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Industry-Specialized Auditors

Manufacturing Company Audit Services in Dubai

Cost Accounting | Production Cycle | Inventory Controls

Specialized audit services for manufacturing, industrial production, and assembly operations. Our auditors understand cost accounting systems, work-in-progress valuation, standard costing, and the unique complexities of UAE manufacturing sector.

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Manufacturing Sector in the UAE

The UAE manufacturing sector contributes over $35 billion to the national economy, with strategic focus on food processing, petrochemicals, pharmaceuticals, metals, and high-tech industries. Whether operating in KIZAD, Dubai Industrial City, Sharjah Industrial Areas, or other manufacturing zones, all entities require annual statutory audits under UAE Commercial Companies Law.

Manufacturing audits are distinctly complex: they require verification of cost accounting systems, standard costing methodologies, work-in-progress (WIP) valuation, production overhead allocation, quality control costs, and environmental compliance expenses. Unlike trading companies with simple inventory, manufacturers must account for raw materials, WIP, finished goods, production variances, and capitalize certain costs under IAS 2 and IAS 16.

Our manufacturing audit team has examined over 150 production facilities across UAE, from small-scale food processors to large petrochemical complexes. As one of the [top manufacturing audit firms in Dubai](/en/top-10-audit-firms-dubai), we understand the operational realities of production planning, materials resource planning (MRP) systems, lean manufacturing, and how they integrate with financial reporting. With increased focus on sustainability reporting and ESG compliance, manufacturers also need auditors who can verify environmental data and energy efficiency metrics.

Unique Challenges in Manufacturing Audits

Industry-specific audit complexities that require specialized expertise and proven methodologies

Work-in-Progress Valuation
WIP inventory represents partially completed goods and must be valued at cost of materials, labor, and overhead consumed to date. Auditors must verify production stage assessments, overhead allocation methods, and cut-off accuracy at period-end.
Cost Accounting System Verification
Manufacturing requires sophisticated costing: job costing, process costing, or activity-based costing. Auditors must test the accuracy of cost accumulation, overhead absorption rates, variance analysis, and reconciliation to general ledger.
Standard Costing vs Actual
Many manufacturers use standard costs for inventory, with periodic variance analysis. Auditors must assess whether standards are reasonable, variances are properly analyzed, and any material variances are allocated to inventory and COGS appropriately.
Production Overhead Allocation
Fixed and variable production overheads must be allocated to inventory per IAS 2. Auditors verify allocation bases (machine hours, labor hours, etc.), normal capacity assumptions, and treatment of abnormal wastage or idle capacity.
Quality Control and Rework
Quality costs, rework expenses, and warranty provisions affect inventory valuation and profit. Auditors must determine what costs should be capitalized vs expensed, and verify warranty liability estimates based on historical data.
Capitalization of Production Equipment
Manufacturing equipment costs, installation, testing, and commissioning must be properly capitalized per IAS 16. Auditors verify that only qualifying costs are capitalized, with proper distinction from maintenance expenses.

Manufacturing Regulatory Compliance

Comprehensive compliance coverage across all applicable regulations and standards

UAE Industrial Standards
Emirates Authority for Standardization and Metrology (ESMA) requirements
  • Product quality certifications (ISO 9001, etc.)
  • Industry-specific standards compliance
  • Product testing and certification records
  • Traceability and batch control documentation
  • Labeling and packaging requirements
Environmental Compliance
Federal Law No. 24 of 1999 for Protection and Development of Environment
  • Environmental impact assessment compliance
  • Waste management and disposal records
  • Emissions monitoring and reporting
  • Hazardous materials handling documentation
  • Environmental permits and renewals
Health & Safety Regulations
Occupational health and safety requirements under UAE Labor Law
  • Workplace safety protocols implementation
  • Employee safety training records
  • Accident reporting and investigation
  • Personal protective equipment provision
  • Regular safety inspections and audits
Inventory Accounting Standards
IAS 2 Inventories and IAS 16 Property, Plant & Equipment
  • Raw materials, WIP, and finished goods classification
  • Cost accumulation (materials + labor + overhead)
  • Normal capacity determination for overhead allocation
  • Abnormal waste expense recognition
  • Production equipment capitalization and depreciation

Our Manufacturing Audit Methodology

We have developed specialized procedures for manufacturing audits that address cost accounting complexity, production process verification, and multi-location inventory challenges.

1

Planning & Process Understanding

We conduct facility walkthroughs, interview production managers, and map your manufacturing process to understand cost flows and identify audit risks.

