A financial audit involves a detailed analysis and evaluation of a company’s economic and accounting records to ensure that the financial statements accurately reflect its financial position, to verify compliance with current accounting regulations.

In essence, financial auditing ensures that the company manages its financial operations in a transparent, consistent and legal manner. This lends credibility to the financial reports presented to third parties, validating book values, sales figures and other significant data. The result of the audit is consolidated in a detailed report that summarizes the conclusions obtained after the exhaustive analysis performed.

What are the objectives of a financial audit?

The financial audit plays a crucial role in detecting possible inconsistencies between the information declared by the company and the reality of its business operations. These discrepancies may indicate concealment of data, potential fraud or improper practices.

It is essential that the audit report is prepared and signed by an independent auditor, duly registered. In addition, the report must comply with all guidelines and regulations applicable to account auditing, thus ensuring its integrity and legal validity.

When is it necessary to perform a financial audit?

A company is obliged to carry out an accounting audit when it meets two of the following conditions for two consecutive fiscal years:

· Turnover in excess of €5.7 million.
· Total assets in excess of 2,850,000 euros.
· An average of more than 50 employees during the fiscal year.

In addition, the audit of the consolidated annual accounts is mandatory when two of the following limits are exceeded during two consecutive fiscal years:

· An average of more than 250 employees during the fiscal year.
· Turnover exceeding 22.8 million euros.
· Total assets exceeding 11.4 million euros.

Other reasons to perform an accounting audit

In addition to the requirements established by law, there are other reasons that may lead a company to audit its accounts:

· On a voluntary basis: seeking transparency and reliability to improve the company’s image with third parties such as credit institutions, suppliers or customers.

· Other legal reasons: Obligation for listed companies, companies issuing public offerings, financial intermediation companies and certain branches of insurance.


· Corporate operations: Required in operations such as mergers, spin-offs, etc.


· Partners’ request: Partners with more than 5% shareholding in public or limited companies may request an audit to obtain transparency and reliability on their investment.


· Subsidies: Some public subsidies or grants may require an audit if they exceed certain established amounts, such as 600,000 euros in total.

Who can perform it?

The financial audit must be performed by a certified financial auditor. Depending on the size and complexity of the organization, the audit may be carried out by an individual auditor or by a team.

Phases of a financial audit

The phases of a financial audit involve several tasks that the auditor must carry out in a structured and meticulous manner:

1) Review of economic and accounting documentation: the auditor should begin by reviewing the company’s financial and accounting documentation in detail. This includes the financial statements such as the balance sheet, the profit and loss account, the statement of changes in equity, the cash flow statement and the annual report.

2) Verification of regulatory compliance: The auditor verifies that the company has prepared its financial statements in accordance with applicable accounting standards. This ensures that the financial information presented is accurate and complies with established accounting standards.

3) Contrasting information: To corroborate the information contained in the financial statements, the auditor may request confirmations from third parties such as banks, customers and suppliers. This helps to verify accounting balances, accounts receivable, accounts payable, among other relevant aspects.

4) Review of additional aspects: In addition to the financial statements and accounting accounts, the auditor examines other crucial aspects such as taxes paid during the audited period, information on ongoing litigation and corporate records such as the company’s minute books.

5) Preparation of the audit report: Finally, the auditor prepares a detailed report including his conclusions and technical opinions. This report not only points out any shortcomings or errors found during the audit, but may also provide recommendations for improving the company’s accounting management and internal control.

These phases ensure that the financial audit is complete, rigorous and provides an objective assessment of the audited organization’s financial situation.

Other aspects taken into account

As we have already established, a financial audit primarily evaluates the reasonableness of the balances of the main accounts in the financial statements. To achieve this, several steps are followed:

· Review of internal policies and processes: The auditor examines the internal policies and processes established by the company for the preparation of its financial statements. This includes verifying that the accounting and financial procedures are consistent with applicable accounting standards and practices.


· Review of supporting documentation: The documentation supporting the transactions recorded in the financial statements is reviewed. This may include Purchase Orders, Invoices, Remittance Notes, Entry Sheets, Payment Approvals, Proofs of Payment and any other relevant documentation that demonstrates the authenticity and legitimacy of the transactions.


· Random samples: The auditor selects random samples of different items within the audited accounts. This random selection helps to obtain a representative sample of the company’s operations and transactions, ensuring that they are thoroughly reviewed.

Main features

The main characteristics of financial audits are fundamental to ensure the quality and credibility of the financial information presented by an entity. Here are the most important characteristics:

· Independence and objectivity: The auditor must be independent of the audited entity to provide an unbiased opinion on the financial statements.


· Professional competence: Auditors must possess the technical knowledge, skills and experience to perform the audit effectively and in accordance with current regulations.


· Confidentiality: Auditors must maintain the confidentiality of the information obtained during the audit and not disclose it without the specific authorization of the audited entity, except when required by law.


· Supported by evidence: The audit should be based on the collection of truthful, verifiable, sufficient and appropriate evidence.

· Systematic and methodological approach: The audit is carried out following a structured methodology that includes planning, evaluating internal control and obtaining evidence through appropriate techniques and procedures.


· Audit report: The result of the audit is a report that expresses the auditor’s opinion as to whether the financial statements present fairly the financial position, results of operations and cash flows of the entity in accordance with generally accepted accounting principles.