The Federal Tax Authority (FTA) has announced that businesses must complete Corporate Tax registration within 90 days from the Date of Incorporation / MOA.
Internal audit in the UAE has evolved rapidly due to the introduction of UAE Corporate Tax, stricter AML/CFT regulations, and enhanced data protection requirements under the PDPL. As regulatory expectations and governance standards increase, many organisations in Dubai and across the UAE are finding that a purely in-house audit team may not be sufficient, particularly for specialised areas such as IT audits, corporate tax risk, and AML compliance. As a result, internal audit co-sourcing and internal audit outsourcing in Dubai have become practical solutions for accessing expertise, improving flexibility, and strengthening independence. This blog outlines the importance of internal audit services in the UAE and explains how businesses can choose the right audit model to enhance governance, risk management, and compliance.
What is Internal Audit and Why It Matters in the UAE?
Internal audit is defined by the Institute of Internal Auditors (IIA) as an independent and objective assurance and consulting activity designed to improve an organisation’s risk management, governance, and internal control processes. In the UAE, internal audit has become a business necessity rather than just a compliance function, as companies face increasing regulatory scrutiny and governance expectations. A strong internal audit function helps organisations enhance corporate governance, strengthen enterprise risk management (ERM), conduct effective compliance and risk assessments across corporate tax, AML/CFT, procurement, contracts, and operations, and evaluate the effectiveness of internal controls including financial, operational, IT, and compliance controls. With the introduction of UAE Corporate Tax under Federal Decree-Law No. 47 of 2022, stricter AML/CFT requirements under Federal Decree-Law No. 20 of 2018, and the UAE Personal Data Protection Law (Federal Decree-Law No. 45 of 2021), businesses in Dubai and across the UAE must ensure accurate record-keeping, transparent reporting, proper risk assessments, and strong data protection practices making internal audit services in the UAE essential for maintaining regulatory compliance, audit readiness, and long-term business stability.
Overview of Internal Audit Service Models in UAE
Most organisations in the UAE adopt one of three internal audit models based on their size, regulatory requirements, and available expertise.
A) Traditional In-House Internal Audit
In this model, the company builds and manages its own internal audit department. Internal auditors are full-time employees who report to senior management and the Audit Committee. This approach is common in large or regulated organisations with ongoing audit needs. While it provides strong business understanding and direct oversight, it requires higher fixed costs and continuous investment in specialised skills.
B) Internal Audit Co-Sourcing
Co-sourcing is a hybrid approach where the company retains an internal audit team but partners with an external firm to provide additional expertise or support. External specialists assist with areas such as IT audits, AML compliance, corporate tax, or peak workloads. This model offers flexibility, access to specialist knowledge, and capability building while maintaining internal control and oversight.
C) Internal Audit Outsourcing (Dubai & UAE)
In outsourcing, a professional firm manages the internal audit function on behalf of the organisation. The external provider handles planning, execution, reporting, and follow-up, while the Audit Committee maintains governance oversight. This model is often preferred by SMEs and growing businesses seeking cost efficiency, independence, and access to experienced audit professionals without maintaining an in-house team.
Internal Audit Co-Sourcing in the UAE: an integrated approach
Internal Audit Co-Sourcing is often the “best of both worlds” model: you maintain internal ownership while plugging skills and capacity gaps with external specialists. Grant Thornton describes co-sourcing as bringing staff/resources within the client structure rather than fully handing off the function.
How co-sourcing works in the UAE:
- The Audit Committee and senior management approve the audit plan and retain governance oversight.
- The internal audit team remains in place.
- External professionals support specific audit areas such as ITGCs, cybersecurity, AML/CFT compliance, corporate tax governance, data analytics, and specialised operational audits.
- Responsibilities are clearly defined between internal and external teams.
Key advantages for UAE businesses:
- Access to specialised expertise without hiring full-time specialists.
- Scalability during peak periods such as year-end, regulatory changes, business expansion, or multi-location audits.
- Knowledge transfer through improved methodologies, tools, and practical coaching.
- Strong governance while maintaining internal ownership and strategic control.
Typical UAE use cases:
- SMEs are building an internal audit capability without establishing a full department.
- Real estate and construction companies require project and third-party risk audits.
- Financial services and regulated entities need enhanced compliance coverage.
