ADGM audit requirements: who must audit and who is exempt

Companies in Abu Dhabi Global Market must have their annual accounts audited unless an exemption applies. The rules sit in Part 15 of the ADGM Companies Regulations 2020, and the audit must be carried out by an auditor registered with ADGM. The exemptions for small, subsidiary and dormant companies are real, but they come with conditions, and several categories of company cannot use them.

The general rule

Under the Companies Regulations 2020, a company's annual accounts for a financial year must be audited unless it is exempt under one of three provisions. The audit must be carried out by an ADGM-registered auditor. The auditor's report is filed with the accounts at the ADGM Registration Authority.

The three exemptions

To rely on any exemption, the balance sheet must carry a directors' statement saying so. A company that does not include the statement is not entitled to the exemption. The size limits for small companies are set in the regulations and can be amended, so confirm the current figures with the Registration Authority rather than relying on an older summary.

Who cannot use the exemptions

• A company licensed to provide company services.
• Public interest entities and financial services firms, which cannot use the simplified small company route.
• A company in an ineligible group, where another group entity, anywhere in the world, is a financial institution or public interest entity.

Group membership catches more companies than they expect. A small trading company owned by a regulated financial group may have to audit even though its own numbers are tiny.

Members can require an audit

Members holding at least 10% of the shares can require an exempt company to obtain an audit for a financial year. The notice must be given after the year begins and at least a month before it ends. A shareholder dispute can therefore end an exemption.

Audit and corporate tax

The ADGM requirement is separate from the federal tax audit rules. For corporate tax, taxable persons with revenue above AED 50 million, and qualifying free zone persons, must prepare audited financial statements. ADGM has published guidance on accounts and audit for QFZPs. A company can therefore be exempt under ADGM rules and still need an audit for tax. See audited accounts and corporate tax and QFZP explained.

Choosing the auditor

An auditor who is not registered with ADGM cannot sign the audit of an ADGM company. Before engaging anyone, including us, check the ADGM register. AONE supports ADGM entities with accounting and tax, and with coordination on the audit file; the signing auditor must be ADGM-registered. For the audit side in other zones, see audit services in Dubai and free zone audit requirements.

Filing

Accounts are filed with the Registration Authority after the year end. Summaries commonly cite nine months for most private companies, but confirm the date applicable to your company type. Late filing carries penalties set by ADGM.

What to do now

1. Check whether any of the three exemptions applies and whether your group disqualifies you.
2. Check whether corporate tax requires an audit anyway.
3. Appoint an ADGM-registered auditor early if an audit is needed.
4. Diarise the filing date and the members' notice window.

See also the DIFC and ADGM compliance guide and is audit mandatory in the UAE.

Sources

The statutory references are to the ADGM Companies Regulations 2020 as amended and the ADGM guidance on accounts and audit. This is a summary, not legal advice.

A checklist for an ADGM company

1. Confirm your company type and whether it provides company services, which excludes the exemptions.
2. List your group entities and check for any financial institution or public interest entity.
3. Test the size conditions in the current regulations using your latest accounts.
4. Decide whether the directors will make the exemption statement in the balance sheet.
5. Check whether corporate tax requires audited statements anyway.
6. If an audit is needed, engage an ADGM-registered auditor before year end.

Common mistakes

• Claiming small company status without the directors' statement.
• Missing a regulated entity elsewhere in the group.
• Engaging an auditor registered elsewhere in the UAE but not with ADGM.
• Treating the ADGM exemption as a corporate tax exemption.

ADGM and the rest of Abu Dhabi

ADGM is a financial free zone with its own legal system. Companies licensed elsewhere in Abu Dhabi, on the mainland or in other zones, follow different rules. For the emirate overview, see Abu Dhabi company registration and audit firms in Abu Dhabi.

Qualifying free zone persons in ADGM

An ADGM company that wants the 0% corporate tax rate on qualifying income must meet the conditions for a qualifying free zone person, including audited statements. ADGM has published guidance on how its accounts and audit rules interact with the tax requirements. The ADGM audit exemption does not remove the tax requirement. See QFZP explained.

Working with the auditor

Give the auditor a clear timetable. Agree the year-end date, the date draft accounts will be ready and the filing date. Provide the trial balance, bank confirmations, contracts, board minutes and the register of members early. An auditor who receives complete information in week one will usually finish before the deadline. One who receives it in week eight often cannot.

Consequences of getting it wrong

Late or non-compliant filings carry penalties, and an unaudited set of accounts filed by a company that was not entitled to the exemption can be treated as non-compliant. If you have claimed the exemption in the past, review that the conditions were met each year, particularly after any group change.

Frequently asked questions