Running audit a business is a complex activity, which involves the fulfilment of various tax, labor, fiscal and accounting obligations. There are countless rules, laws and regulations applicable to the day to day of companies and that must be complied with in order to avoid problems that normally result in fines.
Therefore, entrepreneurs must seek solutions that aim to minimize risks, bringing more legal certainty to the business. And it is in this context that audits and their different types arise, the central theme of this article.
We will help you to know 6 types of top auditing firms in UAE that can help your company: legal, business and labor, tax and tax, environmental and operational. In addition to learning the concepts and understanding the role of auditing, you will discover its advantages, the models and how they are done.
We will also show the entrepreneur how to identify the appropriate time to carry out an audit, for which companies this type of solution is indicated, what are the requirements to hire an audit and other relevant issues involving the topic.
Do you want to deepen your knowledge on the subject and understand how it can contribute to the management of your business? Follow up!
What is auditing and what is its role within the company?
Auditing is an activity through which conferences are held in order to identify whether the actions and procedures adopted by a particular company comply with the legislation in force.
In this way, the corporate audit is associated with the analysis of accounting, labor and tax operations of the business, seeking information on what is being done and any changes that may bring more legal certainty, economy and clarity in the processes.
Thus, the audit evaluates internal controls, looks for inconsistencies and prepares reports with the opinion on the current situation of the company’s internal processes. In addition, it provides suggestions on measures that can be taken to improve internal procedures and keep them in line with legislation and organizational policies.
It is important to emphasize that it is interesting that this legal audit is conducted by independent professionals who have no connection with the company. This guarantees the impartiality of all processes and brings more security as to the accuracy of the reports developed.
It is worth noting that the audit shows the corporation’s vulnerable points, including the risk of the company suffering lawsuits in various spheres, such as tax, labor and contractual matters.
The main objective of the audit is to point out possible errors that could compromise the company’s results, as well as the measures that must be adopted to ensure the safety and healthy development of the business.
What are the audit models?
Essentially, there are two audit models: internal and external. Find out how each of them works below!
The internal audit is carried out by people who are linked to the company, usually the organizations own employees and employees. Its objective is to verify the internal processes, evaluate the level of security and the efficiency and effectiveness of the administrative control of the business.
The external Auditors in UAE, in turn, is outsourced and performed by professionals such as auditors and specialized lawyers. The objective is the same as the internal one, with the difference that the auditor has no relationship with the company or risk of suffering a conflict of interest.
Differences between external audit and internal audit
Both external and internal audit use the same precepts and techniques to perform the work. Its activities are based on attention to internal management, analysis of procedures and inadequacies, in addition to suggestions for improvement.
However, while the internal audit has the scope of seeking relevant information for the qualification of the decision-making process, the external audit is more market-oriented. Also, the external audit is more used when the entrepreneur wants to evaluate processes and minimize the occurrence of failures, and the internal audit is more common to deal with operational aspects of the business.
Why is auditing important for business?
It represents a management tool that strategically controls processes and maintains the regularity of organizational activities.
Thus, its application allows managers to identify possible risks to the business, eliminating them and seeking general quality in the services provided and/or products developed.
In addition to preventing possible fraud and schemes within the company, the audit also contributes to legal and operational security and the increase in the degree of trust of employees, suppliers, investors, partners and customers.
That is why it is a procedure that contributes to the healthy growth of the company, as it helps in the identification of gaps and eventual corrections.
Therefore, in general, the audit is an interesting mechanism to improve the way the company manages its resources, developing planning and optimization strategies that provide more security, transparency and provide opportunities for business growth.
What are the reasons for doing an audit?
In some situations, companies are legally required to carry out independent audits, in terms that can vary from every six months to annually.
As a mandatory procedure, companies need to hire independent audits, in the form of external audit, as mentioned earlier.
However, even though it’s not mandatory, there are a few reasons why your company can do an audit. Check out below what are the reasons for your company to consider holding one!
- If the manager and/or entrepreneur wants to prevent errors and fraud, evaluating the efficiency of internal controls and if the execution of activities is in line with the planning.
- When there is a need or interest in improving procedures, getting to know the processes and controls better and investing in business development.
- In cases where there is a need to prove information, accounting numbers and the company’s credibility to investors, institutions and/or third parties that may be interested in the business. In this type of situation, the audit evaluates both the processes and the records and movements performed.
