The global economic crisis has placed a greater importance on the need for strong corporate governance, internal auditing and risk management procedures. Sound corporate governance is a crucial factor in sustaining economic growth, and as conditions change, so too must risk management priorities.

Thus, internal auditors should first consider whether they are aligned with the strategy and direction of the company. By focusing on the company’s long-term strategy, understanding the impact of short-term initiatives on this strategy and aligning themselves accordingly, internal auditors will be in a better position to address risk management activities throughout the organisation. Risk may drive strategic decisions, be a cause of uncertainty or simply be embedded within an organisation. An enterprise-wide approach to risk management allows for the consideration of the potential impact of all types of risk on processes and services. All organisations must understand the risks they are exposed to in the pursuit of a desired level of reward. They also need to also understand the overall level of risk associated with their activities.

The reform of insolvency and creditor-debtor regimes could help to improve economic efficiency and strengthen market resilience in times of crisis. Reforming insolvency laws in order to provide clearer and more transparent means for company reorganisation would benefit the national economy by reducing the cost of capital for UAE companies over the medium to long term. While a bankruptcy law is already in place, it has yet to be tested, leading to legal uncertainty about how it will be applied in practice. Provisions for corporate governance best practices could also play an important role in enhancing investor confidence.

While the Commercial Companies Laws do not currently specify any accounting standards framework for the preparation of financial statements, the Central Bank of the UAE has made it mandatory for banks to prepare their accounts according to International Financial Reporting Standards (IFRS). Listed firms also prepare their accounts as per IFRS. In the absence of a specific standards framework in the UAE, practicing firms typically apply IFRS in the preparation of financial statements and use International Standards of Auditing when auditing financial statements.

The Real Estate Regulatory Agency (RERA) of the Dubai Land Department (DLD) also recommends that the financial statements of building owners’ associations (OAs) be prepared using IFRS. Dubai’s Jointly Owned Property Law (Law No. 27 of 2007) establishes a framework for the subdivision of developments into such units and common parts, with the subdivision known as “jointly owned property”.

Each development in Dubai comprises not only a number of units, but also common-use areas designed for use by the unit owners. The law states that an OA, being made up of all the unit owners, is responsible for the management, as well as the operation and maintenance, of these common areas. The developer must file a “jointly-owned property declaration” with the DLD for each development. The RERA has also made it mandatory for OAs to submit their annual audited financial statements.

Under the Strata Law (DIFC Law No. 5 of 2007), OAs must appoint an auditor at the first annual general meeting. At the end of the financial year, they will evaluate the annual financial statements and can give the board guidance during the initial transition phase.

The OA management is also responsible for the collection of service charges from owners. The Strata Law does not allow for non-payment of service charges to be written off. An issue could therefore arise if it is difficult to chase down the owner for non-payment. The Strata Law accounts for this and provides OAs with the power to put a lien on the property of those who have not paid their respective charges.

If homeowners are able to successfully navigate the numerous financial and legal implications resulting from the Strata Law, they will be able to take greater control over the management of their properties.