Audit File Preparation in UAE

What Is Audit File Preparation?

Audit file preparation means organizing the accounts, documents, and schedules that the external auditor needs to review the financial statements and issue the audit report.

The purpose is to ensure that every figure appearing in the trial balance and financial statements is supported by a schedule, reconciliation, contract, invoice, or clear document.

This service does not replace the external auditor and does not represent an audit opinion. It prepares the company, accounting file, and supporting documents before the audit stage, and helps management address errors before they become audit points.

When Does a Company Need Audit File Preparation?

Components of a Good Audit File

A good audit file should explain the figures before the auditor asks for explanations. Every major account should have a supporting schedule, reconciliation, and sufficient documents.

• Final trial balance for the required period.
• Bank reconciliation for each bank account.
• Customer balance and ageing schedule.
• Supplier balance and accounts payable schedule.
• Inventory and stock count schedules, where applicable.
• Fixed asset register and depreciation schedule.
• Loans, finance, and liability details.
• Revenue and sales schedules.
• Main expense schedules.
• VAT file, returns, and invoices.
• Corporate Tax file and supporting documents.
• Important contracts and agreements.
• Adjustment and closing entries.
• Financial statements and drafts where needed.

Bank Reconciliation Before Audit

Bank accounts are among the most important items reviewed by auditors. The bank balance in the books should match the bank statement or be clearly explained through a reconciliation of outstanding items.

Any unknown movement, unexplained transfer, or unrecorded charge may lead to questions and audit points during the audit process.

• Bank statements for the period.
• Separate reconciliation for each bank account.
• Explanation of outstanding issued and received cheques.
• Recording bank charges, card charges, and transfer fees.
• Matching transfers between company bank accounts.
• Explaining unknown or unrecorded movements.
• Matching POS and payment gateways with the bank.
• Preparing a bank movement schedule for the auditor.

Customers and Suppliers in the Audit File

Customer and supplier balances should be clear and supported by invoices, receipts, payments, credit notes, and advance payment schedules.

Old, negative, or unexplained balances often lead to additional auditor requests and may affect provisions, expenses, or revenue.

• Customer balance schedule at period-end.
• Customer ageing analysis.
• Identification of old or disputed invoices.
• Supplier balance schedule at period-end.
• Matching supplier balances with payments and invoices.
• Explanation of advance payments from customers and to suppliers.
• Credit notes, returns, and settlements.
• Customer or supplier confirmations where needed.

Inventory and Fixed Assets

If the company has inventory, stock count reports, movement schedules, cost details, and cost of goods sold should be prepared. If the company has fixed assets, the asset register, depreciation, additions, and disposals should be prepared.

Inventory and fixed assets require clear supporting documents because they directly affect profit, financial statements, and Corporate Tax.

• Inventory schedule at period-end.
• Stock count sheets or system reports.
• Cost of goods sold calculation.
• Damaged, obsolete, or slow-moving stock.
• Fixed asset register.
• Fixed asset purchase invoices.
• Annual or monthly depreciation calculation.
• Sold or disposed assets.
• Matching assets with physical existence where needed.

VAT File Before Audit

The VAT file should be organized because sales, purchases, and tax figures in the accounts should be reconcilable with VAT returns, invoices, and supporting documents.

When preparing the audit file, we review whether sales invoices, purchase invoices, credit notes, and returns have been recorded correctly, and whether there are differences between the accounts and VAT returns.

• VAT returns for the period.
• Output VAT report on sales.
• Input VAT report on purchases.
• Tax invoices issued and received.
• Credit and debit notes.
• VAT reconciliation with accounts and returns.
• Explanation of differences or corrections.
• Import and export documents where needed.

Corporate Tax File

Corporate Tax starts from accounting income as per the financial statements, with required adjustments. The audit file should therefore support revenue, expenses, balances, and accounting entries.

Unorganized accounts, unsupported expenses, or unexplained balances may affect the quality of the financial statements and the Corporate Tax file.

• Financial statements or draft financial statements.
• Final trial balance.
• Revenue and expense details.
• Unsupported or mixed expenses.
• Fixed assets and depreciation.
• Loans and shareholder accounts.
• Related party transactions and shared transactions.
• Provisions and doubtful debts.
• Potential tax adjustments that require review.

