Can you sue your auditor in the UAE?

Article 255 of the Commercial Companies Law (Federal Decree-Law No. 32 of 2021) says the auditor is liable towards the company for the audits it performs and for the validity of the statements in its report, and must indemnify the company for damage caused by its acts in performing the job. It sits in the chapter on public joint stock company auditors, and Article 102 applies those provisions to the auditor of a limited liability company as well.

Where there is more than one auditor, Article 255 makes each liable for its own fault that caused the damage. Article 247 adds that joint auditors who sign a joint report are jointly liable for that report, so the allocation depends on whose work failed.

The claim belongs to the company, and the decision to sue sits with the general assembly: for a PJSC, Article 179 lists the discharge or dismissal of auditors and the filing of a liability lawsuit against them among the annual general assembly's powers. Shareholders who want to pursue the auditor should therefore put a resolution to the assembly rather than act alone. Typical grounds are a failure to detect a material misstatement that a competent audit would have found, signing off figures the auditor never tested, or a report that misstated the company's position.

The most important practical rule is in Article 256: the company's liability lawsuit against its auditor is time-barred one year from the date of the general assembly at which the auditor's report was read. If the act attributed to the auditor is a crime, the claim does not lapse until the public criminal action itself is time-barred.

That clock is short and starts at a fixed, documented event, not when the company discovers the problem. A worked example:

• Financial year ends 31 December 2025.
• The general assembly meets and the auditor's report is read on 20 April 2026.
• The company's Article 256 claim lapses on 20 April 2027, unless the conduct amounts to a crime.

If you suspect a problem with an audit, record the date of the relevant general assembly from the minutes, preserve your correspondence with the auditor and take legal advice early. A new auditor's findings or a qualified opinion in a later year can be the first sign, and by then the window for the earlier year may be closing.

Article 255 speaks only of liability towards the company. People outside the company, such as a bank that lent on audited figures or a buyer that relied on them in an acquisition, look instead to Article 25 of Federal Decree-Law No. 41 of 2023 on the Regulation of the Accounting and Auditing Profession. It says anyone who suffers injury from the services of a chartered accountant or an accounting firm may claim civil compensation for the damage under the rules and procedures of the legislation in force.

That points to the general civil law, so the conditions (fault, damage, causation) and the limitation period are those of the general law, not the one-year Companies Law bar. We have not quoted a period here because it depends on how the claim is framed; take advice on it.

Engagement terms matter too. An auditor's engagement letter normally names who may rely on the report. If a lender or buyer needs to rely on the audit, ask for that reliance in writing, or commission separate work such as financial due diligence, rather than assuming a statutory audit report was written for you.

Federal Decree-Law No. 41 of 2023 gives claimants three practical supports:

• Professional liability insurance. Article 16(2)(b) requires every accounting firm to procure professional liability insurance for the firm and its chartered accountants, at the firm's cost.
• Working papers. Article 19 requires the firm to keep the data and documents of each engagement for at least 10 years from the date of the report, and longer while related court claims are pending. Partners remain responsible if the firm's licence is cancelled.
• Court judgments reach the Ministry. Under Article 30, the courts inform the Ministry of civil and criminal judgments against practitioners arising from their practice.

Separately from compensation, the Ministry can refer a firm to its Professional Compliance Committee, which can impose a written notice, a fine of AED 10,000 to AED 1,000,000, a licence suspension of one month to three years, or cancellation (Article 20). A complaint to the Ministry runs alongside, not instead of, a court claim, and the two can reach different results.

Some conduct goes beyond negligence. Federal Decree-Law No. 41 of 2023 sets criminal penalties, without prejudice to harsher penalties in other laws:

• Article 27: at least three months in prison and/or a fine of AED 100,000 to AED 2,000,000 for practising without a professional licence, practising while suspended, giving false information to obtain a licence, or signing a report not prepared by the signer or staff under the signer's supervision.
• Article 28: at least one year in prison and/or a fine of AED 300,000 to AED 5,000,000 for knowingly signing a false report, disclosing a client's secrets, or facilitating, concealing or failing to report a financial crime involving public funds or third-party funds.

On conviction the court may also cancel the licence or close the firm. Where the auditor's act is a crime, Article 256 of the Companies Law keeps the company's civil claim alive until the criminal action is time-barred. These provisions were read from the Ministry of Economy's published texts; check uaelegislation.gov.ae for any later amendments.