Annual or Statutory Audit

1. For a simplified estimate of fees for tiny and small clients, click here. However, the indicated fees may reduce or increase depending on many factors.
2. Audit fee usually increases with:
   • Higher volume of transactions that need to be checked by auditor
   • Risk of higher revenue (sale), receivables, payables, assets, loans and other important figures remaining unverified and wrongly reported
   • Incompleteness of accounting records making the available information not easily comparable and inconsistent
   • Additional work required to be carried out by the auditor to derive accounting information or improving it (reconciliations, calculations, follow-up, explanations, communication, visits)
3. Example of a tiny audit - typical fee of AED 2,500 per year of audit
   • Constitution: sole proprietorship or up to 2 Partners
   • Size of business: either flexi-desk or small office
   • Activity: consultancy or trading in up to 3 items
   • Sales: to less than 10 customers
   • Recoveries: easily identifiable with sales bills, most amounts received during the audit period and balance recovered before the audit date
   • Inventories or stock: either no stock or stock sold before the audit date or clearly identifiable inventory position
   • Employees: not more than the Shareholders themselves or up to 3 staff actively involved in the business, with gratuity and other benefits appropriately calculated
   • Loans: no loans
   • Assets: no business assets or few assets like office equipment and a vehicle with full details
   • Expenses: clearly identifiable with volume of sale, employees and verification possible by expense head
   • Key documents: all properly scanned and available
   • Read more: detailed in the separate section for tiny and small audits
4. The amazing No Frills Benefit:
   The “No Frills Benefit” is designed on the concept of the budget airlines or the fares offered by no-frills airlines. In is applicable if the client:
   • has approached us directly, not with any referral or an intermediary service provider or reference of any regulator;
   • is a flexi-desk (with the natural shareholder as the only person employed and the company has no fixed assets and loans);
   • has a single source of revenue;
   • does not require a physical meeting with the auditor and
   • all information is made readily available with no modifications subsequently.
5. Documents needed to obtain an audit quote or estimate (for medium sized enterprises):
   • Ideally, a trade license and trial balance (accountants derive this from the accounting system) are essential to estimate the efficiency of the accounting system, the clear segregation of accounting information, the expertise of the accountant, a rough idea of the accounting records that may be available and the time that may be required to audit these records.
   • Alternatively, a reasonable estimate can be drawn if the auditor is informed about the constitution, volume of turnover, number of employees, value of loans, value of assets, number of vehicles, value of receivables, payables and inventory and other key financial information of the organisation.
   • For large audits, personal visits would be essential to estimate fees.
6. Audit fees are a subjective function that depend on the auditor’s perception of effort and risk involved in the audit

Over blocking by airlines helps them to arrive on time even if a flight takes off late. Over blocking is simply blocking or allowing more time for all routine operations than is typically required. While airlines would over block about 1/8th of the total duration of a flight, we auditors do it about 8 times more. From food delivery companies to airplane and boat manufacturers, everyone factors in some extra time for carrying out their work. Although this may sound unreasonable, it still makes sense as our audits are still faster than others.

• Tiny audits, where the audit fees are typically around AED 2,500 per year of audit, should take about 3 days to review the information and 3 more days to freeze the trial balance and the financial statements
• Small companies would need about 3 days more than tiny audits as additional information pertaining to specific accounting aspects is often required to be asked
• Medium companies would need a little more than a fortnight to evaluate the information, ask for additional information, evaluate this information and then freeze the report
• Larger audits can take up to a month
• Audit time is considered after complete information required for the audit is received - the time spent in asking for and receiving the information is often (not always) excluded from the time of carrying out an audit
• Where information is not readily available and auditor’s time is lost, audit fees will be increased
• In general, insisting on reducing the audit time is a serious audit limitation and will lead to issuing a qualified audit report or a disclaimer of opinion

1. The Letter of Engagement (LOE) defines the contractual appointment of an auditor by the shareholders (or their authorised representative). It is important that only the shareholders appoint the auditor - no one else is authorised to do the same. Normally, the appointment is during the annual general meeting. However, if an auditor resigns or if the Shareholders so decide, another auditor can be appointed during the year.
2. The LOE contains the following clauses:
   • Terms of Engagement
   • Audit Responsibilities
   • Audit Limitations
   • Management's Responsibilities and Representations
   • Fees
   • Scope creep
   • Indemnity
   • Confidentiality and Non-Disclosure
   • Acceptance and Acknowledgement
   • Complete Letter of Engagement
   • Additional clauses may be added to the LOE depending on the audit requirement
   • It is not allowed to limit the time in an audit, although the LOE mentions an expected time, as this can lead to qualification of the audit report
3. What information is required to begin and complete an audit?
4. Compilation of records: The audit process follows a universal rule: If it cannot be documented, it does not exist. The documents and records are compiled in an audit file (under the below-mentioned heads) and cross-linked to the trial balance and the financial statements:
   
