17 Oct 2022
Ministry of Economy announces amendments to insurance policies against liabilities from auditing mistakes
H.E. Al Saleh: Amendments will provide the necessary protection to investors and auditors, thus enhancing the quality of financial & auditing services in the country
Subsequent to the Cabinet Resolution No. 48/2022 on the implementing regulation of federal law no. 12/2014 on the regulation of the auditing profession, the Ministry of Economy launched the Cabinet Resolution No. 111/2022 amending insurance regulations against liabilities caused by errors in auditing. These changes fall in line with the UAE’s ambitions to adopt a new economic model based on knowledge and innovation, in light of the Principles of the 50 and the UAE Centennial 2071 goals aimed at building a sustainable and competitive economy.
H.E Abdulla Al Saleh, Undersecretary of the Foreign Trade and Industry at the UAE Ministry of Economy, emphasized the significance of regulating the auditing profession, as it is a key pillar to supporting the UAE’s efforts to provide an attractive environment for investment and the sustainable growth of businesses. This profession further plays a major role in strengthening the supervisory role of relevant governmental entities, in line with the global best practices.
H.E. added: “Through these amendments, we seek to offer the necessary protection for auditors and investors, as well as create a safe and professional environment that ensures a flexible performance of their roles in line with the highest quality standards. These amendments further keep pace with the rules and obligations of insurance against professional errors, in line with the recent global developments in the accounting and auditing professions. This contributes to enhancing the quality of financial and accounting services in the country, protecting investors’ rights from any damages due to unintentional errors in the auditing system within offices and companies responsible for auditing and the issuance of financial reports. Furthermore, it offers protection to the capital of auditing offices and companies from erosion from offering compensation to clients to make up for any unintended professional errors.”
The Ministry of Economy listed the account auditors’ professional liability insurance controls as follows:
- The issuance of an insurance policy in the name of the auditing company, which used to be previously issued in the name of individual auditors (natural persons), this providing insurance coverage to account auditors through the company that employs them. This protects the entire workforce from any professional errors committed by one employee/auditor and holds the company responsible instead.
- The revision of insurance coverage limits, thus making it a percent of the total annual revenue of the auditing company, so that the insurance limit is calculated on a pro-rata basis according to the company’s annual volume of work. The revised limits, which will apply to legal persons during the first and second years, are as follows
- Insurance coverage limits are 100 per cent of the total revenues if such revenues are less than AED 20 million.
- Insurance coverage limits are 120 per cent of the total revenues if such revenues exceed AED 20 million
- Account auditing professionals registered with the Ministry of Economy are required to submit annual statement determining the value of their annual revenues, according to their financial statements issued by the end of each year, to specify the insurance coverage limits.
- New activities are exempted from the insurance coverage percentage requirement in the first two years, provided that an insurance policy amounting to at least AED 500,000 for bureaus, and AED 1 million for local companies and foreign company branches, is submitted.
Issued last June by virtue of the Cabinet Resolution No. 48 of 2022, the Executive Regulations of the Federal Law No. 12 of 2014 regulating the Account Auditing Profession in UAE include several amendments, aimed at promoting the role of financial control and accounting in enhancing the balance and stability of the business environment and the national economy and attract highly qualified and experienced account auditors.