The Licensed Person must maintain appropriate books of accounts that reflect the true and fair view of its financial position at any point in time. This chapter provides standards to be maintained on Accounting and Auditing functions of the Licensed Person.

1. 7.1.1Appointment of an Accountant
   1. a)The Licensed Person must appoint an Accountant who is primarily responsible to maintain appropriate books of accounts and prepare periodical financial reports for submission to the Central Bank;
   2. b)The job title of the Accountant may vary at the discretion of the Licensed Person, for example Accounts Manager, Chief Accountant, etc.; and
   3. c)The Accountant must possess sufficient knowledge and appropriate experience to deal with all issues related to the bookkeeping, financial accounting, reporting to the Central Bank and to manage the annual audit of the books of accounts by External Auditors.
2. 7.1.2Accountant’s Responsibilities (the list is not exhaustive)
   1. a)Ensure accuracy and completeness in the bookkeeping and financial accounting;
   2. b)Arrange to submit accurate regulatory reports, such as monthly returns, quarterly returns, monthly remittance reports, audited financial statements, etc. within the submission deadlines to the Central Bank;
   3. c)Obtain statements related to remittances, foreign currency export/import, hedge accounts or special products/services from banks, remittance partners or other relevant institutions/partners to perform reconciliation of balances on a regular basis, preferably daily;
   4. d)Investigate differences identified during the reconciliation process and report all unreconciled items to the Manager in Charge immediately;
   5. e)Assess the amount of unclaimed funds as on the last day of every month; and
   6. f)Assess the liquidity position and capital adequacy on a regular basis to inform the Manager in Charge.
3. 7.1.3Books of Accounts
   1. a)The Licensed Person must maintain comprehensive and accurate books of accounts and supporting records that reflect its correct liquidity/financial positions at all times;
   2. b)The books of accounts and other records must be available within the UAE at all times and for the examination by the Central Bank;
   3. c)The Licensed Person must introduce automated books of accounts in order to generate periodical Central Bank returns with the aid of suitable accounting software; and
   4. d)The systems of the Licensed Person must be capable of generating appropriate reports related to the foreign currency exchange and remittance transactions at any point in time and for any period. Such reports must provide the below information at a minimum:
      • •Number, total value and average value of transactions for each product;
      • •Number, total value and average value of foreign currency exchange transactions for each currency;
      • •Number, total value and average value of outward/inward money transfers to/from each correspondent, country and for each currency; and
      • •Number, total value and average value of outward/inward money transfers via instant money transfer service providers to/from each service provider, country and for each currency.

1. 7.2.1Appointment of Internal Auditor
   1. a)The Licensed Person must appoint an Internal Auditor who is responsible to carry out regular audits across all aspects of its business; and
   2. b)The Internal Auditor must possess sufficient knowledge and appropriate experience to deal with all issues related to internal audit.
2. 7.2.2Scope of the Internal Audit
   1. a)The Licensed Person must have an Internal Audit Charter, that clearly states the purpose, scope and reporting lines of the Internal Auditor;
   2. b)The Internal Audit Charter must be reviewed by the Audit Committee and then approved by the Board of Directors (or by the Owner/Partners where there is no Board of Directors);
   3. c)The Internal Auditor must adhere to relevant auditing standards and code of ethics that are applicable to the internal audit profession;
   4. d)All business activities of the Licensed Person, core functions, non-core functions, branches, Head Office, Management Office (if any), reconciliation process, unreconciled items, unclaimed funds, liquidity, capital adequacy, etc. must be covered under the scope of internal audit in addition to the AML and regulatory compliance;
   5. e)The Internal Auditor must be given access to employees, data and records which may reasonably be required to fulfil all responsibilities;
   6. f)The Internal Auditor must be informed, on a timely basis, of any changes in the applicable Regulations, the Standards and the Licensed Person’s policies or procedures;
   7. g)The Internal Auditor must prepare the Annual Internal Audit Plan after discussing with the Audit Committee and obtain the approval of the Board of Directors (or of the Owner/Partners where there is no Board of Directors) at the beginning of each financial year;
   8. h)The Annual Internal Audit Plan must contain timelines for each internal audit, internal audit reporting deadlines, allocation of resources, areas to be audited, follow up audit plans etc.;
   9. i)Internal audits must be performed in accordance with the Annual Internal Audit Plan and the Board of Directors (or the Owner/Partners where there is no Board of Directors) must ensure that internal audit findings are addressed in a timely manner; and
   10. j)The Internal Audit Charter and Plan must be reviewed by the Audit Committee at the end of each year to assess the effectiveness of the internal audit function and a summary of such reviews must be presented to the Board of Directors (or to the Owner/Partners where there is no Board of Directors).
3. 7.2.3Internal Audit Reporting Lines
   1. a)The Internal Auditor must report directly to the Board of Directors (or to the Owner/Partners where there is no Board of Directors); and
   2. b)Copies of all internal audit reports and corrective actions taken by the Manager in Charge must be available for verification by the Central Bank Examiners.
4. 7.2.4Independence and Conflict of Interest
   1. a)The Internal Auditor’s role must be handled by a dedicated resource and must not be combined with any other function of the Licensed Person; and
   2. b)The Internal Auditor must bring any matter affecting their independence such as creating any conflict of interest or limiting the scope of internal audit, restricting access to any information, etc. to the attention of the Board of Directors (or of the Owner/Partners where there is no Board of Directors).