   1. Deliverables - The Audit Report
   2. Planning, LoE, LoR, Correspondence, Additional Work
   3. Key Documents - Trade License, MoA, Partners' PP Copies, HO Papers
   4. Transaction Audit and Flowchart, System Notes
   5. Intangibles, Investment Properties, Non-current Financial Assets
   6. Property, Plant and Equipment
   7. Other Assets and Liabilities
   8. Combined with I below
   9. Inventories
   10. Cash, Bank, Short Term and Long Term Loans
   11. Combined with J above
   12. Receivables
   13. Other Current Assets
   14. Payables, Provisions and Other Current Liabilities
   15. End-of-service Gratuity, Manpower List
   16. Other Combined Information
   17. Combined with P above
   18. Related Party Receivables and Payables
   19. Capital, Reserves, Equity, Current Accounts
   20. Contingent Liabilities and Purchase Commitments
   21. Revenue, Sales, Income and Other Income
   22. Combined with U above
   23. Purchases and Cost of Sales
   24. Expenses
   25. Combined with X above and Z below
   26. Combined with X above

   Download the audit file index : PDF | Spreadsheet

5. Besides the accounting records, additional confirmations will be obtained by the auditor from you. However, the auditor will not simply accept your confirmations as evidence - he will apply his own due diligence to determine that the confirmations are in line with his other audit evidence. For example: (i) a confirmation from you that there are no loans obtained by your company will be contested if there is a monthly deduction of a fixed amount from your bank account, as that may signify that there is an equated monthly installment being paid; (ii) the auditor may remain personally present for year-end cash counting besides obtaining balance confirmation; (iii) complete statement of account for customers or suppliers having large number of transactions in addition to a balance confirmation. In general, the following confirmations are obtained:
   • Bank balance confirmation (provided by the bank for a fee)
   • Cash balance confirmation
   • Third party balance confirmations from debtors (customers)
   • Third party balance confirmation from creditors (suppliers)
   • Lawyer’s confirmation
   • Staff advance confirmation
   • Partner’s balance confirmation
   • Letter of Representation (LoR)
6. The Letter of Representation (LoR) is a statement that you provide to us, which details the information provided to us - with an undertaking thereof - that cannot be provided in the form of documentation.
7. Whom will you trust - the auditor or your accountant? When it comes to satisfying audit queries, the answer is obvious - you need to trust the auditor. The auditor has every reason to complete the engagement on time - his fees depend on that - and the more time he spends on the audit, the more his cost of audit increases. We regularly experience that the accountant only responds to a small part of our requirements and conveniently informs you (the management of the client) that he has satisfied all the requirements. In reality, he hasn’t given all the asked information, but has merely given all the information that he could arrange or understand. Be wary of such practices of your accountant and keep in touch with the auditor to know the progress of your audit.
8. The audit process depends on the best judgement of the auditor. Several numbers, placed together in the logical pattern of how they interact with each other, indicate what’s amiss - and what requires further scrutiny - to the auditor. For example, when visa deposits increase, the recruitment cost, salaries, fuel expense and such parameters should also increase. Or for example, when the revenue increases, cost of revenue, receivables and consequently payables should also increase proportionately - unless there is a reason like falling prices or such market conditions that cause this. The auditor’s eyes and mind are trained to observe anomalies. He bases his queries or questions on his observations and calculations that are improved by years of practice.

Where is discount available on annual audit service?

• In all Emirates in UAE – except specific authorities and entities who insist on audit reports from auditors listed with them
• In all free zones in UAE – except Hamriyah Free Zone and SAIF Zone

Economy package (50% discounted fee) or the No Frills Benefit

The “No Frills Benefit” is designed on the concept of the budget airlines or the fares offered by no-frills airlines.

Click here to read more: to whom this is applicable, what are the conditions to be satisfied for availing this discount and the limitations.

• What is this CONCEPT of No Frills Service?

  Tiny and small businesses operate on a skeletal infrastructure. They have the minimum office space, minimum staff, minimum support from third parties – it’s like they operate as one-man-armies like the characters we see in movies like Commando and Rambo. We have our deepest admiration to the way they function and decided to extend our hand to them they way they would like it. There are exceptions, but we have considered the vast majority of them who operate this way.

