How To Write An Audit Report – Contents of Internal Audit Report 

audit report

To write a high-impact audit report, you need lots of practice and time with proper guidance. It must be done per the standards and in alignment with the primary objectives to effectively explain the whole audit management process. To learn how to write a good audit report, you must look for some tips and best practices.

The first step should be penning down the detailed writing format for the report. Utilizing the standard internal audit report formats provided by ISO and other organizations is always better. Brainstorm how you will present your information and what stats you will be including because overwhelming them with unnecessary facts and figures will bore them sooner. Keep the 5 C’s of internal audit report writing in mind.

You can search for audit report templates (audit report samples) to get a quick idea.

How to Write an Internal Audit Report?

Do you know the what is the best internal audit report format? For an Internal audit summary report, a standard template is usually followed to meet the core objectives and requirements that the addressee has asked for. The better the report format, the clearer the picture of the business’s financial status.

The audit report structure must have the below-mentioned sections in the same sequence but you can make slight changes such as adding follow-up section:

  1. Title & Cover

How to prepare internal audit report? Let’s start with a simple yet engaging cover that must leave a good impression. After all, it will be the first point of contact with the reader. A quality internal audit report cover page speaks for the auditor’s efforts. Your cover should provide the readers with the title, auditor’s name, the end date for audit, and the company’s name being audited. Don’t forget to mention “Independent Auditor’s Report” in the title as per the internal audit report structure.

  1. Addressee details 

Addressee means the person who will be addressed in the report, a person responsible for hiring the auditors. It is usually the shareholders of the company. Their professional life, designation, duty roles, and essential employment incidents or experiences must be highlighted. It makes the internal audit report presentation more engaging.

  1. Introduction

One of the most important headings in an internal audit report writing format! This section must highlight the significant points to have a better understanding and give a quick overview to understand why the audit report is presented, such as:

  • The area/departments being audited
  • The processes being audited
  • The standards followed while conducting an audit (ISO 9001, ISO 14001, etc.)
  • Any historical financial information
  • Any facts that readers must keep in mind while reading the report

It must be concise but legible and authentic. No false facts or unverifiable statements must be made.

  1. Scope & Objectives

As the heading implies, the scope and purpose of the audit must be explained thoroughly. After reading this section, the addressee must understand:

  • What the audit is really about
  • The reasons why the audit risk areas are of importance to the company
  • Any limitations on the scope of work completed
  • The members responsible for conducting the audit
  • Why internal controls are tested 
  • How Company’s accounts are inquired about and verified

The auditor must provide credible proof that the audit examination of the company’s financial reports has been completed per the country-wide accepted standards. The evidence must be legitimate and free of material misstatements to make the shareholders or investors believe you.

internal audit report
  1. Opinions

One of the essential sections of any internal audit report is the auditors’ opinions concerning the business’s current financial status. It can be:

Unqualified or Clean OpinionThe highest grade opinion signifying that the report is generated and maintained in full compliance with the Generally Accepted Accounting Principles (GAAP) without any misstatements in financial records.

Qualified Opinion: It is issued only if the company fails to maintain financial records following GAAP. However, the report is free of misstatements or when unacceptable disclosures are provided for the financial accounts.

Adverse Opinion: Lowest-grade opinion, or the worst type of opinion given on the internal audit review report explaining that records are neither conformed to the GAAP nor free of misrepresentations. It directly puts the company in the lousy spotlight, being called a fraud.

Disclaimer of Opinion: If the company fails to prove its financial status or the auditor is unable to determine the status due to the lack of details.

  1. Results

Once the reason for auditing is explained, issues with their root causes are identified, flaws in financial records are highlighted, opinions are made, and the final verdict of the auditors’ team is provided. The result section summarizes the major findings supported by credible references and criticizes the performance of the management in resolving formerly acknowledged problems.

  1. Recommendations 

It is a point where you suggest new action plans to meet the deficiencies of the financial department considering the records. The skilled auditors can only play an advisory role, making recommendations or encouraging them to take certain actions to get rid of problems, but the final decision will be taken by the management

  1. Conclusions

It is considered the end of the internal quality audit report format where auditors are asked to add more comments (positive or negative) that cannot be mentioned in the result section. It goes beyond the individual issues of a company’s corporate governance. You can write an internal auditor’s opinion in this section as well. Most importantly, it gives you extra space to write positive notes to appreciate the management team.

The internal audit annual report is finalized after examining the company’s internal control systems deficiencies, which have some common sections, as mentioned above.

  1. Terminologies: 

Provide a short and easy-to-understand definition for each and every term you have used in the structure of internal audit report. It makes it easier for everyone to understand the information.

  1. Auditor’s signature and Place of the signature

At the end of the internal audit reporting structure, don’t forget to add the auditor’s signature on the report for credibility. The auditor must mention the city in which the report is signed.

  1. Date of the Internal control audit report: 

Always mention the date when the auditor signed the audit report.

Create an Executive Summary

Do you really think that senior executives read every word or go through every page? Well, they don’t have enough time to do so. That’s why draft internal audit report with an executive summary highlighting key points such as important dates, procedures, factual statements, and figures.

