Auditing at the request of banks and creditors, such as the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC) and others, is an essential procedure for enterprises receiving financing from such institutions. This type of audit aims to confirm financial stability and compliance with economic conditions set by creditors.
Also, a banking institution may require confirmation of the debtor’s annual (consolidated/combined) financial statements during its evaluation of the financial position of a legal entity-borrower measurement of the value of the default probability ratio. Corresponding requirements are given in the NBU Resolution No. 351 dated 30 June 2016 On Approval of the Regulation on Determining the Size of Credit Risk by Active Banking Operations by Banks of Ukraine
The annual financial statements of the debtor or consolidated/combined financial statements of the group (if the debtor belongs to a group of legal entities under common control/related counterparties) must be confirmed by an audited entity if the debtor is a resident legal entity and its total credit debt exceeds UAH 200 million.
the auditor shall ensure that an entity's financial statements meet the legal requirements in all material aspects. This includes compliance with the defined standards for classification, evaluation, recognition of assets and liabilities, and their proper presentation in financial statements.
the auditor evaluates the effectiveness of a company's internal control systems and conducts its testing to obtain assurance as to whether the reliability of financial statements is ensured.
the auditor verifies the accuracy and completeness of the data included in the financial statements by applying the procedures of external confirmation, recalculation, inspection, observation, analytical procedures, substantive procedures, etc. A particular emphasis is on the analysis and state of settlements with counterparties.
the auditor focuses on checking whether the borrower complies with the conditions established by banks or creditors when providing financing. The auditor also checks the fulfilment of other requirements and obligations that may be included in the financial credit conditions.
the auditor assesses the borrower's financial position to determine his ability to fulfil financial obligations to creditors.
upon completion of the audit, the auditor provides his opinion on the reliability of all material aspects of the financial statements, which may be unmodified (clean, unqualified) or modified (qualified opinion, adverse opinion, disclaimer of opinion).
Importance of the audit on request by banks and creditors:
audit helps enterprises to obtain the necessary funding from banks and creditors, confirming their financial position and performance.
the auditor’s opinion increases creditors' confidence in the company's financial information and reduces the risk for creditors.
the results of audit procedures help an entity identify and manage risks associated with economic indicators and financial management.