  We have designed this service in the manner of a “no-frills airline ticket” where only the basic, essential and statutory service is provided and all other benefits are charged extra.

• WHO are TINY clients?

  1. Constitution: Single shareholder – individual natural human
  2. Team: Operating alone or with one assistant at the most
  3. Office: Having a flexi-desk or a shared workspace or a small office at the most
  4. Activity: Professional service, trading of single class of products, commission agent
  5. Assets: A table or two, few chairs, a computer with peripheral devices and a car at the most
  6. Inventory: None
  7. Receivables: All realised before the date of the audit
  8. Payables: All paid before the date of the audit
  9. Bank accounts: In one bank, one account for 3 currencies at the most
  10. Bank borrowings: None

• WHO are SMALL clients?

  1. Constitution: Two shareholders (individual natural humans) or branch of a company or a wholly owned subsidiary
  2. Team: Two to seven people handling similar functions or supporting the main team
  3. Office: Office space sufficient to seat the people but not a large elaborate office with multiple facilities
  4. Activity: Professional service; trading in few products; small business like a saloon or laundry, language training centre, tailoring shop, ready-made garments store; etc
  5. Assets: Office furniture, office equipment, administrative vehicles or in exceptional cases a small machinery set
  6. Inventory: In transit or with a third party and necessarily sold before audit
  7. Receivables: Majority realised before the date of the audit
  8. Payables: All paid before the date of the audit
  9. Bank accounts: In one bank, one account for 3 currencies at the most
  10. Bank borrowings: Trade finance, if at all, but usually none

• Key features of the tiny and small clients:

  1. Constitution: Constitution often, though not always, determines the purpose of forming a business. Tiny businesses are usually proprietorships that are formed to render services that are the expertise of its owner. Small outfits are created by larger organisations for representing themselves in the local market (for example, the branch of an aircraft manufacturer) but negligible commercial activity is carried out from there.
  2. Team size: Number of people may sometimes be more, for example a law firm that has half a dozen lawyers supported by another half dozen support staff like office boys and drivers. Yet, if the nature of service is limited to three types of services, the firm may still be counted as a small firm.
  3. Office size: Office space is usually directly proportional to the number of people working in an organisation. However, some businesses require a larger space (for example architects, auditors and lawyers may require separate meeting places for clients) and some prefer large spaces to show a degree of affluence that attracts a different kind of clientele. So, although the size of office is an important consideration, it may well be excused in some circumstances.
  4. Activity: Activity or simplicity of the business model is an important consideration for the scale of business and the nature of complexity of its transactions. Tiny businesses promote the single owner like an accountant, architect, artist – painter / sculptor / singer / music composer, sportsman – boxer / footballer – for fees and endorsements, trainers – sports / life skills / artistry / languages / technical subjects, commission agents, traders of individual products – sugar / cement / aircraft parts / wheat / commodities, and such other businesses who have less than a dozen sale transactions each month. Small businesses accommodate activities requiring a little more number of people like a large team of accountants / architects, a group of people like a laundry / saloon / tailors / trainers, who either collectively render a similar service / trade in the same set of products or render common services / trade in similar products under a common banner.
  5. Fixed assets: Fixed assets are required for complex commercial and industrial activities. A tiny business with one or two people may at the most have an office setup and their own means of conveyance where most of these assets are owned in the personal name of the users. Small businesses would have computers – laptops / printers / modems / network drives, furniture and equipment – tables / chairs / desks / air-conditioners / pantry equipment, administrative vehicles or a rare delivery vehicle and in exceptional cases a single machine like a washing machine for laundry / printer for a designer / sewing machines for tailors / delivery van for sugar. In case where there are number of assets, an additional fee will be applied for physically inspecting the same, although the business may still be considered small for the purpose of estimation of work and fee.
  6. Inventory: Inventory is never held by tiny businesses – even if they are trading in a physical commodity, the goods will be in transit and sold before the first fortnight of the next year. Small businesses do not own a warehouse but may sometimes hold some inventory in a third party’s warehouse. This is also usually disposed off before the completion of the audit. As an exception, some businesses like sugar or fuel traders may be treated as small although they hold inventory that is clearly measurable and whose value can be determined without ambiguity. Where applicable, an additional fee would be charged for stock taking exercises.
  7. Customer base / client base: Tiny and small businesses have few customers – usually less than 10 for traders or several but not clearly identifiable for businesses like saloons / laundry as a result of which they wouldn’t have receivables. Receivables are usually realised before the completion of the audit report. The recovery from receivables is easily identifiable with sales bills, most amounts are received during the audit period (the time after the end of the reporting year and before the issue of the audited financial statements) and balance is recovered almost entirely before the date of the audit report.
  8. Number of bank accounts: Bank accounts are one or two, to receive amounts from the few customers or process payments to suppliers and carry out expenses. Often, credit card of the shareholder is used as a source for petty cash expenses. Tiny and small businesses do not have accounts in more than two banks, except in rare instances.
  9. Bank borrowings: As tiny and small businesses have no fixed assets, they do not avail term loans from banks. At the most, they avail trade finance, which is often transactional, means it rolls over with each set of transactions and so is easy to monitor. However, as a matter of our principle for charging fees, the moment bank finance appears, we stop considering the business as small (tiny is definitely ruled out) as complicated calculations and reporting implications increase greatly with the introduction of borrowing facilities in a business.
  10. Others parameters: There could be other secondary tests that are applied to determine whether a business is small or tiny. For example, the expenses are clearly identifiable with volume of sale or the number of employees and the verification of these expenses is possible by expense head.
  11. Exceptions
      1. Large number of tiny transactions like a grocery store
      2. Contractors
      3. Manufacturers
      4. Holding companies or head offices of multiple branches or some kinds of SPVs (special purpose investment vehicles) where the reporting requirements are elaborate and require our special expertise
      5. Other businesses at the discretion of the auditor

