UPDATE 1-Dubai Holding CEO heads property unit amid probe

* Byat named acting chairman of Dubai Properties

* Dubai Properties chairman questioned in probe

* Probe takes place ahead of Emaar merger

(Recasts analyst comment, background)

By Jason Benham

DUBAI, Nov 1 (Reuters) - Dubai Holding's chief executive took the helm of its property unit in a move likely aimed at assuring investor confidence after the division's chairman was ordered by a Dubai watchdog to face questioning over suspected wrongdoings.

The appointment came ahead of a multi-billion dollar merger between three of Dubai Holding's property units, including Dubai Properties, with the Arab world's biggest listed-developer Emaar Properties EMAR.DU.

Ahmad bin Byat was named as acting chairman of Dubai Properties, Dubai Holding, owned by the ruler of the Gulf emirate, said in a statement on Sunday.

Former Dubai Properties chairman Hashim al-Dabal is facing questioning over suspected wrongdoings, in the latest of a string of corruption cases to hit the emirate.

On Sunday, an official at Dubai's financial audit department confirmed a report in state-owned newspaper Emarat Alyoum on Thursday that it questioned Dabal over what it called financial irregularities.

The newspaper said Dabal was being questioned "over suspected financial irregularities and violations of rules and regulations" at the state-linked developer, before sending him to the general prosecutor to complete the investigation.

"The case ... is now with the public prosecutor," the official, who declined to be identified, told Reuters.

Dabal could not immediately be reached for comment.

"If I were an investor, I would question whether the merger will go through on time or if there will be any significant delays," said Saud Masud, UBS real estate head of research.

Emaar said in October the merger would take a "reasonable time" after it had said in June it expected the merger to take place within about four months. [ID:nL5718785]

"It does seem a positive that high profile cases are not being excluded from scrutiny ... but it does make investors wary that we are still dealing with these issues which were more prevalent earlier in the year."

Dubai Holding declined to comment on Sunday when asked about the allegations. Byat could not be reached for comment.

"Dubai Holding and all of its business entities are committed to the highest levels of corporate governance," it said. "As such we fully support the Dubai government's initiatives to uphold these standards."

The emirate, one of seven in the United Arab Emirates, has intensified efforts to crack down on corruption in the wake of a series of high profile cases in tourism and business hub.

Other high profile cases include that of the former Tamweel TAML.DU chief executive and the former chairman of Dubai Islamic Bank DISB.DU.

Dubai Holding reorganised its business into four groups in August: property, business parks, hospitality and investments, in a bid to deal with the economic crisis.

(Additional reporting by Raissa Kasolowsky and Inal Ersan)

(Editing by David Cowell)