Companies use audits to check all their finances, operations, and costs against global standards. An oil and gas audit UAE makes sure they follow global rules and easily manage business risks.
Oil and Gas Audit in UAE: Why It Matters
An oil & gas audit report includes looking into cost management, operational practices, financial accounts, and production insights. It is meant to convey to your investors and the general public that you are following the right procedures when tracking your financial data.
Audits have multiple uses, including:
- Ensuring transparency in business practices
- Building trust with stakeholders, customers, external investors
- Detecting instances of fraud or inconsistencies in records
- Lowering business risk
- Avoiding business closure and government inspections
Financial Reporting Standards in UAE Oil and Gas Sector
- In the UAE, the International Financial Reporting Standards (IFRS) is the main reporting framework most companies follow. This is to stay in line with the global standards and maintain credibility with international markets. Additionally, the Ministry of Finance regulates financial reporting and enforces corporate tax governance. The Securities and Commodities Authority (SCA) also acts a regulatory body, mainly for companies dealing with capital markets.
Internal Audit for Oil and Gas Companies in UAE
An internal audit is a way for oil and gas companies to check how well their systems are working. Regular internal audits will make sure the whole operation is running smoothly and is an essential part of compliance.
These are some of the main parts of an internal audit:
- Asset valuation: The audit ensures your reserves, infrastructure, and equipment are properly recorded and accurately valued.
- Joint venture audits: The audit reviews how costs and profits are shared with partners like ADNOC or international companies to confirm fairness and transparency.
- Revenue recognition: The audit checks that your production data matches your sales and contracts, so revenue is reported correctly.
- IT and cybersecurity: The audit assesses systems like SAP or Oracle to make sure your data is secure and your technology supports the business effectively.
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Benefits of Internal Audit in Oil and Gas Companies
- Improved controls: Internal audits can help strengthen finance, operations, and IT processes to keep everything running smoothly.
- Risk detection: The audit can catch fraud, errors, or misstatements early, stopping bigger problems before they start.
- Operational efficiency: The audit can reveal where costs can be cut and resources used more effectively.
- Stronger governance: The audit can provide accurate data and reliable reports to support smarter decision-making.
- Regulatory confidence: The audit can prepare systems for external audits and inspections through regular testing.
Challenges of Internal Audit in Oil and Gas
- High data volume: Oil and gas companies produce a lot of operational and financial information, which makes audits take a lot of time.
- Complex contracts: Agreements like production sharing and joint ventures are tricky to review and divide up correctly.
- Changing standards: Keeping up with updates to financial reporting rules, such as IFRS, puts extra pressure on audit teams.
- Cross-border issues: Handling international payments, imports, and exports adds extra steps and rules to follow.
- Technology risks: Systems like ERP, cybersecurity measures, and automation tools need auditors with the right skills to check them thoroughly.
Industry-specific risks: Costs related to health, safety, and the environment need special focus that many audit teams might not have experience with.
Financial Compliance in the UAE Oil and Gas Sector
If you run an oil and gas business in the UAE, there are financial rules you need to follow that go beyond regular accounting. These rules help you keep your trade licence valid. Here are the main areas you should pay attention to:
- Corporate tax: You need to follow the corporate tax rules for oil and gas companies. You have to keep clear records of your income and expenses. You also have to track how profits are shared with your partners.
- VAT: You will deal with transactions that involve imports, exports, or services subject to VAT in UAE. You should avoid mistakes in reporting VAT because they can cause serious financial and legal problems.
- Trade licence: You have to renew your trade licence regularly. You also need to keep your financial statements up to date.
- Cross-border payments: Banks review large international payments carefully. If your records aren’t in order, your payments might be delayed or blocked.
- Health, safety, and environment costs: Authorities and investors want to see how you spend on safety and protecting the environment. You need to make sure these expenses are clearly shown in your accounts.
- Contracts and agreements: You often have deals that involve sharing production or recovering costs. If you don’t record these properly, it can cause disputes with your partners.
Work With A&A Associate’s Expert Auditors
A&A Associate offers expert internal and external auditors who can conduct an independent review of your operations and financial statements. We are also the UAE’s largest business setup advisory, offering end-to-end company formation services for clients across the UAE. Get in touch for a free consultation!
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