Why Are Risk-Based Internal Audits Important for Businesses in the UAE?

Internal audit has been considered one of the important elements and procedures of every business in the UAE. Even though it is a sophisticated and lengthy process, for some businesses it is still considered crucial. The concept of internal audit has changed drastically as compared to previous decades, as there have been changes in the regulatory environment, compliance requirements, and business environments. The traditional method of internal audit is not sufficient in the cutthroat competitive environment, such as the UAE's.

As an audit expert, I have been providing assistance to multiple clients regarding the internal audit and have provided the crucial insights, which focus on risk-based internal audits rather than going forward with mere compliance checks and routine procedures. The clients now are exposed to multiple risk scenarios, such as cybersecurity risks, financial reporting requirements, changing regulations, etc., where risk-based internal audits play a crucial role.

What is Meant by "Risk-Based Internal Audit"?

Risk-based internal audit is an internal audit method or procedure where the audit is conducted and focused on the prioritised risk areas of an organisation. The high-risk areas are provided more keen attention and are thoroughly evaluated to mitigate such risks. The limited resources of the organisation are allocated based on such prioritised risks.

Why Would I Suggest Risk-Based Internal Audits for My Clients in the UAE?

Multiple clients have approached me asking the question regarding the importance of such risk-based internal auditors and what change it could bring to their organisation, especially in the UAE. There are multiple aspects that are covered under the risk-based audit method, which is acquired by our expert auditors. Some of it includes the following:

Complex And Sophisticated Regulatory Environment

The businesses in the UAE have to ensure compliance with multiple regulations, especially CT and VAT laws, AML-CFT laws, and reporting standards; hence, these regulatory requirements make it crucial for the businesses to focus on risk-based internal audits. The laws also get amended or might get updated; hence, ensuring compliance is one of the mandatory requirements of the businesses. The RBIA would ensure that the regulations are followed, fines are avoided, and all the areas are monitored.

Business strategy-focused approach

The RBIA would ensure that the risks that affect the business objectives are monitored and audited, whereby the risks are mitigated at the grassroots level itself. It might include the business expansion strategies, cost optimisation, etc.

Cybersecurity risks

There has been a huge revolution in the technological areas where businesses can now automate many processes and also carry out the activities with flexibility. The businesses in the UAE have adopted innovative IT systems, cloud systems, automations, etc.; hence, this also gives rise to the increase in IT and cyber risks. The RBIA considers all these IT aspects and hence ensures that the businesses are protected against these risks and all the mitigating solutions are kept in advance to be implemented.

Fraud assessment

There is an increase in fraud also for the businesses in the UAE. The fraud could be expected at any level and at any process of the business organisation; hence, it is very important to understand the possible frauds and to implement strategies to avoid such circumstances. Hence, the RBIA ensures that the frauds and probable loopholes for such frauds are avoided or detected in advance.

What Are Key Procedures Under the RBIA?

The key procedures that are followed by our audit experts under the RBIA include the following:

• Assessment of the high-risk areas: The major processes include the detection of the high-risk areas using the financial mapping tools, interviews with the stakeholders, etc.
• Setting up the audit universe: All the business processes, IT systems, and functions are categorised and integrated into the audit universe.
• Prioritising the risks: This process includes the classification and prioritisation of the risks based on the nature and impact they could have on the business.
• Audit planning: Based on the risk identified and prioritised, the audit plan is devised for carrying out the RBIA, which could be either for a year or a specific period as per the requirement.
• Audit execution: The audit is executed, and all the high-risk areas are monitored, and the controls pertaining to such areas are tested.
• Up-to-date report: Our experts would provide each and every update and insight from the RBI. A presentation to the board with clear-cut explanations and results
• Following up: Even after the audit is done, the experts will keep a close watch on the controls and will check for any new or existing risk that could pose danger to your businesses.

How Can CDA’s Experts Assist You?

As one of the leading accounting and auditing firms in UAE, CDA has leveraged its expertise and professional assistance to provide the best auditing services to its clientele. Our experts would ensure that your business is protected from any kind of risks that could pose a hindrance during the operations. The strategic plans and process to detect the risks and to mitigate them in real time would enable businesses to prosper in the competitive environment of the UAE.

To know more about the risk-based internal auditing procedures, connect with our team now!

Mitesh Maithia

Tax Manager

Mitesh is a Tax Professional with expertise in direct, indirect, and international taxation, including transfer pricing, since 2018. Passionate about making complex tax matters simple, he shares insights to help businesses stay compliant and forward-looking.