between VAT returns and accounting ledgers often result from incomplete reconciliations or missing documentation related to zero-rated or exempt transactions.
Impact: Misaligned VAT records lead to incorrect filings, overstated or understated VAT positions, and exposure to FTA penalties.
2. Missing or Incomplete Accruals
Unrecorded accrued expenses such as utilities, bonuses, or supplier costs distort reported profit and tax obligations. These omissions frequently require audit adjustments and raise concerns regarding financial statement reliability.
3. Unrecorded or Inaccurate End-of-Service Gratuity
Inadequate or inconsistent gratuity provisions increase the risk of labour law non-compliance and create unforeseen financial liabilities.
4. Incomplete Documentation and Supporting Evidence
Missing or insufficient documentation such as contracts, tax-compliant invoices, or proof of delivery undermines the validity of accounting entries and can prompt FTA challenges.
5. IFRS Presentation and Disclosure Gaps
Incorrect application of International Financial Reporting Standards (IFRS) or incomplete disclosures reduce transparency and may result in qualified audit opinions.
Underlying Causes of Audit Errors
These errors often stem from systemic gaps rather than isolated mistakes. Key drivers include:
- Inadequate Internal Controls: Manual reconciliations and decentralised bookkeeping increase the risk of inconsistencies.
- Weak Documentation Management: Poor document retention and disorganisation limit audit traceability.
- Year-End Adjustments Only: Concentrating all reconciliations at year-end limits review time and increases the likelihood of error.
- Regulatory Knowledge Gaps: Frequent updates to UAE accounting and tax regulations are not consistently reflected in internal procedures.
Strengthening Audit Readiness for 2026
Strengthening audit readiness requires structured, proactive measures. Organisations should prioritise the following actions:
VAT and Tax Controls
- Perform regular VAT reconciliations to align accounting records with VAT filings.
- Maintain comprehensive VAT documentation, including invoices, contracts, and tax treatment summaries.
- Review zero-rated and input tax transactions periodically to verify compliance with UAE VAT regulations.
Accruals and Financial Reporting
- Introduce automated accrual tracking with assigned ownership and validation checkpoints.
- Apply structured month-end checklists to confirm completeness and accuracy of accrued entries.
- Conduct quarterly IFRS compliance reviews focusing on leases, revenue recognition, and disclosure adequacy.
Employee Benefits and Gratuity
- Maintain a consolidated database of employee records relevant to gratuity calculation.
- Record periodic provisions and reconcile with HR data to maintain accuracy.
- Conduct sensitivity analyses to forecast potential liabilities and funding requirements.
Governance and Internal Audit Health Checks
- Establish a compliance calendar that tracks VAT, Corporate Tax, Payroll, and reporting deadlines.
- Conduct internal audit reviews before financial close to assess documentation, control performance, and remediation actions.
- Assign accountability for monitoring progress, with defined responsibilities and follow-up cycles.
Documentation Required for Audit Preparation
Audit transparency depends on evidence. The following records form the foundation of a complete audit file:
- VAT control account reconciliations and supporting schedules.
- Accrual registers with explanations and approvals.
- End-of-service gratuity calculations and employee data summaries.
- VAT, corporate tax, and payroll compliance files.
- Internal audit reports and compliance tracking logs.
Consequences of Non-Compliance
Failure to remediate these issues can lead to severe financial and operational repercussions, including:
- Potential VAT-related risks, voluntary disclosure requirements, penalties and FTA audit risks.
- Corporate tax adjustments and associated fines.
- Labour law disputes linked to inaccurate gratuity calculations.
- Qualified or adverse audit opinions affecting credibility with regulators and investors.
- Operational delays and increased audit costs due to documentation gaps.
Best Practices for Audit Preparedness
Following best practices ensures timely audit readiness and reduces the risk of penalties from the Federal Tax Authority (FTA) and other regulatory bodies. As an FTA-approved Tax Agency with ISO 9001, ISO 27001, and ISO 42001 certifications, SimplySolved recommends the following steps:
- Advance Planning: Initiate reconciliations and compliance reviews well before financial close to avoid last-minute errors.
- Record Accuracy: Maintain complete, validated, and easily retrievable documentation across VAT, accruals, gratuity, and IFRS compliance.
- Professional Oversight: Engage qualified tax and audit professionals to interpret complex regulatory updates and ensure compliance.
- Defined Responsibilities: Assign clear accountability for each compliance function, supported by structured governance frameworks.
- Ongoing Monitoring: Track filing obligations, submission deadlines, and audit milestones through a compliance calendar and periodic internal reviews.
Conclusion
A structured approach to audit preparation enhances transparency, reduces regulatory exposure, and strengthens stakeholder confidence. Continuous reconciliations, effective accrual management, and periodic internal reviews form the basis of sustainable compliance and accurate financial reporting for 2026 and beyond. Addressing these common audit risks in UAE early ensures a well-prepared audit cycle and minimises risk.
About SimplySolved
SimplySolved is an FTA-approved Tax Agency certified to ISO 9001, ISO 27001, and ISO 42001 standards. Our audit and assurance services enhance internal controls, strengthen financial reporting accuracy, and maintain regulatory alignment across VAT, Corporate Tax, and IFRS requirements.
Through comprehensive audit health checks, documentation reviews, and internal control assessments, SimplySolved supports organisations in resolving recurring audit findings and achieving year-end audit readiness. With integrated expertise across accounting, tax, and compliance, SimplySolved ensures every aspect of financial and regulatory reporting adheres to UAE audit and compliance standards.