It must summarize all data and present it to the decision-makers to determine if they need any new action plan. It must not take more than 30 minutes to read. 

In literal meanings, “it is a compact debate of the conclusions of the auditing tasks completed in a complete audit report layout.”

Audit Services to Improve Operational Control

With the help of experienced, professional, and skilled accountants at Profits plus, you can handle an organization’s internal audit more efficiently. We have assurance and consultant services with risk advisory to help you reach your ultimate goal. Our team always selects the most beneficial standard policies for Dubai-based businesses while guiding them through auditing and supervising financial operations.

27 Tips For Writing Internal Audit Report | Best Practices To Make Report Persuasive

Internal Audit Report

For those who don’t know what is internal audit report, it is an essential deliverable of the audit engagement which must explain all the efforts that have been made, all the steps that have been completed, and all the decisions that have been taken while conducting the audit. It must contain the results of the whole audit process summarized with facts and supported with credible references.

You can call it a good internal audit report only if the contents of internal audit report make the readers understand its objectives clearly along with describing the scope and findings of your audit engagement. Every company tends to have their audit report template (internal audit report layout). To make your internal audit engagement a complete success and draft the best internal audit report, it is advised to follow the rule of 20:40:40:

  • Spend 20% of your energy on developing a detailed plan for the internal audit
  • Use the first 40% of your efforts in fact-finding, making observations, examining, and conducting fieldwork.
  • Keep the second 40% of your energy reserved for the internal audit findings report.

Top 27 Internal Audit Report Writing Tips – Internal Audit Reports Best Practices 

If you have been questioning yourself “how to write an audit report”, you must look for the below-mentioned tips!

  1. The best practice is to start creating the report’s rough draft from the very first day of the fieldwork. Day 1 of engagement should be your day 1 of writing an internal audit summary report to avoid unforeseen delays.
  2. Like other auditors, do you also want to be called the “bearers of bad news”? If not, then you must check your tone and selection of words. The time has changed, and now the “Give and Take” approach is preferred as it creates a favourable business environment radiating pleasant vibes. BUT, don’t exaggerate your positives and balance them with negatives.
  3. A report will only get a higher rating and be comprehensible when the content revolves around your core objectives. The information must clearly explain the purpose of the draft.
  4. You must have used terminologies in the report, and they must be explained for a better understanding at the end of the report.
  5. Never miss out on proofreading internal audit reports before the final presentation. Keep a review internal audit report checklist for each step to limit the risks of avoidable mistakes. It is advised to never finalize the report without checking for the spelling, grammar, formatting, and factual or numerical errors.
  1. Timely reporting and communication with team members are necessary to maintain stability, transparency, and a collaborative environment.
  2. Limit writing your executive summary of the internal audit annual report to 1 page of the Word document and 1 PowerPoint slide that must not take more than 10 minutes for the readers. The senior management must keep it compact for a better influence.
  3. Avoid writing material misstatements in the scope and objectives paragraphs of the report.
  4. The best internal audit report format is title cover, addressee details, introduction, scope and objectives, opinion, basis of the opinion, results, recommendations, conclusions, auditor’s signature, place of the signature, and date of the audit report.
  5. The standards you are following for auditing processes must be highlighted in the introduction section, for example, ISO 9001, ISO 14001, etc.
  6. Never overwhelm your report with the company’s positives. Make a “Findings Sandwich” where you will be making layers by explaining positive and negative points alternatively. Although, you better end your report on a positive note.
  7. For the content, you must use bullets to your best. It is easier to catch the reader’s attention with bullet points.
  8. The purpose of internal audit report is not only to explain engagement results but also to make practical recommendations and find better opportunities to make greater progress.
  9. Apart from bullets, the internal audit report’s content must have tables, charts, and graphs summarizing essential stats.
  10. While writing the detailed observations, make sure that each issue comprises all 5 c’s internal audit report (Criteria, Condition, Cause, Consequence, and Corrective Action Plans/ Recommendations).
  11. To keep the report legible and authentic, reference every point. Making unverifiable claims will make you lose your credibility.
  12. Take full advantage of indices, appendices, and tables for bridging any information gaps.
  13. Putting too much data will bore the readers. The report must have specific information to make it persuasive and logical. Eliminate redundant ideas to maintain readability.
  14. Whenever you discuss any issue, it must be explained with its root cause.
  15. We all have heard “first impression is a last impression” that is why make a good impact with a quality cover. It must not skip any important information, including report title, name of auditor responsible, audit end date, name of company or business unit audited.
  16. Scientifically, you can keep the audience engaged in reading one paragraph for not more than 5 seconds. That’s why keep the 3-5 second rule in mind and try covering maximum information in the starting lines.
  17. A good audit report must be drafted and critically evaluated from the audience’s perspective. You must be aware of their interests, demands, and preferences.
  18. One of the best approaches to draft internal audit reporting is to emphasize the important data by circling or underlining it, highlighting it with different colours, or changing its format to bold or italics.
  19. Mentioning particular teams or blaming others for the failures in internal control audit report presentation should not be the aim. The problem must be seen universally.
  20. Always keep the internal audit report rating system in mind to help highlight the issues accordingly. 
  21. Get rid of all the unnecessary descriptive adjectives, adverbs, or pointless information from your “executive summary.” Use numbers, facts, stats, figures, and percentages while summarizing your report’s content. 
  22. Always make your internal audit reporting lines brief yet understandable and move with brevity!