Key Deliverables:

  • Production process flow documentation
  • Cost accounting system evaluation
  • Inventory locations and flow mapping
  • Key controls identification and testing plan
  • Standard costing methodology review
  • Overhead allocation basis assessment
2

Fieldwork & Substantive Testing

Our audit team performs detailed testing of cost accumulation, inventory valuation, production cycle, and physical verification across all inventory categories.

Key Deliverables:

  • Physical count of raw materials, WIP, and finished goods
  • Production cost testing (materials, labor, overhead)
  • WIP stage of completion verification
  • Standard cost variance analysis review
  • Fixed asset additions and disposals testing
  • Environmental and quality compliance spot checks
3

Reporting & Operational Advisory

We provide audit opinions plus actionable recommendations on cost control, inventory management, and production efficiency improvements.

Key Deliverables:

  • Audited financial statements (Arabic & English)
  • Independent auditor's report per ISA standards
  • Management letter with improvement recommendations
  • Cost accounting system enhancement suggestions
  • Inventory optimization opportunities
  • Sustainability reporting readiness assessment

Why Choose Our Manufacturing Audit Services

Industry Technical Expertise

Our audit teams include qualified cost accountants (CMA) and engineers who understand manufacturing operations, not just financial statements. We can assess your cost accounting system's technical accuracy.

Process-Oriented Approach

We conduct production floor walkthroughs and observe actual operations, not just review documents. This operational understanding helps identify control weaknesses and efficiency opportunities beyond compliance.

Complex Costing Capability

Whether you use job costing, process costing, ABC, or hybrid systems, our team has expertise in all costing methodologies. We can audit sophisticated ERP systems like SAP, Oracle, or industry-specific manufacturing software.

Multi-Site Experience

We have audited manufacturers with multiple production facilities across UAE and GCC. Our teams can coordinate simultaneous inventory counts and production testing across locations efficiently.

Value Engineering Insights

Beyond compliance, we provide recommendations on waste reduction, overhead cost optimization, yield improvement, and working capital efficiency based on best practices seen across industries.

Sustainability Assurance

As ESG reporting becomes mandatory, we can provide assurance on energy consumption, carbon emissions, waste recycling rates, and other sustainability metrics increasingly required by stakeholders.

Common Audit Findings in Manufacturing

Learn from common issues we identify and how to resolve them proactively

Issue

WIP Valuation Inaccuracy

Impact

Work-in-progress inventory overstated or understated due to incorrect stage of completion assessments

Solution

Implement engineering estimates for completion percentage, document standard production stages, reconcile WIP movement monthly

Issue

Overhead Allocation Errors

Impact

Fixed overhead under-absorbed due to idle capacity not properly treated, overstating inventory value

Solution

Define normal capacity based on realistic production levels, expense unabsorbed overhead due to idle capacity per IAS 2

Issue

Abnormal Waste Capitalized

Impact

Abnormal spoilage, defects, or production losses incorrectly included in inventory cost instead of expensed

Solution

Establish normal waste percentages by product line, expense all abnormal waste immediately, track quality metrics

Issue

Maintenance Costs Capitalized

Impact

Routine maintenance and repairs incorrectly capitalized as equipment additions instead of expensed

Solution

Create clear capitalization policy distinguishing repairs from improvements, expense routine maintenance

Issue

Standard Costs Not Updated

Impact

Standards not revised for significant material price or labor rate changes, causing large unanalyzed variances

Solution

Review and update standards at least annually, investigate material variances, allocate significant variances to inventory/COGS

Issue

By-Product Revenue Treatment

Impact

By-product or scrap sales not properly deducted from production costs, overstating inventory and COGS

Solution

Track by-product quantities and revenue, reduce cost of main product or treat as other income consistently

Contact us for Manufacturing Audit Service

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Success Story

Case Study: Food Processing Plant Cost Accounting

The Challenge

A major food manufacturer with 3 production lines processing different products struggled with accurate WIP valuation and overhead allocation. Their cost accounting system could not differentiate between lines, causing cross-subsidization and pricing issues. Previous audits identified material weaknesses in inventory controls.

Our Solution

We helped implement activity-based costing separating each production line, established WIP valuation based on conversion percentage by line, set up normal capacity metrics per line, and integrated the cost system with their existing ERP. We designed monthly variance analysis reports and trained their finance team.

Measurable Results

Achieved accurate product-line profitability for first time
Discovered one product line was loss-making, leading to strategic pricing changes
Reduced WIP valuation disputes and audit adjustments to minimal
Identified AED 400K annual savings through overhead allocation improvements
Clean audit opinion with no material weaknesses in year 2

Frequently Asked Questions

Get answers to common questions about our industry-specialized audit services

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