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The Registration Authority (RA) has a statutory responsibility to oversee the regulated area of audit within the jurisdiction of ADGM. The RA is responsible for:
- Registration, incorporation and licensing of audit firms in ADGM
- Granting authorisation to registered audit firms and principals to conduct audit work
- Authorising and maintaining changes with ADGM registered firms and principals
- Maintaining the register of Recognised Auditors
The current legal framework gives the RA its powers. The framework, in place since ADGM’s inception, was based on English common law. The framework’s company regulations and rules provide the approach to the RA’s oversight of audit.
However, international developments including EU audit directive changes and high-profile corporate failures coupled with ADGM’s significant growth over the last five years meant that it was time to enhance the audit legal framework.
The new Auditors’ Framework
In late 2020, the RA conducted a public consultation to enhance and strengthen the legal framework governing the regulated area of audit. The RA proposed enhancements to the framework with the following objectives in mind:
- International equivalence to Competent Authorities in the developed world,
- Placing investor protection and public interest at the forefront of any new regime,
- Protecting and improving audit and financial reporting quality,
- Audit firms upholding the highest professional standards,
- Increasing and safeguarding business confidence, and
- Strengthening the integrity of markets and financial systems.
Following the consultation phase and constructive dialogue with stakeholders, the proposed changes to the framework made their way for enactment. On 25 August 2021, through a written resolution the ADGM Board approved the new auditors’ framework for commencement on 1 December 2021. The new legal framework enhances powers of the RA in several areas to help ensure effective audit oversight.
The importance of audit quality
The role audit firms and professionals perform is more important than ever. Stakeholders, from registered entities to investors, all rely on the soundness of financial markets and systems to make decisions. For the Abu Dhabi Global Market (ADGM) to continue as a world leading financial centre that attracts talent, investment and business activity from all over the world, we must recognise the crucial role of high-quality audits.
High-quality audits matter because they reinforce trust in financial reporting by companies. The financial statements and reporting by ADGM entities allows shareholders, investors, and other stakeholders to form a view of the audited entity. This in turn then allows informed decision making.
Audit quality suffers when auditors fall short of the standards expected from them. The consequences of which can be severe not only for investors but also for other stakeholders, the profession and importantly to the reputation of ADGM’s status as a leading international financial centre.
Role of the RA
As ADGM’s audit regulator, the Registration Authority (RA) plays a key role in monitoring and supervising the regulated area of Audit with the primary focus of ensuring stakeholders, particularly investors, have access to reliable, transparent and timely financial information.