Profits Plus’s Internal Audit Service – Designed to Improve the Reliability

Profits Plus has a team of certified accountants who are always ready to guide Dubai-based businesses throughout the internal audit process and provide outstanding risk advisory. From measuring the procedure’s effectiveness to supervising financial operations, we ensure you adopt the policies that help you improve internal operational control.

7 Effective Cash Flow Management Techniques

Whether your business is small or mid-sized, completing decades of establishment or a few months – efficient cash flow management is critical because “cash is king” and a key to a successful future. 
With cash flow management, companies exercise full control on input and outflow of funds which helps them make sure that the outflow of cash stays lesser, profits keep increasing, excess funds are available for further investment, business is not going to run out of money shortly, and the return on capital is always maximising.
7 Best Tips for a Better Cash Flow Management
If you are only looking for nonpayers, heavy invoices, and loan repayment deadlines for a better cash flow accounting, you lack a strategy. Many companies, particularly SMEs, make mistakes of not planning, misallocating resources, or over forecasting their sales, consequently affecting their cash flow. But, we have enlisted the most practical cash flow tips that will let you save big and enjoy the positive cash flow.
Generate Cash Flow Reports
How do you plan on keeping a close check on each transaction without reports? 
Well-maintained cash flow report, generated with accounting or Cash Flow Management software and tools (XERO), is necessary for calculating the incoming and outgoing balance. It is advised to use cloud-based storage spreadsheets to supervise and identify the highs and lows in the company’s money flow anytime.
Always assign such monitoring tasks to trustworthy team members who must be aware of all financial aspects as managing cash flow gets easier.
Smart Inventory Management
How to manage cash flow effectively?
Always keep your inventory updated for a better understanding of ongoing supply-and-demand levels. Also, keep it freshly loaded with your best-selling products to cope with the growing orders without delay. The clever way is to do “ABC analysis”, as it will highlight the products that have been the client’s favourite and the products that are not appreciated.
You can either dispose of your no longer needed stock or sell it at great discounts for quick cash, leaving the only products that your customers are demanding. Prioritised stocking will help you get rid of excess stock, as well, because apparently, they won’t be generating revenue any time soon.
Online Payment Methods 
Never compromise on the payment method, or else you will face major setbacks. There are phone payment methods applications, but online payment methods will be a good choice as it tracks every activity and keeps a record. With net banking, Google pay, Paypal, etc., you will get your payment faster. 

Fixed and Variable Expenses Across the Financial Year
It is very important to categorise your fixed and variable expenses. For instance, you will be paying rent, telecommunications costs, and employees’ salaries throughout the year – fixed variables. On the contrary, you will be receiving shipping fees depending on the location and paying for manufacturing material considering the demand or products – variable expenses. Cut their cost down from your total earnings and move forwards with another investment with a clear figure in your mind.
Additionally, there is common area maintenance (CAM) fee for a brick and mortar shop that needs your attention. It includes other outlays such as lighting, janitorial services, cleaning, etc. Don’t forget to add them up to your operating expenses!
Lease for Small Businesses
Buying is not always a secure option. Leasing the equipment or inventory will benefit you in the longer run. It might get tricky sometimes but will save you from getting troubled with debt because you won’t be paying massive amounts; instead, making small payments over a defined period. And yes, it does write off your taxes.
Still, asking how to improve cash flow management? We have just told you the best way to manage cash flow!
Keep A Cash Reserve 
With no backup cash, you will always be scared of making a new investment or taking a future decision because WHAT IF you fail to maximise capital or sales don’t give you the expected amount?! Petrifying!
That is why you must have a hefty cash reserve of a fixed amount to cover unanticipated or emergency expenses at any given time because companies run on money. If you face a sudden shortfall of money, your business will crumble.
Maintain Your Invoicing Workflow 
One of the most important aspects of maintaining a positive cash flow is utilising the invoice-on-demand model for the company’s benefit. You must practice and teach your employees to send invoices immediately after delivering the products and collaborate watchfully with the buyers to get your payment as early as possible. SMEs don’t go well with the monthly billing cycle. Your invoice should be:
Clear and understandable
Fully detailed
Easy to read
Every profitable business must have a secure method for sending an invoice, such as an email automation system. Choose the method of payment that not only pays you faster but saves your time. It will play a significant role in cash flow management during a crisis.
Profits Plus’s Expert Accountants at Your Service
Do you want to predict your company’s future financial position? Or looking for professional assistance in financial management planning? Profits Plus has every solution to your business and accounting problems!
Our cash flow management accounting services are solely focused on helping businesses generate a greater amount of cash for a secure future. We use the best cash flow management tools & techniques to minimise the chances of negative consequences.

