Dubai, UAE, 28 March 2021: Standards and controls for auditing annual budgets for service charges and financial reports for jointly owned properties (JOPs) in Dubai have become more established and tightened after the Real Estate Regulatory Agency (RERA) at Dubai Land Department (DLD) signed agreements with 27 audit offices. This came within the framework of RERA’s constant keenness to enhance the principle of governance and control on JOPs through auditing firms and strengthening the strategic relationship and work with DLD’s partners by establishing an audit process for the audit firms to enhance and complete the audit process and related transactions.
According to the signed agreements, the auditing firms are required to audit the financial statements of JOPs to affirm whether their respective financial statements are free from material misstatement. Auditors can comment on whether the data was prepared in accordance with the International Financial Reporting Standards (IFRS) as well as provide a report on the financial statements and the necessary communication under international auditing standards (ISAs). The firms will also evaluate the control standards and the risk management process for JOPs as well as assess the efficiency and effectiveness of operations, and the adequacy and reliability of the financial information for properties. The firms can ensure that a management company complies with the applicable laws and regulations regarding JOPs as well as ensure the extent of their commitment to managing the common parts of JOPs in accordance with the scope of the audit prepared by RERA.
Under the provision of reviewing the budget for service charges for JOPs, the agreement also stipulates that the auditing firm shall issue a detailed report on a property’s budgets, including a statement of the extent of compliance with all the conditions, controls and regulatory requirements specified in Law No. 6 of 2019 and the regulations and directives issued by RERA in this regard, including auditor notes and non-compliance issues. The report would also include the results of the assessment of the control environment, in addition to the risk management process for real estate projects, the assessment of the efficiency and effectiveness of operation, and the assessment of the adequacy and reliability of the financial information of JOPs. It also includes the results on the assessment of compliance with the laws and regulations enforced regarding JOPs.
The agreement emphasises transparency and independence as the auditing firm must be independent in form and substance by being prohibited from having any financial interests in the audited entity or the management company of the responsible partner. Additionally, all members of the audit team and their relatives must comply with the rules of professional conduct issued by the International Federation of Accountants and the local standards issued. A firm’s duties must also be restricted to auditing services, such as preparing accounting records, designing financial information systems, or presenting implementation, evaluation, insurance, internal auditing, investment advisory, investment banking services or any relevant auditing service. They are also prohibited from investing in their real estate projects or those of their family members, or from assigning family members to administrative positions in real estate projects. They are also prohibited from practising legal and expert services that are not related to auditing or any other service specified by RERA.
HE Eng Marwan bin Ghalita, CEO of RERA, commented: “We are continuously seeking t partnerships with the most prominent and specialised institutions from the private sector that would help us optimally implement our strategies. This reflects our keenness to strengthen the principle of governance and control by using audit firms to audit JOPs. Moreover, we are working with our various partners to develop standards and controls that govern audit mechanisms, reach annual budgets with the highest levels of integrity and credibility — especially when it comes to service allowances — and develop financial reports related to the management of a property. We fully believe that such relationships and their objectives would help maintain Dubai’s position as a leading real estate destination that guarantees all parties’ rights.”
These agreements are in line with the provisions of Law No. (6) of 2019 regarding the ownership of JOPs in Dubai, especially the four articles related to the disposal of common parts and facilities, the management of shared parts and facilities, and the building management system. Moreover, it embodies RERA’s efforts to appoint auditing firms to provide auditing services and various other advisory services for JOPs and major complexes in real estate projects that are subject to the provisions of Law No. 6 of 2019 and other laws and regulations enforced in Dubai.
Mohammed Khalifa bin Hammad, Senior Director of the Real Estate Relations Regulatory Department at RERA, said: “The signing of such agreements with prominent companies across various specialties in the private sector comes within the framework of RERA’s keenness to provide the best auditing services to our customers and raise the efficiency and completion of the auditing process and related transactions. We will continue to seek the best partners to help us achieve our goals and the best financial solutions for JOPs, ultimately providing more options for owners.”
Under the agreements, these firms will audit the financial statements of JOPs, evaluate the control standards and risk management process, and verify the compliance of the management company with the relevant laws and regulations as well as its commitment to managing the common parts. In addition, the company will review the service charges for JOPs and show the extent of management companies’ compliance with all conditions, controls, regulatory requirements, regulations and directives issued by RERA. It will also assess the control environment, in addition to the risk management process for real estate projects; the efficiency and effectiveness of operation; and the efficiency and reliability of the financial information of a JOP. The review will include the results of assessing compliance with applicable laws and regulations regarding condominiums.
To view the list of auditing offices accredited by DLD, you can download the Dubai REST application or visit the following link https://dubailand.gov.ae/en/eservices/search-for-certified-auditors/approved-auditors-list/#/.