1. 7.3.1Appointment of External Auditor
   1. a)The Licensed Person must appoint an External Auditor after obtaining a Letter of No Objection from the Banking Supervision Department for each financial year to audit its books of accounts and the financial statements;
   2. b)The Central Bank reserves the right to appoint an External Auditor at its sole discretion to audit the books of accounts of the Licensed Person for any financial year in the following cases:
      • •The Licensed Person had failed to obtain the Letter of No Objection from the Banking Supervision Department to appoint an External Auditor; and
      • •The Licensed Person had appointed an External Auditor contrary to instructions from the Banking Supervision Department.
   3. c)The Central Bank reserves the right to appoint additional External Auditors where it deems it appropriate, reasonable and necessary;
   4. d)In all cases of appointments as per Paragraphs 7.3.1 (a) to (c) of this Chapter, the audit fee payable to External Auditors must be paid by the Licensed Person; and
   5. e)The Central Bank reserves the right to instruct External Auditors to submit the audit report, financial statements and any other relevant information directly to the Central Bank if it deems it necessary.
2. 7.3.2Approval Process to Appoint the External Auditor
   1. a)The Licensed Person must submit the request for the Letter of No Objection to the Banking Supervision Department on or before 31^st May of each financial year; and
   2. b)The request letter must be signed by the authorised signatory of the Licensed Person and accompanied by the following documents:
      • •duly completed Form BSD IIIA & IIIB which must be signed by the proposed External Auditor; and
      • •a copy of the professional license of the proposed External Auditor.
3. 7.3.3Rotation of External Auditors
   1. a)The Licensed Person is permitted to appoint the same External Auditor to audit its books of accounts and financial statements for a maximum period of six (6) consecutive financial years provided that the following conditions are fulfilled:
      • •A Letter of No Objection from the Banking Supervision Department is obtained to appoint the same External Auditor for each financial year; and
      • •The audit partner is changed after a maximum period of three (3) consecutive financial years.
   2. b)After six (6) consecutive financial years, the Licensed Person must appoint a different External Auditor for a minimum period of one (1) financial year after obtaining a Letter of No Objection from the Banking Supervision Department in accordance with Paragraph 7.3.2 of this Chapter;
   3. c)In case the External Auditor is unable to change the audit partner after a period of three (3) consecutive financial years as required under Paragraph 7.3.3 (a) of this Chapter, the Licensed Person must appoint a different External Auditor for a minimum period of one (1) financial year after obtaining a Letter of No Objection from the Banking Supervision Department in accordance with Paragraph 7.3.2 of this Chapter;
   4. d)An External Auditor appointed for a period of less than one (1) year, usually for a start-up business, will be considered as one (1) full financial year for the purpose of calculating the limit of six (6) consecutive financial years under Paragraph 7.3.3 (a) of this Chapter; and
   5. e)The limit of six (6) consecutive financial years shall be applied retrospectively, starting from the financial year 2012.
4. 7.3.4Auditors’ Report and Financial Statements
   1. a)Audited Financial Statements and the Auditors’ Report for any financial year must be submitted to the Banking Supervision Department on or before 31^st March of the following year;
   2. b)External Auditors must expressly state their views on the following matters in the Auditors’ Report in addition to their audit opinion:
      • •Whether the Licensed Person has kept regular books of accounts and it was available in the UAE during the audit;
      • •Whether suitable accounting software has been implemented in accordance with Paragraphs 7.1.3 (c) and (d) of this Chapter; and
      • •Whether there is any major breach of the Regulations or the Standards applicable to Exchange Business.
   3. c)Where the Licensed Person has Subsidiaries, whether inside or outside the UAE, the Consolidated Financial Statements and Auditors’ Report must be submitted to the Central Bank within six (6) months from the end of each financial year;
   4. d)External Auditors must directly report to the Banking Supervision Department, if there are any serious violations or breaches of applicable Laws, Rules, Regulations, Notices and the Standards or deficiencies/manipulations in the books of accounts which comes to its attention during the course of audit engagement; and
   5. e)An External Auditor issuing a report under Paragraph 7.3.4 (d) of this Chapter to the Banking Supervision Department, in good faith, shall bear no liability to the Licensed Person or to its Owner, Partners, Shareholders or any other party for the breach or alleged breach of confidentiality.
5. 7.3.5The Management Letter
   1. a)The Licensed Person must request the External Auditor to issue a Management Letter highlighting all deficiencies in its internal controls along with recommendations for the mitigation of such deficiencies;
   2. b)The Licensed Person must provide its comments for each finding in the Management Letter;
   3. c)In case the Management Letter was not issued by an External Auditor, a letter stating the same and the reasons thereof must be issued by the External Auditor; and
   4. d)A copy of the Management Letter or the letter as per Paragraph 7.3.5 (c) of this Chapter must be submitted to the Banking Supervision Department along with the Auditors’ Report and financial statements for each financial year.