Choosing between Saasu and Xero

For starters, for a business to grow and expand, the annual financial data is very important to devise strategies for the next fiscal year. For a better understanding of the operations of the enterprise, the managerial hierarchy must have access to clear, correct and latest data and information of their enterprise.  

Now the term cloud computing has been around for a long, we’ve seen many iterations of accounting software come and go. This has allowed the business market to evolve and become breeding grounds for more competition. That makes sure that the quality of the products/services can always be held to a standard that is best for the consumer- basic economics. 

As we all know by now these nifty cloud computing services allows the right people to access the data at their whim, provided they have the necessary permits to access the data. 

These days cloud computing services are now readily available for businesses of all sizes and operations in Dubai. That is made possible through the use of accounting software like Xero and Saasu which are used by all leading firms. It offers an extensive range of accounting services which include SMSF audit, taxation, financial management and accounting outsourcing services. This software can manage operational bookkeeping of businesses which can help keep track of the business transactions, but they both have some differences in comparison.  

Xero and Saasu have several similar qualities when we talk in accounting terms, mainly revolving around pricing and transactions. The user-friendly accessibility allows users a wide range of formatting, printing and mailing options. Both the software are available in various currencies as well, enabling people from all parts of the world to reap the benefits from using them. 

Xero 

  • Xero (accounting software) has fairly high demand these days amongst the accounting fraternity mainly because of its ease of access. 
  • Xero contains an all-inclusive payroll tool that facilitates the user to manage employee payroll obligations suitably by creating ABA files. These files are meant for the majority of the employee payments, track employee entitlements, and execute an automated super payment process. 
  • Xero has exceptional integrational abilities for third party add-ons that help raise the system functionality. 
  • Xero is a timesaver essentially, the bank feed feature reduces bookkeeping time and costs. 
  • Xero is user-friendly and customisable, with more options for the user to prioritize financial aspects. 
  • Xero provides different types of invoicing, enabling business operations to be accessed easily when needed.   

Saasu 

  • Saasu (accounting software) enables the conversion of sales quotes into individual invoices. Making it a must-have for businesses in the construction sector and also for trading businesses that have a high sales volume.  
  • Saasu focuses more on inventory and accounts associated with it. users can gain access to PO’s and send them to suppliers. The system at the backend tracks this movement via the inventory. 
  • Saasu allows its users to mail invoices in large volumes, all while providing highly customisable email templates as well. 
  • Saasu like Xero can easily incorporate third-party add-ons to bolster system functionality  

It has been made clear what features both software have to offer. Using either of them relies upon the nature of your business and what you as the user are looking for. 

But the appeal of Xero is unparalleled in its capabilities. Xero is the complete package with so many benefits and can offer so much more to owners than any other accounting software. If you want to go for the best accounting software for small businesses, opt for XERO! 

8 Different Types of Accounting Practices

How do you plan on expanding your business without knowing how many resources you are left with, how much revenue you can expect, and how much money has been spent on taxation? You simply can’t! 

Every business needs a stable accounting department responsible for keeping the owners updated about the current financial position along with anticipated percentages of profit or loss. 

8 Types of Accounting Practices 

To keep your finances straight and up-to-date with the company’s cash flow, you must be familiar with all eight types of accounting. 

  1. Public Accounting 

As the name suggests, public accounting is a practice where a businessman allows an independent accounting firm’s certified public accountants (CPAs) to keep their company’s accounts, financial records, bank statements, and related information in check and balance as a few of the financial documents are necessary to be publicized. UAE has plenty of well-known public accounting firms offering additional services, such as bookkeeping, financial consulting, and payroll services, apart from auditing and taxation. 

The firm will be held accountable for strategizing business plans, suggesting profitable mergers, and making acquisitions while keeping the internal accounting system streamlined. 

  1. Private Accounting 

It is an accounting practice where an accounting professional (expert) is recruited to bring the business’s accounting and other information in order. He is responsible for recording finances properly and keeping them updated. The accountant will be provided full authority to tackle all financial, tax-related, and managerial accounting issues within the organization. 

  1. Government Accounting 

A practice where government agencies responsibly deploy state auditors (or equally eligible individuals) for recording, creating, and anticipating budget (income and expenditures) in accordance with the Governmental Accounting Standards Board (GASB). Agencies will set reporting standards and track: 

  • How public money is being spent 
  • Amount of the remaining available funds 

 It is a valuable step in ensuring that financial, accounting, and related information is accurate.  

  1. Financial Accounting 

This accounting principle is a traditional practice and serves the purpose of keeping an updated record of each transaction, maintaining a balance sheet for trailing the financial situation, pinning down assets and liabilities, informing shareholders about the financial shifts, and providing the owners with the detailed summary of cash flow. A financial accountant expert (secretaries, stock intermediaries, chartered accountants, etc.) is obliged to follow internationally or locally recognized accounting standards to prepare financial statements and the statement of change in equity. 

Two main types of financial accounting are cash accounting (mainly practiced by SMEs) and accrual accounting (suitable for larger businesses). It is necessary to define the company’s existing financial status. 