Know the differences between audits
There are different types of audits, usually focused on different aspects of the business: legal, business, labor, tax and tax, environmental and operational audits. Understand the main features of each of them.
Legal auditing is aimed at companies seeking legal guidance and support for management. Conducted by specialized lawyers, it is suitable for companies that want to develop strategies and processes aimed at organizational improvement, taking into account the legislation in force and the need to adapt to the law.
The business audit is a broader species, as it encompasses several characteristics of business law and other areas of law, such as labor, tax and contractual, for example.
Its focus is to provide clarity regarding the business, aiming at saving retirement resources and improving professional relationships with customers, suppliers, shareholders, investors and suppliers.
During the corporate audit, internal controls (labor, tax and accounting) are evaluated, as well as the annual development of the company. All this is done looking for any type of inconsistency in the information recorded and providing means for managers to develop improvement strategies for the business.
In addition, professionals specialized in the area of business law can offer advice on matters involving business succession and other matters related to the laws associated with the topic.
Undoubtedly, the labor audit is one of the most sought after by entrepreneurs, because the number of labor demands can be very high in many businesses and this is usually associated with management problems.
In this sense, a labor lawyer offers full support for analyzing the processes adopted by the company in hiring, legal management of human resources and procedures for terminating employment contracts. With active action and process evaluation, it is possible to significantly reduce lawsuits in the sector.
Tax and Taxation
Another critical point in the legal security of companies and which is usually one of the central themes of problems in processes is associated with tax law and its numerous laws, regulations, rules and guidelines.
The function of tax law is to regulate taxpayers’ obligations in relation to tax collection, however, the high number of rules and recurring changes in legislation end up generating many doubts and eventually errors in the routine of companies.
Often, simply choosing the wrong tax regime can lead to a series of problems for the business. It is for this reason that it is interesting to invest in specialized audits, in addition to evaluating and mapping the company’s tax obligations, professionals offer guidance on best practices and how to carry out tax planning that will favour the growth and security of the business.
United Arab Emirates environmental legislation is strict, especially regarding the practices of companies that have the greatest potential for pollution.
Within the environmental audit there are different subgroups: audit of legal compliance, management systems, performance evaluation, decommissioning, production chain, liability and post-accident.
It is important that the manager knows the characteristics of each one of them and knows how to apply them in the reality of their business, using them strategically in the management and security of their company.
The central objective of the operational audit is to contribute to the improvement of management performance, acting mainly in the business planning part. In this sense, it is evaluated whether the goals and objectives set are being achieved, taking into account departments, systems used, controls, among others.
In general, it serves to provide all members of the management and board of directors with subsidies to improve the company’s performance, seeking efficiency through the economy of resources and the development of organizational potential.
In practice, this is done by searching for irregularities in the operational cycle, identifying causes of inefficiency or waste of resources, verifying the effectiveness of management controls and analysing the compatibility between administrative actions and operations in relation to organizational policies and guidelines.
How to perform an audit?
If you are thinking about carrying out a legal audit in your company, the ideal is to seek the support of a business legal consultancy .
It is carried out through the application of legal knowledge and specific procedures for analysis and internal controls. Professionals establish what will be analysed, how and in what way, in order to achieve the company’s objectives and intentions.
The audit is carried out based on a regulation, which begins with the indication of the processes and routines of the audited organization, following until the evaluation of the results and the suggestions for improvements that will be pointed out by the responsible professional.
Here is a step-by-step guide on how an audit is carried out in practice:
The first step of the audit is the identification of all existing processes in the audited sector. In this stage, the tasks are outlined and maps are drawn up that summarize all the procedures and how they are carried out in the organization’s practice.
Process analysis and risk identification
Once the mapping is done, the next step is the identification of risks. Here, the professional responsible for the audit will analyze each practice registered in the mapping, evaluating any risks linked to it.
This step requires in-depth knowledge of the legislation and the necessary adjustments, as only this knowledge allows for a thorough analysis of the tasks and the identification of eventual failures and inconsistencies.
Analysis of results
The third stage consists of evidence and results. If the audit is positive, the auditor prepares a report that points out the regularity and recommends the maintenance of activities in that way.
On the other hand, if errors are found in the process, the auditor points out the problems, informs the reasons why they are happening and suggests ways to resolve them.