Contracts, Liabilities, and Legal Documents

The auditor may need important contracts to understand revenue, leases, loans, suppliers, customers, liabilities, or related party transactions.

• Trade licence and company documents.
• Lease agreements.
• Main customer contracts.
• Supplier and contractor agreements.
• Loan or finance agreements.
• Shareholder or related party agreements.
• Important employee contracts where needed.
• Any claims, disputes, or contingent liabilities.

Adjustment and Closing Entries

Before submitting the file to the auditor, closing and adjustment entries should be reviewed because they affect the financial statements. These may include depreciation, accrued expenses, prepaid expenses, accrued revenue, provisions, and foreign exchange differences.

• Depreciation entries.
• Accrued expenses.
• Prepaid expenses.
• Accrued or deferred revenue.
• Doubtful debt or inventory provisions where needed.
• Foreign exchange differences.
• Related party adjustments.
• Correction entries for previous errors.
• Final closing entries.

Documents Required to Prepare the Audit File

• Trial balance for the period.
• Bank statements.
• Bank ledger from the accounting system.
• Sales and purchase invoices.
• Receipt and payment vouchers.
• Customer and supplier schedules.
• Inventory and stock count reports where applicable.
• Fixed asset register.
• Payroll and accrual schedules.
• Lease, loan, and important contracts.
• VAT returns and tax invoices.
• Corporate Tax file where available.
• Adjustment and closing entries.
• Any previous auditor comments or requests.

Steps to Prepare the Audit File

• Identify the financial period to be audited.
• Receive the trial balance, accounts, and documents.
• Reconcile banks, receipts, and payments.
• Correct customer and supplier balances.
• Review sales, purchases, and expenses.
• Review inventory, fixed assets, and depreciation.
• Prepare the VAT file and reconcile it with accounts.
• Review Corporate Tax and supporting documents.
• Prepare supporting schedules for each major item.
• Prepare adjustment and correction entries where needed.
• Organize contracts and important documents.
• Prepare a list of notes before submitting the file to the auditor.

Common Mistakes in Audit File Preparation

• Sending only a trial balance without supporting schedules.
• Not reconciling bank accounts before the audit begins.
• Having old unexplained customer or supplier balances.
• Not preparing VAT invoices and tax returns.
• Not reconciling inventory or not having clear stock count records.
• Not maintaining a fixed asset register and depreciation schedule.
• Mixing owner personal expenses with company expenses.
• Not recording accrued expenses or prepaid expenses.
• Not preparing important contracts, loans, and liabilities.
• Leaving differences until the auditor requests explanations.
• Clearing differences with general entries without explanation.
• Submitting disorganized documents not linked with accounts.

Reports You Receive After File Preparation

• List of required and available audit documents.
• Bank reconciliation report.
• Customer and supplier difference report.
• Inventory and fixed asset report.
• VAT and tax reconciliation report.
• Initial Corporate Tax notes.
• List of required entries and adjustments.
• Report of issues to be addressed before audit.
• Organized file ready to be submitted to the external auditor.

Who Needs This Service?

• Companies preparing for external audit.
• Free Zone companies that need audited financial statements.
• Companies with delayed or unorganized accounts.
• Companies with differences in banks, customers, or suppliers.
• Companies with inventory or fixed assets that need review.
• VAT-registered companies.
• Companies preparing for Corporate Tax.
• Companies that need an organized file for banks or partners.
• Companies that want to reduce auditor comments.
• Companies that want to close the financial year properly.

How Can Al Basma Help with Audit File Preparation?

Al Basma reviews the accounts and documents before audit, reconciles banks, corrects customer and supplier balances, and reviews expenses, sales, inventory, and fixed assets.

We prepare supporting schedules for each major item, organize the VAT and Corporate Tax files, and identify required entries and adjustments before the file is submitted to the external auditor.

We also help management understand potential audit points before the audit starts, so the company is ready to answer auditor requests with clear and organized documents.

Services Related to Audit File Preparation

Why Choose Al Basma for Audit File Preparation?

• Organize accounts and documents before sending them to the auditor.
• Prepare supporting schedules for each major financial statement item.
• Reconcile banks, customers, suppliers, inventory, and fixed assets.
• Review VAT and Corporate Tax before audit.
• Identify entries, adjustments, and notes before file submission.
• Make auditor requests easier to answer with clear and organized documents.

Related Updates and Articles