  1. Cost Accounting 

It only collects and analyze information regarding the company’s expenditure on manufacturing products. Cost accounting helps you make sensible decisions about future inventory, production, manufacturing, and supply spending. It comprises fixed costs, variable costs or input costs, etc. and is aimed at finding the cost gap between the estimated and the actual cost of production. 

  1. Forensic Accounting 

Forensic accounting is inevitable for any business as it serves the function of a financial detective, responsible for: 

  • Scheduling timely evaluations to get a hold of financial fraud 
  • Finding lawful proof of malpractices 
  • Submitting evidence to the courts to prove the case of embezzlement 
  • Writing an accounting report in easy terms for the court to explain if the company is carrying out illegal procedures 
  • Analyzing data to determine the missing amount  
  • Suggesting practicable solutions to recover the lost amount 
  • Highlighting misstatements and verifying controls 

You can either keep it in-house or hire forensic accountants. 

  1. Management Accounting 

Like financial accounting, management accounting involves using statistical tools and approaches for recording data and analyzing financial transactions. By using these statistics, accountants manage to infer current or upcoming trends as well as forecast financial liabilities. It not only considers the company’s expenses but also non-financial aspects of the business to make profitable decisions.  

The three most common categories of management accounting include strategic, performance, and risk management. Depending on your business needs, you can implement one or all three at once for obtaining information. 

  1. Tax Accounting 

A type of accounting solely designed to check the company’s tax liabilities: registration, returns, deregistration, and payments.  

In UAE, tax accountants take care of VAT-related issues. They check if your company needs to pay tax, what amount, and when. With their proper help, you will be paying the respected amount of taxation without delays, saving you from administrative penalties. It ensures that you are following all-time changing tax laws. 

How Profit Plus Can Help in Accounting 

Outsourcing your accounting needs is beneficial for highlighting high-level risks of future events and preparing you to embrace unforeseen circumstances. Profit Plus has qualified British accountants for delivering high-class accounting practices and maintaining financial transactions properly for SMEs and large companies to survive in the long run. We will not only let you save big on money but also give you a golden chance to benefit yourself from professionalized and personalized VAT services.  

Contact us to consult about different types of accounting practices in the UAE and audit-related queries, as we will help you select the most suitable approach for your business. 

 

Tax accountants get your all tax responsibilities done! 

 

9 Common Mistakes to Avoid While Filing VAT Returns in UAE 

In January 2018, UAE implemented Value Added Tax (VAT) for the first time, instructing every business to follow the laws set by FTA (Federal Tax Authority). VAT plays a key role in compensating the declining revenue and keeping a close check and balance of expenses. That’s why every company is advised to be extra careful when filing for VAT registration, returns, or deregistration. 

Most Common 9 Errors Made by Registered Companies During VAT Returns  

Once you have paid your tax, you must file the VAT return for the confirmation of payments. Act vigilantly if you want to keep yourself safe from paying hefty fines and administrative penalties. People filing Value Added Tax returns themselves must try avoiding the following mistakes because being an industrialist or businessperson, you will probably not have time to deal with tax issues. 

  1. Not Disclosing Zero-Rated and Tax-Exempted Sales 

Have you been carefully filing for only standard-rated transactions without mentioning zero-rated and tax-exempted sales? If yes, then you are doing it half right! 

Identifying and disclosing zero-rated and exempted transactions to the legal authorities is equally important. Like missing out on output and input VAT can cause you to pay heavy penalties, forgetting or hiding the record of zero-rated and tax-exempt sales can take your business downhill. 

  1. Entering The Sales in The Wrong Emirate  

Another common mistake is categorising standard-rated transactions per the consumer’s location while filing VAT returns in the UAE. The right emirate for sales is where you have your business running regularly and actively. 

It must be based on a business’s fixed establishment – an official workspace or office with enough team force, technical assistance, and industrial resources for conducting business operations. 

  1. Missing the Deadline  

Getting busy in business meetings and forgetting about filing VAT returns before the proposed date – a very common problem.  

For quarterly and monthly VAT returns filing, FTA has specified the deadlines, and in case of any delay, miscalculations, or omission errors, the taxpayer is penalised heavily. The administrative penalty for delays in VAT returns filing is worth AED 1,000 for the first time and AED 2,000 for the second. 

Keep your tax filing schedule up-to-date, make sure you never miss out on filing a VAT return and save yourself from the last-minute panic episode! 

  1. Mistakes in VAT calculation 

Companies should keep the applicable Value Added Tax rates in mind considering their services and goods. Mistakes in calculations or disbursements will lead to consequences (punishments, fines, etc.) 

  1. Carelessness in Maintaining a Detailed Invoice  

Nimesh Goel said, It is critical for businesses to develop their tax compliance strategy to contain the rise of non-compliance.” And it really is!  

Without a well-structured strategy in place, you cannot keep your tax-record straight, and every tax-eligible person must have a detailed invoice ready for each return. Authorities can ask for transaction details anytime, even from the past years, and you should be able to deliver it within 5 business days. 

