What is the Need for Accounting And Auditing in ADGM?
Abu Dhabi Global Market (ADGM), being recognized as the result of a global-leading financial conveyor, plays an indispensable role in economic development and leads to the emergence of innovation within the United Arab Emirates and worldwide.
To bring success to the financial ecosystem within ADGM, they maintain very high transparency and trust. Hence, what is needed is sound accounting and auditing. All these processes establish high reliance upon accurate and reliable financial reporting, enhancing confidence among investors and encouraging equal competition among market players.
This blog will explain the real significance of the accounting and auditing standards in the ADGM. The best way to embark on this journey will be to examine key statutory requirements, how compliant behaviour and non-compliance create values, and to learn the audit activities in the ADGM.
Major Accounting and Audit Requirements
The major accounting and audit requirements for the entities in the ADGM include the following:
Maintenance of Account and Annual Accounts:
- The entities in ADGM will have to maintain detailed accounting documents for a duration of at least ten years.
- The accounts need to be finalized and filed with the Registration Authority (RA) ADGM within stipulated time limits.
Audit Requirements:
Unlike other exemptions, it is important for regular businesses in ADGM to have accounts audited by an auditor like CDA, who got accreditation in ADGM. The audited accounts for each financial year should comply with the various requirements as outlined in the respective regulations.
Key Considerations:
- Special Purpose Vehicles (SPVs): If an SPV has control over its subsidiaries and does not get the small company exemptions, it has to also prepare consolidated financial statements covering all cross-borders globally. It has to comply with IFRS 10 and appoint an ADGM-approved auditor for the group audit.
- Consolidation Exemption: A consolidated financial statement exemption could be earned by companies that have a parent or intermediate entity, which is listed on a recognized stock exchange, under certain conditions.
- Ineligible Groups: For those belonging to an "ineligible group," for example, if one member is a financial institution or a public interest entity—even overseas—a local audit requirement and filing of accounts would be called for, irrespective of whether the small company threshold criteria apply.
- Standalone Exception: Any company with Subsidiary companies within ADGM may be exempt from individual account audits under special clauses in the regulations.
- Migrated Entities: If companies migrate to ADGM, there is no alteration in their prior financial year and the companies would remain the same.
Understanding the ADGM Regulatory Framework
The Abu Dhabi Global Market (ADGM) has put in strong and independent regulatory frameworks that ensure an environment of stability and transparency in the field of finance. Their implementation is overseen by an independent regulatory body known as FSRA (or Financial Services Regulatory Authority in ADGM).
Role of FSRA:
FSRA, as an independent regulatory authority, ensures the performance of the following functions:
- Licensing and Supervision: Licensing and supervision of all the financial institutions that are operating in the Global Market Area, including banks, insurance companies, investment firms, and any other financial services providers.
- Enforcement of Regulation: It must enforce all that falls under the financial services issued by the ADGM, including everything concerning the ins and outs of accountancy and auditing.
- Protection of Consumers: More importantly, it must do all this for the protection of the consumer and investor in the ADGM financial market.
- Promotion of Market Integrity: Maintaining a fair and orderly market by flagging any market abuse and financial crime.
Benefits of Accounting and Auditing In ADGM
Following are the major benefits of accounting and auditing in ADGM.
Boosting Quality and Authenticity:
- Information about Financial Integrity: Financial transparency is appreciated by the investors, who are the lenders or stakeholders of the firm.
- A Trustworthy Investor: The confidence of the shareholder receives its fuel from the performance of an audit team in controlling the financial statements of a business. Certainly, it helps attract investors to get financed easily in capital markets as well.
Ensuring Regulation and Evading Penalties:
- Compliance of Law: The necessary requirements for regulatory compliance under the ADGM are nothing but the adherence of accounting and auditing with the regular guidelines and compliance with accounting and auditing standards.
- Penalizing Incident: Business may even have to pay a fine, endure suspension of a particular business license, or damage reputation irreparably if not complied. Regular examination would bring any possible compliance anomalies into being and give a chance to have them managed appropriately.
Creating the Foundation of Sustainable Growth and Trust:
- Straightforward Decisions: For organizations, offering finance is supposed to have the most perfect financial information, as so many decisions are based on this data, as regards strategic planning, resource allocation, and risk management.
- Enhanced Management of Internal Efficiency: Recognizing the deficiencies in audits ensures that it removes the need for higher operational efficiencies, leading to cost savings and better profitability.
- Building Confidence for a Long Time: Belief with respect to accounting and auditing processes creates trust and, therefore, credibility among the stakeholders. Thus, supportive development and growth within ADGM for long years can take place.
Accounting standards and audits have increasingly become essential aspects rather than just regulatory needs for any dynamically operated business in the Abu Dhabi Global Market (ADGM). Hence, these practices enhance transparency, build relationships with stakeholders, and foster sustainable growth. Because it follows international rules of best practice, given that complete records are maintained and an audit is undertaken periodically, one's compliance may be ensured; any given company must follow a way that works in mitigation of risks and traverses the complex ADGM regulatory landscape.
Choose CDA For Your Accounting and Auditing Requirements
Since we, at CDA, are determined to provide solutions that are utterly unique in accounting or auditing, these requirements will be tailored by the experts at CDA. Our team offers almost every type of service, inclusive of financial reporting, audit support, and regulatory compliance guidance. We are always on standby to understand the needs and get your requirements met.
