ICFR in the UAE: Why Internal Controls Over Financial Reporting Are Rising in Popularity

ICFR in UAE: Why Internal Controls Over Financial Reporting Are Now Essential?

Internal Control Over Financial Reporting (ICFR) has become a cornerstone of corporate governance in the United Arab Emirates, transforming how businesses and public entities address financial integrity, investor confidence, and regulatory compliance. Recent regulatory updates and market dynamics have catapulted ICFR to the forefront, making its adoption not just a best practice, but a necessity for sustainable business success in the region.

What is ICFR?

ICFR is the set of procedures and frameworks organizations employ to ensure accuracy, reliability, and transparency in their financial reporting. These controls safeguard assets, deter fraud, and assure all stakeholders—shareholders, regulators, and the public—that financial statements are free from material misstatement and comply with international standards.

UAE’s 2025 ICFR Regulatory Transformation

2025 has marked a watershed year in the UAE's financial regulatory landscape. The Abu Dhabi Accountability Authority (ADAA) unveiled landmark updates, setting higher standards for ICOFR governance and digital transformation. These reforms require mandatory continuous auditing, broadened internal audit authority, integrated risk assessment aligned with strategic objectives, and a strong focus on digital oversight using data analytics.

Concurrently, the UAE Securities and Commodities Authority (SCA) extended the ICFR transition timeline: by January 2027, all listed companies must publicly report on ICFR effectiveness according to new global standards. From 2028, these reports must also integrate comprehensive risk management, linking financial integrity with operational, strategic, and technological risks. This reflects the UAE regulators’ push for greater transparency, investor trust, and alignment with international corporate governance best practices.

Why ICFR is Gaining Momentum

Several factors explain the growing adoption of ICFR across private and public sectors in the Emirates:

• Regulatory Pressure and Deadlines: The SCA and ADAA have introduced firm deadlines and disclosure requirements, making ICFR mandatory for listed companies and government entities in the coming years.
• Investor Confidence: Improved internal controls mean reduced risk of misstatement, fraud, and scandal, bolstering investor trust in UAE capital markets.
• Strategic Risk Management: Integrating risk assessment into ICFR frameworks allows organizations to manage not only financial risks but operational, compliance, and technology risks critical in today’s digital economy.
• Technological Innovation: The rise of digital audit tools and data analytics has streamlined continuous monitoring of controls, making ICFR processes more effective and efficient.
• Globalization: UAE companies aiming to attract foreign investment and compete globally must align with international reporting and governance standards, which require robust ICFR.

ICFR provides a structured approach to risk assessment, control design, testing, and monitoring — significantly reducing fraud risks and improving operational resilience.

Key Components of ICFR Implementation

1. Risk Assessment

UAE companies begin by identifying financial reporting risks across business cycles, such as:

This assessment determines where controls are needed and the level of testing required.

2. Control Design & Documentation

Controls are documented across:

Clear documentation forms the foundation of a sustainable ICFR framework.

3. Control Testing

Organisations test the design and operating effectiveness of controls through:

• Walkthroughs
• Sample testing
• ITGC testing (system access, change management, backups, etc.)

This stage highlights control gaps requiring remediation.

4. Remediation & Continuous Improvement

ICFR is not a one-time exercise. Remediation involves:

Continuous monitoring ensures the control environment evolves along with business growth.

ICFR Implementation: Best Practices in 2025

Successful ICFR adoption goes beyond regulatory compliance. UAE organizations are embracing robust strategies:

• Develop agile, well-defined implementation roadmaps tailored to the business size and complexity.
• Invest in digital audit solutions for real-time control monitoring and risk detection.
• Foster transparent relationships between internal and external auditors for objective oversight.
• Embed ICFR culture across organizational levels, linking controls to strategic objectives.
• Train and upskill staff in new digital and governance requirements.

The Future of ICFR in the UAE

Local Regulatory Context: What UAE Businesses Should Be Aware Of

For organizations operating in the UAE, understanding the regulatory environment is particularly important because requirements differ depending on whether the entity is located on the mainland or within a Free Zone.

Mainland (On-shore) UAE:
Most businesses fall under Federal Decree-Law 45 of 2021 (PDPL) for personal data protection, alongside sector-specific rules for areas such as healthcare and banking. All entities must also comply with federal cybercrime laws, including Federal Decree-Law 34 of 2021, which addresses hacking, unauthorized access, and misuse of systems.

Free Zones:
Some Free Zones have their own data protection laws, such as:

• DIFC Data Protection Law No. 5 of 2020
• ADGM Data Protection Regulations
• DHCC health data regulations

These operate independently of PDPL, although federal cybercrime laws still apply regardless of location.

Dubai-specific Requirements:

Under Dubai Law 15 of 2024, the Dubai Electronic Security Centre (DESC) oversees cybersecurity for government entities and certain private-sector organizations designated as critical. Internal audit teams must ensure alignment with DESC’s standards and reporting requirements.

For internal auditors, the key is understanding which jurisdiction applies to the business and ensuring that controls, documentation, and reporting processes reflect those obligations.

Strengthening Resilience for the Future

Strong cybersecurity requires more than technical defenses, it demands clear governance, disciplined oversight, and continuous learning. By combining structured risk assessment with a practical understanding of both operational and regulatory expectations, internal audit plays a central role in building resilience and preparing the organization for future threats.

The years ahead promise further innovation and integration. By 2027, annual ICFR disclosures will be mandatory, and by 2028, organizations must formally include risk management findings within ICFR reports. These steps will raise the bar for UAE businesses and public entities, making financial governance more transparent, trustworthy, and aligned with top international practices.

For startups and entrepreneurs, embracing ICFR early will be key to sustainable scaling, capital raising, and reputation building in an environment where compliance is essential. Proactive implementation today positions UAE companies at the forefront of global business standards.