- Organisations implementing ERP systems, e-invoicing workflows, or new IT controls require assurance support.
Co-Sourcing vs Outsourcing: key differences for UAE businesses
Co-sourcing is usually best when you want:
- to keep a visible in-house audit presence
- to build internal capability over time
- flexible specialist support (AML, tax, IT, ESG, analytics)
Outsourcing is usually best when you want:
- Full delivery handled externally due to limited internal resources
- a predictable service model and coverage
- strong independence while management retains oversight
Factors to consider when choosing an internal audit model in UAE
When selecting between internal audit co-sourcing and outsourcing in UAE, businesses should consider the following:
1. Size, Complexity, and Industry
Larger or highly regulated organisations usually need broader and more specialised audit coverage. Smaller businesses may benefit from more flexible models.
2. Regulatory Exposure
Companies subject to UAE Corporate Tax, AML/CFT laws, or cross-border operations often require specialist audits and stronger compliance oversight.
3. In-House Expertise
If experienced internal auditors are not available or difficult to retain, co-sourcing or outsourcing can fill the skills gap.
4. Budget and Long-Term Strategy
Co-sourcing helps build internal capability over time, while outsourcing offers predictable costs and full audit coverage without maintaining a large internal team.
Benefits of Co-Sourcing and Outsourcing for UAE Businesses
Both co-sourcing and outsourcing internal audit can deliver significant advantages for organisations in the UAE, including:
- Stronger Audit Governance Framework: These models help establish clear reporting lines, improve transparency with the board or audit committee, and embed a consistent and robust audit methodology across the organisation.
- Enhanced Enterprise Risk Management (ERM): By supporting risk-based audit planning and execution, co-sourced and outsourced arrangements enable more effective identification, assessment, and prioritisation of key business risks.
- Improved Compliance and Risk Assessment: External expertise brings up-to-date knowledge of evolving regulations (such as AML/CFT requirements, corporate tax compliance, and sector-specific laws), helping businesses assess compliance risks more thoroughly and reduce regulatory gaps.
- Stronger Internal Control Evaluation: These models facilitate systematic testing of both the design and operational effectiveness of internal controls from financial processes to IT and operational controls, providing better assurance that controls are working as intended.
- Greater Independence and Objectivity: I n outsourcing, and to a large extent in co-sourcing, external audit professionals offer unbiased perspectives and challenge management assumptions, reducing potential internal bias and strengthening overall audit credibility.
Common Challenges in Internal Audit (UAE) – and How to Handle Them
When using internal audit co-sourcing or outsourcing in t UAE, businesses may face some practical challenges. These can be managed easily with proper planning and clear governance.
- Coordination between internal teams and external auditors can sometimes be unclear. If roles are not defined properly, work may be duplicated or delayed. To avoid this, companies should clearly decide who is responsible for audit planning, fieldwork, reporting, and follow-up actions. Setting clear timelines, holding regular meetings, and tracking audit findings in a shared system helps ensure smooth coordination.
- Maintaining independence and objectivity is essential for internal audit to remain credible. The audit function should report to the Audit Committee or Board rather than operational management. Any conflicts of interest should be checked and documented before starting the engagement. This ensures the audit remains unbiased and aligned with IIA principles.
- Data security and confidentiality are especially important when external auditors are involved. Since audits require access to sensitive financial and operational data, companies should use confidentiality agreements (NDAs), restrict system access, and share documents through secure platforms. Compliance with the UAE Personal Data Protection Law (PDPL) should also be ensured.
Conclusion
At Reyson Badger, we deliver internal audit services that go beyond compliance to create measurable value for your business. With strong expertise in the regulatory and business environment of United Arab Emirates, we support organisations with risk-focused, independent, and practical audit solutions.
Our internal audit approach is designed to strengthen governance, enhance internal controls, and improve operational efficiency. Whether through internal audit co-sourcing or full internal audit outsourcing in Dubai, we tailor our services to your organisation’s size, industry, and risk profile. We ensure full alignment with UAE Corporate Tax requirements, AML/CFT regulations, and the Personal Data Protection Law, while maintaining independence, objectivity, and professional integrity.
By combining local regulatory knowledge with international best practices, Reyson Badger acts as a trusted partner in protecting your organisation, managing risk effectively, and supporting long-term business resilience.
