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;
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.
c)The Central Bank reserves the right to appoint additional External Auditors where it deems it appropriate, reasonable and necessary;
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
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.
7.3.2Approval Process to Appoint the External Auditor
a)The Licensed Person must submit the request for the Letter of No Objection to the Banking Supervision Department on or before 31st May of each financial year; and
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.
7.3.3Rotation of External Auditors
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.
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;
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;
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
e)The limit of six (6) consecutive financial years shall be applied retrospectively, starting from the financial year 2012.
7.3.4Auditors’ Report and Financial Statements
a)Audited Financial Statements and the Auditors’ Report for any financial year must be submitted to the Banking Supervision Department on or before 31st March of the following year;
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.
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;
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
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.
7.3.5The Management Letter
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;
b)The Licensed Person must provide its comments for each finding in the Management Letter;
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
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.