Auditing has become an essential tool for companies. It ensures transparency, accounting reliability and regulatory compliance within the business environment.
At Afianza, we offer our customers a rigorous and up-to-date accompaniment For this reason, we will analyze its different types, benefits, cases in which it is mandatory and how to prepare to face the process.
What is an audit of accounts and what is its purpose?
One audit of accounts, is a comprehensive review of the annual accounts and accounting documents carried out by an independent external auditor.
Its purpose is to verify that the financial information accurately reflects the economic and property situation of the company in accordance with the regulations in force. In the audit process, the external auditor reviews the annual accounts and their alignment with the regulatory framework of financial information that results from application.
The resulting audit report serves to strengthen confidence before third parties, such as financial institutions, partners, investors or the public administration itself.
Other types of audit in companies and when they apply
There are different types of audit in companies – other than the audit of accounts – which vary according to the objective of the analysis, the applicable rules and the scope of the report issued.
The most common are:
- Legal audit: required by law in certain situations.
- Financial audit: analyses the financial situation of the company in certain situations.
Each type of audit can be applied on a voluntary or mandatory basis, depending on the legal and company size requirements.
When is the audit of an account of a company mandatory?
The obligation to audit of accounts is regulated by Article 263 of the Capital Corporations Act. quantitative limits that they require to undergo external accounting review – audit of accounts -.
It shall be compulsory when the undertaking fulfils two of the three conditions for two consecutive years:
- Assets exceeding €2,850,000.
- Annual turnover of more than €5.7 million.
- Average number of employees exceeding 50*
In addition, in the first financial year since its formation, transformation or merger, companies are obliged to be audited if they meet, at the end of that financial year, at least two of the three limits set out in the preceding paragraph.
Similarly, companies that do not comply with the above limits may be required to be audited under different circumstances, such as access to public grants, external financing, or when required by statute by the partners.
Benefits of conducting voluntary audits
Although there is no legal obligation, many companies choose to carry out voluntary audits such as: tool for improving financial management and control.
These audits make it possible to identify accounting errors, as well as weaknesses in internal control, prevent tax risks and strengthen reputation vis-à-vis third parties.
They also provide value in decision-making processes, budget planning or investor search and external financing.
Key steps in the business audit process
The audit process It consists of several phases that require collaboration between the auditor and the company's management team.
- Planning: definition of scope, timing and resources.
- Implementation: Review of key business processes, identification of risks and relevant controls. Conduct of substantive tests where documentation is reviewed, as well as financial statements.
- Final report: issue the report with the opinion of the auditor.
A process well managed by a specialized accounting consultant reduces the risk of errors and avoids observations that may affect the company's image.
Documentation and requirements for the audit of annual accounts
Companies must prepare a series of pre-existing documents at the beginning of the process, including:
- Financial statements, report and management report.
- Accounting books and auxiliary records.
- Contracts, deeds and relevant records.
The orderly preparation of this documentation is essential to enable the auditor to carry out his or her work efficiently.
Audit and business reorganization: special cases
In situations of fusion, excision, transformation or dissolutionThe purpose of the audit is to ensure the legal certainty of the process.
For example, in a merger by absorption, it is common to require a audit report on the balance sheets involved to protect the interests of the parties.
Internal audit and management control
In addition to external audit, some companies implement internal audits as a tool for continuous monitoring of management control.
Internal audit enables the identification of budgetary deviations, the strengthening of process security and the evaluation of compliance with internal procedures.
In growing companies, this type of audit can help anticipate risks and improve efficiency without waiting for relevant errors to arise.
What if a company fails to comply with a mandatory audit?
Failure to present the annual accounts audited in the event of an obligation may entailing sanctionsIn addition, it may involve difficulties in accessing funding or engaging with the public administration.
Therefore, from Afianza we advise to review annually if your company reaches the mandatory audit limits and meet the deadlines set.
* There is the Bill in the Official Gazette of the Courts, but does not appear as a law already published in the BOE, so is not yet applicable. Until that reform is published as Law in the BOE (and under its transitional regime), the valid thresholds to decide on mandatory audit remains 2.850.000 / 5.700.000 / 50.