  1. Appealing VAT Return on Outlays that are not Legalised 

If you are a businessman, you must be aware of daily expenses. But that doesn’t mean you will be recovering VAT on each and every penny. Unfortunately, we have seen companies claiming VAT returns on expenses that are not allowed.   

As per the VAT rules in UAE, the below-mentioned expenses don’t ask for Value Added Tax recovery: 

  • Entertainment/recreational activities 
  • Automobiles (vehicles) used for personal work 
  • Employee-related expenses 

Are you still confused? Contact Profit Plus to get the necessary VAT assistance. Our VAT experts will guide you about the UAE VAT law.

  1. Errors in RCM 

RCM stands for Reverse Charge Mechanism – a tax applicable on goods or services imported to UAE, which is paid by the buyer to the government directly. Most companies prefer not to link their Tax number with the taxpayer’s account, making it difficult to claim for input VAT along with bringing imprecisions in transactions as they forget to account for import transactions (covered under RCM) while filing VAT returns. 

  1. Faults in Adjustment Columns 

What tax-eligible persons don’t understand is that each adjustment column in the VAT returns filing process must be filled accurately and completely. They must be utilised for the adjustment of bad debts rather than mentioning and rectifying the mistakes that are done in previously filed VAT returns. 

Fill every column with the right type of information. Or else, confusion in numbers can cause investigation and/or penalties trouble. 

  1. No Proper Record-Keeping 

Authorities are allowed to ask the VAT registered businesses to submit their previous VAT data. In fact, FTA has made it compulsory for all industries to maintain correct records of each sales invoices, purchase, inventory, tax paid on import and export goods, salary transfer, general ledgers, bank statements, credit and debit notes, employee benefits, and payment receipts from the past 5 years. For real estate, they must maintain a record of the last 15 years. 

Keep it organized! 

Put Your VAT Worries Behind with Profit Plus 

We, specialised and reputable tax professionals in UAE, ensure that your VAT return filing procedure goes error-free with our expert-level guidance and professional support of qualified VAT accountants. 

Whether it is about VAT registration, deregistration, or return filing, Profit Plus resolves tax issues thoroughly and delivers the right VAT solutions without exposing your business to any threats.

 

Top 8 Administrative VAT Fines & Penalties in UAE Levied by FTA

Federal Tax Authority (FTA) is the only organisation of UAE that decides the amounts and percentages for fines and penalties every year and looks after all the tax procedures to resolve disputes. Companies are penalised upon finding a case of proven violation where they have either failed to fulfil the requirements or has breached the VAT (Value Added Tax) Law.  

Penalties come with brilliant discounts for offering an opportunity to companies to come forward and make their errors known. Or else, an audit will be performed, and if any error is found, they will be fined heavily. 

8 Fines and Penalties Under VAT 

  1. Failure to meet Registration Requirements 

The business should be mandatorily registered one month before reaching the turnover limits, only if the total amount of the taxable expenses crosses a registration threshold of AED 375,000. The unregistered business will be penalised with a late registration fee worth AED 20,000/- as per the VAT Law. 

  1. Late or no VAT Deregistration 

In case of failure to deregister in the specified time of 20 days (counting the days from the deregistration is applicable), a fine worth AED 10,000/- will be asked from a taxable person. 

  1. Problems with VAT Return 
  • A penalty of AED 1,000/- is applicable to the taxable person in case he fails to file or files for a VAT return after the 28th of the end of the tax period. If he forgets to file the return again, the fine is doubled to AED 2,000/- for the second time. 
  • FTA will levy two administrative penalties if the taxpayer voluntarily reveals errors in their previous Tax Return assessment through a disclosure form 211 and shows the under- or unpaid tax of AED 10,000/- or more. 
  • Fixed penalty worth 3,000 for the first mistake and 5,000 for making the same mistake the second time. 
  • Percentage-based penalty decided on the basis of the unpaid amount. 5% and 30% for making a voluntary- disclosure before and after getting an official notice of the tax audit, respectively. 50% of registrants who never use disclosure form and their errors are caught during the tax auditing.  
  1. Display of Prices  

An administrative penalty worth AED 15,000 applies to the taxable person who decides to display the price of the goods but disagrees with the Value Added Tax Law and puts the costs of the company’s supplies or services without tax inclusion. 

  1. Failure to Keep the Records or Submission of Information 

A VAT-registered person is held accountable for maintaining accurate documents to prove the authenticity of the official transactions. He must provide the genuine documents to Federal Tax Authority when asked. In case of carelessness, he will be charged: 

  • First time: AED 10,000/- 
  • Second time: AED 50,000/- 

If FTA asks for submission of financial records in Arabic and taxpayers fails to deliver, AED 20,000/- is levied. 

  1. Failure to Notify About Charge of Tax Based on The Margin 

A failure to inform the FTA about the total amount of calculated tax on selling used goods, antique pieces, or collectors’ items invites an administrative penalty of AED 2,500. It is essential to be transparent in trade due to the differences in profit margin observed between purchasing and selling prices. 