• WHAT CONDITIONS are required to be satisfied for availing the 50% discount?

  1. No intermediaries: The client should have approached us directly – by learning about us from our online presence. We should not be approached with any reference, or through an intermediary service provider, or with the reference of any regulator, etc.
  2. No meetings: Audits will be carried out remotely. The client should not require a physical meeting with the auditor – all information should be transmitted on phone, by email, on information sharing applications like WhatsApp, courier, by post, by visiting our office, or such means that do not require the auditor to spend time in commuting.
  3. No follow-up: The clients should make all information readily available to the auditor without the need for unreasonable follow-up.
  4. No modifications: Information provided by the client at the first instance should be complete and correct. There should be no subsequent modifications to information that is once provided – because this requires reworking. In the event of reworking, it will be treated as scope creep.
  5. Our own discretion: Sometimes, we feel we should extend a discount to some categories of businesses like women entrepreneurs, sportsmen, ex-services personnel, wildlife or nature conservationists, social activists and those who have, in general, served the planet and its inhabitants in an exceptional manner. However, we have not yet come up with a firm strategy on this and would consider these on a case-to-case basis depending on their contributions to society.

• We can withdraw all discount without the need to provide any explanation to anyone whatsoever.

Exceptional low activity discount (66% discount or 1/3rd fee)

• Why: It’s all about the volume of work that the auditor is expected to perform while carrying out his duties as an independent evaluator of the financial statements.
• Who: This discount is applicable to / for:
  1. Tiny clients only
  2. Should generally not reside in the country and incur no local expenses
  3. Generated zero revenue during the year
  4. Does not require copies of the audit report besides the original
  5. Any other condition that we would specify
• When: This discount is already built in into the predefined fee calculator on our website so no additional discount will be provided to any client

Charity deserving service (up to 80% discount)

This service is almost free – we take a slight ‘commitment fee’ of up to 20% just as a formality.

We hope our clients do not come into a situation where they need someone’s support to this extent, however, the following may seek our benevolent gesture:

• Loss making businesses who need to issue an audit report to an educational institution (for the fee of a dependent student) or a charitable institution (for the medical treatment or social support of a dependent elderly person or person with special needs) to justify their low income;
• People of determination (it is likely that this will be treated as a premium service and a discount will be applied on that);
• Legal heirs of businesses whose directors have taken a drastic step (like committing suicide) as a recourse to mounting financial debts;
• Any such or similar cases where our small contribution can alleviate someone’s sorrows or support a cause.

Conditions when discount may be withdrawn: refer scope creep Click Here

For any additional enhancement of services or discounts, please contact
dhawalgn@prudentialauditing.com or +971-55-222 4657.

Where is this available?

• Super premium: In all Emirates in UAE – and also some other countries
• Premium: In all Emirates in UAE – except Abu Dhabi or for entities registered anywhere under specific authorities (not mentioned here)

c) Super premium service (double fee)

This is applicable only to medium and large enterprises. Although small and tiny businesses can avail it, we do not recommend it and it is usually not worth the time, cost and effort involved.

