Much further down the road, the accounting scandals of a few years ago have impacted quite heavily upon the way in which auditors are required to perform and document their audits of financial statements. And this is the case regardless of whether the company being audited is of public interest, such as a bank or quoted company on a stock exchange, or is a large private company or small owner-managed business. In each case the overall principles are the same. International Standards on Auditing, with which most reputable audit firms comply in conducting their audits here in the UAE, have undergone significant revision over the past year or so. Substantial emphasis has now been placed on the planning process – increasing the involvement of more senior members (partners, directors, senior managers) of the audit team – and a fuller and more detailed documentation of that process. More detailed understanding of the business risks faced by clients is required with the consequent documented impact on the audit. So if your audit team has begun asking different types of questions than in past years, this is the reason.

There are two significant International Financial Reporting Standard changes coming into effect this year, which will impact disclosures on financial statements with December 2007 year-ends. Firstly, an amendment to IAS1: Presentation of Financial Statements requires disclosures regarding objectives, policies and processes for managing a company’s capital, however defined and, secondly, IFRS7: Financial Instruments: Disclosures replaces IAS32. IFRS7 requires much more extensive disclosures than the previous standard, such as; analyses of debtors that are overdue but not impaired; debtors that are impaired with a commentary as to why they are impaired; sensitivity analysis resulting from hypothetical changes in interest rates, exchange rates and other prices, such as quoted market prices.

All of the foregoing has resulted in substantial training for our staff and is going to impact on audit time spent. Consequently, the costs that we have incurred and will continue to incur in order to maintain our position as a leading audit firm in the UAE have increased significantly.

There are other usual columns, updates on happenings in the UAE, PKF International and the offshore world, Oman Update etc. I do hope you will enjoy reading our newsletter. Please feel free to write or mail to update@pkfuae.com if you wold like to express an opinion on any matter inside.