Resolving Legal and Financial Audit Disputes Effectively

Audit disputes rarely begin as disputes. They begin with a request for records that one side says falls outside the engagement, a restated valuation, or two sets of accountants reaching different figures from the same ledger. By the time the disagreement has a name, it is usually about three things: what the audit was permitted to examine, what the resulting numbers mean, and who has to produce which documents.

In the UAE that argument can be heard in more than one place. Companies licensed onshore answer to federal law and to the courts of the emirate in which they are registered. Companies established in the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM) sit inside separate common-law jurisdictions, each with its own courts and its own financial regulator — the DFSA in the DIFC and the FSRA in the ADGM. The same set of accounts can therefore be tested under different rules depending on where the entity is registered and what the contract says.

What follows sets out where audit disagreements come from, what an audit clause has to contain to be usable, how the imbalance in access to financial records is corrected once a dispute has started, and how to choose between the forums available. Taking legal advice in Dubai at the point the first request for records is refused is considerably cheaper than a contested audit.

Where audit disputes come from

Most audit and financial review disputes fall into a small number of recognisable categories.

• Scope. The engagement letter or contractual audit clause does not state clearly which entities, periods, accounts and systems may be examined. Every subsequent request becomes negotiable.
• Access. The party holding the records controls the pace. Documents arrive late, in unsearchable form, or with material redacted on grounds the contract never mentioned.
• Methodology. The parties agree on the underlying figures but disagree on treatment: revenue recognition, related-party allocations, provisioning, intercompany balances, or the valuation basis applied to inventory and receivables.
• Consequences. The contract entitles a party to an audit but says nothing about what a finding produces — a price adjustment, repayment, an indemnity claim, or a right to terminate.
• Regulatory overlap. Findings that suggest misstatement, misappropriation or unexplained transfers can trigger reporting duties. Where that possibility exists, the audit and the potential financial crime exposure have to be managed together rather than sequentially.

Drafting an audit clause that can actually be used

A clause that says only that a party "shall have audit rights" generates argument rather than information. A usable clause identifies the following.

• Who may audit — the party itself, its external auditor, or an independent firm, and whether the other side may object to the identity of that firm and on what grounds.
• What may be examined: entities, financial periods, categories of record, and access to accounting systems and personnel rather than to printed extracts alone.
• The notice required, the frequency permitted, and the period within which records must be made available. Where the parties cannot agree a fixed period, tie it to the timetable the contract or the relevant authority sets rather than leaving it open.
• The accounting standards and the contractual definitions against which the figures are to be tested.
• Who pays. Cost-shifting where the audit discovers a discrepancy above an agreed threshold is a strong incentive to cooperate.
• What happens to the result: whether the auditor's finding is binding, subject to review by a jointly appointed expert, or simply evidence in a later claim.
• Confidentiality, and what the auditing party may do with what it learns.

Our legal and financial audit practice is generally engaged at one of two points: when the clause is being drafted, or when it has failed and the records are not forthcoming. The first engagement is shorter.

Correcting the imbalance in access to records

The party that holds the books holds the advantage. Several mechanisms reduce it.

An independent accountant. Appointing a firm that acts for neither side, on agreed terms of reference, converts a contest between two partisan reports into a single set of findings both parties have to address. The appointment mechanism matters: name the appointing body in advance so that a refusal to agree cannot stall the process.

Document production before a tribunal or court. Arbitral tribunals sitting in the UAE routinely order the production of specified categories of document, and the DIFC and ADGM courts have their own disclosure rules. Requests succeed when they identify a narrow class of document and explain its relevance; they fail when they read as a general trawl.

Consequences for non-production. A tribunal may draw adverse inferences where a party withholds records within its control, and may reflect obstruction in the costs award. Say so in the clause, and record every unanswered request in correspondence so the pattern is visible later.

Where a dispute is already live, a legal and financial audit review conducted under privilege lets a business establish its own position on the figures before it is committed to one in correspondence.

Preservation. Once a dispute is foreseeable, send a written instruction to preserve accounting records, email and system data, and suspend any routine deletion. Destruction after that point is difficult to explain.

Confidentiality protection. Where the records contain commercially sensitive material, disclosure can be limited to external advisers and the appointed expert rather than to the opposing business itself.

Choosing the forum

Four routes are commonly available, and the contract usually decides which one applies.

Expert determination suits a self-contained accounting question — whether a particular item should have been provisioned, or how a completion account should be computed. It is quicker than arbitration, and the grounds for challenging the outcome are narrow. The clause has to state whether the determination is final and binding, and what the expert may and may not decide.

Arbitration. Where the seat is onshore, Federal Law No. 6 of 2018, as amended in 2023, governs the proceedings. In Dubai, DIFC-LCIA was abolished by Decree No. 34 of 2021 and its caseload transferred to the Dubai International Arbitration Centre; contracts still referring to the former institution should be reviewed and, where possible, amended by agreement. In Abu Dhabi, ADCCAC was restructured as arbitrateAD and has operated under that name since 2024. The DIFC remains available as a seat for arbitrations administered by other institutions, which keeps the supervisory jurisdiction with the DIFC courts.

The DIFC and ADGM courts hear matters connected to those centres and, where the parties have agreed to it in writing, disputes with no other connection. Proceedings are in English and are conducted on common-law lines, which suits disputes turning on expert accounting evidence.

The onshore courts apply federal and emirate-level law, in Arabic, with court-appointed experts playing a decisive role in accounting matters. Preparing the expert submission properly, in Arabic and with the underlying documents, is usually the single most important step in an onshore audit claim.

Practical steps for UAE businesses

• Review the audit clauses in your material contracts before you need them, and rewrite the ones that say nothing more than "audit rights".
• Check that any arbitration clause names an institution that still exists and a seat you are content with.
• Keep accounting records in a form that can be produced — searchable, complete, and capable of being tied back to source documents.
• Answer audit requests in writing, on time, and state the contractual basis for any refusal. Silence is read against the party who chose it.
• Where findings touch on possible misconduct, take advice on reporting duties before circulating a draft report internally.
• Agree the identity of the independent expert early, while relations are still workable.

Related Services: Explore our legal and financial audit and audit dispute services for practical legal support in this area.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.

Nour Attorneys Team

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