It includes:

• All the features of the premium service and
• The audit report is issued by our associate, Behl, Lad & Al Sayegh, Chartered Accountants, who are listed as a Category B Auditor in most banks and is among the top 15 audit firms in the country.
• However, it should be noted that this audit takes more than twice the time required to carry out the audit in the first place and an equivalent time to review the audit through multiple layers (an audit manager, an audit director, a compliance director and the signing partner).

Premium service (50% additional fee)

1. This service is provided to those who are not supported by an assistant who would gather all the required audit information or who value their time enough to spend it on something more rewarding than the paperwork required to analyse and record past events in their business.
2. To know more about why this was started, Click Here

   Tiny, small and medium businesses operate on a skeletal infrastructure. They have the minimum office space, minimum staff, minimum support from third parties – it’s like they operate as one-man-armies like the characters we see in movies like Commando and Rambo. We have our deepest admiration to the way they function and decided to extend our hand to them they way they would like it. There are exceptions, but we have considered the vast majority of them who operate this way.

   However, some of these businesses avail specialised services like asking a booking agent to book an airline ticket instead of booking it themselves online, hiring a chauffeur driven car instead of driving around on their own, availing secretarial services instead of doing the paperwork themselves, engaging a courier almost every time instead of picking up or dropping documents themselves, etc. In general, they live life to enjoy it, delegate mundane tasks to experts and concentrate only on the essentials – the bare and important essentials.

   Such business persons value their own time. They realise that if they are spending more than USD 10,000 per month to stay and operate from somewhere, any task that takes about USD 50 to perform is best delegated to anyone else and any task that takes about USD 100 to perform is best delegated to an expert from that industry. USD 10,000 ÷ 25 working days of 8 hours each = USD 50 per hour. They derive peace of mind, assured quality and can use their time more fruitful elsewhere – may be to perform higher work functions or to play a game of golf or to even spend quality time with their family and friends.

   We have designed this service in the manner of a “business class airline ticket” where personalised and additional service is provided and many other benefits are clubbed. There are no hidden or extra charges – except in clear “scope creep” situations.

3. It usually covers:
   • a business development manager – sort of a relationship officer – who will be in touch with you in person;
   • an accountant from our office who will visit your office to collect all audit information (which saves you the effort of scanning your audit documents and emailing them to us);
   • where required, gather the requirement in a physical file and provide you a copy of the same if you intend to keep it for the mandatory period;
   • work out statutory information like gratuity, interest and the likes and compile lists of people and equipment on your behalf;
   • provide a management representation letter that will provide you our observations on your business practices, that are intended to guide you in your activities and aren’t a part of our audit observations;
   • and such personalised services.

   It is also possible to provide you components of this service, without increasing the total audit fee with a fixed amount or proportion, by availing the service of our accountants and auditors at an hourly fee.

4. To WHOM is this service available – or WHO should avail this service?
   • This service is optionally available to all our clients who are not availing the  “super premium service” as this is already built into that service
   • This service should /may be availed by those who are not supported by an assistant who would gather all the required audit information or who value their time enough to spend it on something more rewarding than the paperwork required to analyse and record past events in their business.
   • It is also possible to provide you components of this service, without increasing the total audit fee with a fixed amount or proportion, by availing the service of our accountants and auditors at an hourly fee.
5. What is the BENEFIT of availing this service?
   • A business development manager – sort of a relationship officer – will be in touch with you in person.
   • An accountant from our office will visit your office to collect all audit information (which saves you the effort of scanning your audit documents and emailing them to us).
   • Where required, we will gather the requirement in a physical file and provide you a copy of the same if you intend to keep it for the mandatory period.
   • Our experts will work out statutory information like gratuity, interest and the likes and compile lists of your people (staff / employees) and equipment on your behalf.
   • We will provide a management representation letter that will provide you our observations on your business practices, that are intended to guide you in your activities and aren’t a part of our audit observations.
   • And such personalised services, in general, will be provided.
6. Any special conditions to be satisfied?

   There are no special conditions beyond the additional fee and the usual support to our accountants and auditors during their visit to you to avail this service.

   We reserve the right to withdraw this service if your cooperation is not available or if we believe that you are abusing this service and making our accountants and auditors perform tasks that are outside their scope of work. Alternatively, we may charge additional fees by way of scope creep.

   We may disclose additional conditions to availing the discount by direct communication although it may not be specifically mentioned on our website.

7. More Information / Avail this service

   For any additional enhancement of services or discounts, please contact
   dhawalgn@prudentialauditing.com or +971-55-222 4657.