It is necessary to keep in mind that auditors are partners of companies, so, in addition to looking for failures, they present suggestions for solutions, aiming to help the company achieve operational efficiency, legal certainty and create a favourable environment for its growth.
That’s why experts recommend that companies carry out audits and consultations periodically, which make them play a preventive role and help with management in a broad and continuous way.
How to prepare for an audit?
If your company is planning to conduct an audit or wants to start implementing the practice in the business, it is important to be prepared for the changes. Here are some tips that will help you implement a corporate due diligence.
Structure an action plan
The action plan is a document that will bring all the steps that must be carried out to align the company’s routines with the work developed by the audit.
It consists of a plan integrating all the departments involved, with information about what needs to be done, what are the deadlines for completion, who will be the employees involved and all other issues related to the work of the audit.
Inform employees about the procedures that will be adopted
First, your employees must know the rules and policies of the business. They need to be committed to compliance with these rules and organizational development. This involvement must be part of your company’s culture and cannot be encouraged only at the time of the audit.
Knowing the rules and procedures and knowing the importance of applying them is essential for the development of actions.
At the time of the audit, employees must be aware of the procedures that will be carried out, encouraging them to maintain quality and the application of company policies and standards.
Identify and plan which sectors will be audited
Typically, only a few specific sectors are audited. You need to be clear about which sectors of your business need to be audited, identifying potential flaws and investing in improving and improving the performance of that sector.
Map and standardize internal processes
Another important management action that will help a lot in the audit is the mapping and standardization of internal processes. This can be done through the elaboration of a manual in which the objective of each process, the steps and the agendas involved are described. Remember that this manual must be aligned with the reality of the business, so that it has applicability in the day to day of the company.
It is also necessary to accompany those responsible for each department. The manager is responsible for helping them in practice, mainly to deal with problems and strategic issues associated with work routines.
Create an action schedule
It is important that you draw up a list with all the information and processes that must be up to date. You can invite the contributors themselves to help identify the processes that deserve attention from the auditors.
Remember that the organization is essential to maintain quality management and that it complies with the objectives and rules established by legislation, rules and internal regulations.
In this way, to ensure that employees deliver all the necessary tasks for the audit on time, and develop good practices for the company’s day to day, the ideal is to follow a schedule of actions.
To set up this schedule, you need to have precise information about: audit date, processes and tasks that will be analyzed by the auditors, employees responsible for each audited sector and who will be available to present documents and information, and deadlines for carrying out each activity.
Having information about what actions need to be taken, it is possible to better manage time and monitor the development of audit activities. Furthermore, the manager will have more security that everything will be ready for the auditors to receive and that the employees are available to deliver documents and information that will be audited.
Remember that the best way to have good results in an audit is to organize activities and documents, preparing employees so that they help in the development of the auditors’ work.
By guiding the teams, preparing a plan and demonstrating to the team the importance of auditing in improving organizational processes, the manager will create a favourable environment for achieving good results, with process improvement, business development and legal protection. and operational of the company.
When the appropriate time to carry is out an audit and for which companies is it indicated?
The audit acts as a tool that helps management so that it knows how to deal with business processes and data. In this sense, it guides the organization so that it can achieve efficiency in its procedures, acting in accordance with the legislation and seeking to comply with applicable rules and laws.
That is why it is a service suitable for all types of companies, regardless of their size or field of activity. The manager must resort to it whenever he feels the need to secure his business and direct his practices towards compliance with the law.
As you can see throughout this article, the benefits of an audit for your business are numerous. It is through it that companies are able to develop their corporate governance practices and ensure the necessary transparency to attract s, improve their image in the market and attract new customers.
In addition, the audit allows managers to make decisions based on more reliable processes, ensuring the best choices for management.
Therefore, regardless of the company’s objectives, auditing and the support of preventive legal advice is a strategic procedure focused on quality, safety and the search for improvements.
When it comes to legal support, many people think only of legal proceedings and the solution of problems that are already in place. However, these professionals have a very important preventive and strategic role and can develop work that will focus, precisely, on mitigating risks and lawsuits to the detriment of the company.
Active consulting brings numerous benefits to companies. Hence the importance of business consulting , auditing and legal support, specialized services that help ensure transparency in processes, as well as the identification and consequent elimination of errors.
In addition, it contributes to the optimization of business activities and practices, the creation of more efficient control systems and the implementation of good practices that will contribute to the success of the business.
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