  1. VAT in Designated Zones 

VAT Laws are inapplicable in Designated Zones, but they have their own rules. The non-compliance to the rules will lead the taxpayer to an administrative penalty worth AED 50,000. In higher-level violation, the penalty increases to 50% of the chargeable tax. 

  1. Issues with Electronic Tax Invoices and Electronic Tax Credit Notes 

A penalty worth AED 5,000 (for each invoice or Note) is applicable on the taxpayers who: 

  • Was unable to issue Tax Invoice or Tax Credit Note electronically 
  • Was unable to meet the requirements for issuing accurate electronic Tax Invoice or Tax Credit Note 
  • Was unable to secure a valid copy of the original electronic Tax Invoice 

VAT Accounting Experts to Deal with Tax & Accounting Matters 

Are you looking for solutions to your tax accounting and VAT concerns? Profit Plus has skilled and highly experienced British accountants catering to your administrative VAT penalty issues.  

VAT Deregistration in UAE | How to Apply for TRN Cancellation 

FTA has made the VAT implementation mandatory for businesses (under certain circumstances), and every taxpayer has been extra careful about registering its company on time to avoid hefty fines. But what they do not usually care about is “VAT deregistration”, which also results in administrative penalties when not done on time.  

Before initiating the process of VAT deregistration, you should understand its rules & regulations, eligibility, and timeframe.  

VAT Deregistration 

VAT deregistration is a crucial and legal procedure in UAE where only VAT registered businesses under Federal Tax Authority or taxable individuals forward their applications online to cancel their Tax Registration Number (TRN) if they fulfil the requirements. It makes a taxable person free from submitting tax returns following the 2017 Federal Decree-Law No. 8. 

Conditions for VAT Deregistration 

You must deregister yourself in case of meeting any of the following criteria to save yourself from fines and penalties of late deregistration. 

Compulsory VAT-Deregistration 

  • Businesses or individuals who used to deal in taxable supplies have stopped. 
  • Businesses or individuals are no longer expected to get involved in taxable supplies for the next 12 months (1 year). 
  • The taxable company is still doing business in taxable supplies, but the total annual amount of money they are making out of it is lesser than the minimum Mandatory Registration Threshold, which is AED 375,000. 

Voluntary VAT-Deregistration 

  • The taxable individual is still dealing in taxable supplies, but the total annual amount of money he is making out of it is lesser than the minimum Voluntary Registration Threshold, which is worth AED 187,500. 

Criteria for Groups 

In addition to the requirements mentioned above, you must fulfil the following conditions to cancel your group VAT registration: 

  • The applicant must not be meeting the group’s official criteria to be considered as its identity. 
  • The companies that used to be part of the group are no longer financially linked with the group. 
  • In the case of continuing VAT registration, there are chances of incidents of tax evasion. 

Time Frame for VAT De-registration 

Every registrant is legally permitted to deregister himself from VAT through Federal Tax Authority portals within 20 business days or less, counting from the day when the taxpayer becomes eligible for VAT deregistration. 

Penalty for Late VAT Deregistration  

In case of failure to deregister your company within 20 business days (timeframe), you are penalised with 10000 AED as a late fee, and then your company will be deregistered.  

The Process to Deregister  

Before applying for deregistration, you must clear all of your outstanding liabilities. You can check your total due amount (if any) in the “My Payment tab.” If you are clear of debts, proceed with the applications. 

  1. Visit FTA official site and log in to the portal with your proper credentials.  
  1. You will see a dashboard where you need to find and click on the ‘De-Register’ button (placed against the VAT registration). 
  1. The portal will ask for complete personal information that you must provide correctly and truthfully. Technically, the portal tends to have your fully detailed data already saved, but you must recheck it, especially the e-mail address of the authorised participant. 
  1. Go to the ‘Choose Files’ and upload all the required documents as evidence. 
  1. You must pick one of the suggested reasons to deregister from the provided drop-down list. 
  1. After reading the necessary declarations, finalise your deregistration application and submit it. 

Status Details 

  • First, your application will enter the “pending” phase, waiting to receive FTA’s processing approval. You can see the pending status mentioned on your dashboard. 
  • Then it reaches the “submitted stage”, where you are informed about the processing acceptance and will be asked to provide additional information. 
  • Here comes the “pre-approved stage”, confirming your application approval but showing that you have pending liabilities. 
  • Once you have no liabilities left, your business will be deregistered.

Reasons for the Application Disapproval 

  1. The application is submitted after the due date (after 20 business days). 
  1. The application is missing the required tax returns. 
  1. The data is incomplete or faulty. 
  1. The individual is left with unpaid credits, tax, or fines. 

How Can Profit Plus Help? 

With the professional assistance of our well-trained British accountants, you can tackle your VAT concerns better. Whether it is about VAT registration, submission, implementation, deregistration, or accounting, we provide the necessary guidance to give your application greater chances of approval and assurance to your business. 

Profit Plus offers much more than VAT deregistration services, such as SOPs, Cash flow management, and BPI consultant services. 

Taxing treatment for Non-Fungible Tokens (NFTs) 

Just like cryptocurrencies, NFTs seem to be gaining traction as well and their popularity is at an all-time high at the moment. It would only be appropriate to discuss how they are to be taxed. 

