Updated November 2026 · 6 min read
Most founders in the UAE first hear the words audit committee when a bank, an investor or a new board member asks whether they have one. If your company has moved past the start-up stage, it is a fair question. A small, well-run committee gives owners a clearer view of the numbers and a firmer grip on risk, and it makes your work with internal and external audit services in UAE far more productive.
What an Audit Committee Actually Does
An audit committee is a small group, usually drawn from the board or the owners, that oversees financial reporting, internal controls and the relationship with the auditors. It does not prepare the accounts. That remains management’s job.
In short, its role is to ask the questions management is too busy, or too close, to ask. Are the numbers reliable? Are the controls working? Is the auditor independent and properly briefed? Are the risks that keep the CFO awake at night being dealt with?
In practice the committee reviews draft financial statements before the board approves them, meets the external auditor at the planning and completion stages, and follows up on issues raised in the management letter.
Is an Audit Committee Required in the UAE
For listed public joint stock companies, yes. Governance rules issued by the Securities and Commodities Authority require them to have an audit committee with a defined make-up and mandate. Likewise, banks, insurers and other regulated entities face comparable expectations from their own regulators.
For a private LLC or a free zone company, there is generally no legal requirement. In contrast, the UAE Commercial Companies Law leaves governance structures largely to the shareholders and the articles of association.
However, that does not mean the idea is irrelevant. Lenders, private equity investors and large customers increasingly look for some form of independent financial oversight, and a committee is the simplest way to show it.
Signs Your Company Is Ready for One
There is no magic revenue figure. The trigger is usually complexity rather than size. Watch for these signals:
- You now have more than one entity, perhaps a mainland company and a free zone company, or a branch in Saudi Arabia.
- Outside shareholders or a family office have invested and want regular reporting.
- Bank facilities come with financial covenants that someone must monitor.
- Your annual audit has started producing repeated findings that never seem to get closed.
- In addition, the owner can no longer personally review every significant transaction.
For example, a trading group in Dubai with three entities and a growing credit line fits this pattern. The managing partner may still sign every cheque, but nobody is checking intercompany balances or covenant ratios until the auditors arrive. A committee fixes that gap.
Who Should Sit on the Committee
In general, three members is a sensible starting point for a private company. At least one should have real financial expertise, such as a qualified accountant or a former finance director. Ideally at least one should be independent of day-to-day management.
The CEO and CFO should attend meetings by invitation, but they should not be members. After all, the whole point is to have people who can challenge management without a conflict of interest.
If you cannot find an independent member yet, start with a non-executive shareholder and an external adviser who attends as an observer. Then build up from there as the business grows.
What the Committee Should Review Each Year
Above all, a written terms of reference, approved by the board, keeps the committee focused. Most growing companies cover the same core areas.
Financial reporting
The committee reviews the annual financial statements, key judgements such as provisions and revenue recognition, and any change in accounting policy. It should understand how the figures were built, not just read the totals.
Internal controls and internal audit
It agrees an internal audit plan, even a modest one, and reviews the results. If you have no internal audit function, it can commission targeted reviews of high-risk areas like procurement, payroll or cash handling. The Institute of Internal Auditors publishes useful guidance on how audit committees and internal audit should work together.
The external auditor
The committee recommends the appointment of the auditor, agrees the scope and fee, and meets the audit partner privately at least once a year. Using internal and external audit services in UAE works best when the committee owns this relationship rather than leaving it entirely to the finance team.
Tax and compliance risk
With corporate tax now part of the UAE system and VAT well established, tax risk belongs on the agenda. The committee should see a summary of filings, open queries from the Federal Tax Authority and any significant positions taken. Many companies ask specialist VAT consultants in Dubai to present an annual review of VAT compliance directly to the committee.
Running Meetings That Add Value
Four meetings a year works well for most private companies. Tie them to the reporting calendar, with one at audit planning, one before the accounts are signed, and two in between for controls and risk.
Keep the papers short. A two-page finance pack, the auditor’s findings tracker and a risk summary are often enough. Long board packs tend to go unread.
Minute every decision and every action, with an owner and a deadline. At the next meeting, start with the action log. This simple habit is what separates a working committee from a quarterly coffee meeting.
Finally, give the committee a private session with the auditor without management in the room. Most issues are minor, but this is where concerns about pressure, staffing or access to information come out.
Common Mistakes to Avoid
The first mistake is making the committee a rubber stamp. If the members never question a number, the board gets false comfort and nothing more.
The second is overloading it. An audit committee is not an operations committee. It should not be approving purchase orders or debating marketing budgets.
The third is ignoring follow-up. Management letter points that reappear year after year are a clear sign that nobody owns the fixes. The committee should track each point until management closes it.
Getting Started the Right Way
You do not need a large board or a listed share to benefit from an audit committee. Start small, write down its purpose, pick members who will ask hard questions, and link its calendar to your audit cycle. Our team can help you draft terms of reference, design a reporting pack and coordinate the committee’s work with internal and external audit services in UAE so that oversight improves year after year.
Contact us on +971 56 227 3735 or email info@liveauditing.com to discuss setting up or strengthening an audit committee for your business.
Frequently Asked Questions
1. Is an audit committee mandatory for private companies in the UAE?
No, private LLCs and most free zone companies are not legally required to have an audit committee. Listed public joint stock companies and many regulated financial institutions must have one. Private companies often set one up voluntarily because banks, investors and large customers value independent oversight of financial reporting and controls.
2. How many members should an audit committee have?
Three members is a practical number for most private companies. At least one member should have recognised accounting or finance expertise, and ideally one should be independent of management. Larger or listed companies may need more members and must follow the composition rules set by their regulator and articles of association.
3. Can the CFO be a member of the audit committee?
The CFO should not be a voting member because the committee oversees the work that the CFO leads. Instead, the CFO attends meetings by invitation to present results and answer questions. Keeping management outside the membership protects the independence that gives the committee its value to owners and investors.
4. How often should an audit committee meet?
Most private companies hold four meetings a year, linked to the reporting and audit calendar. Typical timing is one meeting at audit planning, one before the financial statements are signed, and two during the year to review controls, risks and outstanding auditor findings. The committee can hold extra meetings when urgent issues arise.
5. What is the difference between an audit committee and internal audit?
An audit committee is a governance body that oversees financial reporting, controls and auditors. Internal audit is a function, in-house or outsourced, that actually tests controls and processes. The committee approves the internal audit plan, receives its reports and makes sure management acts on the findings within agreed deadlines.
