As a rule, the business owner faces two main challenges – an increase of the company’s assets value (capitalization) and a boost of their liquidity. They influence the formation of the development strategy as well as the setting of management tasks. The efficiency of their implementation is reflected in the executive reports submitted to the business owner at the end of a certain period. Though, such reports may contain hidden problems, which, if not identified in time, can pose a threat to the future of the company.


The financial audit is a verification of a company’s financial reports. As a rule, external auditors who are able to perform the task with the required level of objectivity, conduct such verifications.


The purpose of the audit is to provide credible and precise information on the situation in the company. Such information then serves as the basis for the adoption of important decisions. Results of the verification allow to:

  • identify the current financial state of the company, track changes of the state and factors causing them, as well as forecast key trends of the further development;
  • identify disadvantages in the work of accounting and financial departments;
  • understand how to effectively use resources, including labor force;
  • optimize financial operations of the company, its taxation system, etc.

Conclusions of an idependent auditor confirm the reputation of the company which is particularly important in case of the attraction of foreign investments and concluding of loan agreements.

Let’s consider 5 situations when the financial audit is required

1. Preparation of a company for sale

In this case, the financial audit is obligatory, as it allows to correctly evaluate the market price of the company. Furthermore, for buyers, it’s a kind of guarantee that after signing of the agreement they won’t face such challenges as unfulfilled credit or tax obligations.

2. Obtaining of the credit rating or loan

Starting from 2018 the corporations who take a loan over 200 million UAH, must undergo an obligatory audit of the financial reports. Furthermore, if such loan is provided to the company which is a part of a holding, the financial indicators of the whole group are verified. This is logical, as, before provision of money, a bank must make sure that indicated figures are real.

3. A conclusion of an agreement with foreign counterparts

International investors have accustomed to the transparent business management and thus expect partners to provide precise and objective data on the state of their companies. It allows to adequately assess risks and invest money.

4. Identification of financial fraud

It’s not a secret that business quite often suffers from dishonest employees. For example, if managers’ bonuses depend on the size of profit, it can push them to inflate a company’s revenues or understate expenses. On the other hand, employees can understate profits in order to appropriate the margin.   

The following types of fraud are distinguished:

  • revenues are registered in one period, while expenses in another;
  • pending invoices are not indicated in the annual reports in order to decrease expenses;
  • ongoing judicial trials which can result in payments are not indicated in the reports.

5. As stipulated by the legislation  

In 2017, the law of Ukraine “On Accounting and Financial Reporting in Ukraine” was amended. The updated law “On Accounting 2017” entered into force on 1 January 2018. Amendments to the Law are aimed at the bringing the national accounting norms in accordance with the EU standards.

Let’s take a closer look at what the introduced changes of the law will bring to Ukrainian accounting professionals.

  • In 2018 the obligatory audit in Ukraine should be conducted by the companies which are categorized as those “representing public interest”. This group consists of emitters of securities, including those traded at stock exchanges, insurance companies, banks, and non-state pension funds. Such entities should conduct an annual audit and issue reports meeting the International Financial Reporting Standards (IFRS).
  • Companies which according to the new classification are considered as medium and large should publish their financial reports on their websites. Small and micro enterprises should provide such reports in case they receive a corresponding request.
  • According to the Law on Accounting financial reports should be compiled on the basis of indicators which can be made public.
  • Facilitation of paperwork requirements which will decrease the number of demands of tax service to the companies.
The financial audit is an important management tool which allows to identify the state of the business as well as potential opportunities and risks. Furthermore, it becomes an indispensable prerequisite for concluding of business agreements involving international investments, the sale of the company or provision of loans. Changes to the accounting legislation will help Ukrainian companies become more transparent and bring them closer to the European business standards.