What are NFTs? 

An NFT is a unit of data that is stored on a blockchain which is a guarantee that the NFT is unique. This means the token is not interchangeable. NFTs run using the Ethereum Blockchain. Many experts claim that because of NFTs using Ethereum, the BTC crash of late did not particularly affect the trading rates of Ethereum Coin (ETH). Every token is quantifiable evidence of ownership of that specific digital asset. Although being a digital asset, it has been pushed as an asset to take ownership of assets in real life also. 

Types of NFTs 

There are many types of NFTs available on the market, let’s take a look at some of them: 

  • Digital art 
  • Games 
  • Collectables  
  • Music 
  • Film 

Now that we have an idea about the types of NFTs and their nature, let’s see how they are taxed for individuals and corporations. We will also shed light on VAT rules regarding NFTs as well! 

NFT Tax Treatment for Individuals 

Although there has been little word on how NFTs ought to be taxed globally, there is a consensus to go the cryptocurrency route and how they are taxed. Now, under that assumption, income tax is subjective to whether the GCC (Gulf Cooperation Council) can classify NFTs as a trading activity. 

For CGT (Capital Gains Tax), cryptocurrencies are classed as an intangible asset therefore it is safe to assume that it will be the same case when it comes to NFTs. If that is the case then, if one purchases an NFT with the intent of investment and then afterwards is sold; any gain on the asset after conversion of the sale price and purchase price into the AED rate will be taxed under Capital Gains Tax. 

In contrast, a loss on sale of an NFT can be balanced out against gains from other sources of capital that will be taxed under Capital Gains Tax. 

NFT Tax Treatment Concerning Companies 

For corporations also, the NFTs will be taxed just like cryptocurrencies. Under that assumption, the profits from trade must be calculated using fair practices. Moreover, if a corporation buys an NFT for investment purposes, the value of that NFT must be presented on the Balance Sheet as an intangible asset. Any proceeds from the sale of the NFT asset will be taxed accordingly. 

NFT Tax Treatment Rules per VAT 

It is expected that VAT is duly paid normally on any services and goods sold in exchange for buying an NFT. When the transaction takes place, the value of the goods and services in question will be the AED price value of the NFTs. 

When an international transaction involving the sale of NFTs takes place, it is crucial to track which sales are subject to VAT and vice versa. 

Conclusively, we would like to state that this is just an overview of the most probable tax treatment for NFTs. We hope the GCC gives us more updates shortly. 

For now, if you or your business own cryptocurrencies and need help with VAT accounting or a tax consultant for crypto, head over to ProfitsPlus for all your accounting and taxation needs! 

Invaluable 5 Pointers when picking an Accounting Software for Your Business in 2022 

Choosing accounting software is no easy task. You have to keep in mind the needs of your business and its user-friendliness. Accounting traditionally is time-consuming and susceptible to errors. Humans can make mistakes, but the software doesn’t! 

Accounting software is designed and programmed to cut down on this human factor to produce a perfect result of number, which can help your business in the short and long term. Not only do they save you precious resources like time and money, but they also minimize the efforts of employees thus increasing their quality of life at work.  

Here are 5 tips on how to choose accounting software that best suits the needs of your business. 

1. What do You Need? 

First, you should list down the features that your business requires. If you do the basic stuff like making income statements or cash flows, then the package you’ll need is a fairly simpler one which you can get cheap.  

Although, if your business needs require you to keep records of costing and expenses of various departments, you’ll need to get a specific package that is used across the industry like construction and real estate. 

In a summary, you should always opt for the software which meets your needs and it is much better than getting an overpriced, overblown software offering a plethora of options. Most of which you’ll probably never end up using. 

2. Which Brand? 

There are numerous accounting software and associated packages available in the market but the big-name brands don’t always provide the best value for money accounting software. Once you have decided upon your choice of software, then what? These are some other factors to consider: 

-The is the support services are worthwhile 

-You can get a free trial before buying/leasing the accounting software from a company that provides accounting services. 

3. Shelf Life and Upgrades 

You must ensure that your software won’t become obsolete in the foreseeable future. Some software cost a lot, even more so than the hardware which they are used on. Therefore, it is important to get updates/upgrades as better hardware starts to launch. 

The software should be upgraded as the business needs change, i.e. your business expands. You should look for software extensions/upgrades for the software you are using at that time, instead of opting for a new package altogether. That should compensate handsomely for the evolving needs of your business. 

4. Should you lease, or buy the software? 

Buying, paying monthly, or leasing, all options are mostly available but they are dependent upon the type of software you select. Some accounting software service providers may have one of the options mentioned or all of them. In any case, you are certainly guaranteed upgrades if and when the technology advances, whether it be software or hardware. 

5. User Reviews and Opinion 

A final pointer is that you should always check out peers/customer reviews and opinions of your choice of accounting software by visiting relevant forums. 

This can be one of the most efficient ways to get useful information on accountancy software available in Dubai. User experience matters a great deal, even more so than some of the tips listed above for choosing accounting software.