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The Value of Audit for SMEs in Spain

Francisco Serrano, ICJCE, Head of the Research Department and Adela Vila, ICJCE, Director of the International Department  | 

In Spain, there are 21,000 licensed auditors—5,000 of them rendering audit services. Moreover, according to the BOICAC 110 Situation of Audit in Spain, in 2017, these auditors issued a total of 60,500 audit reports, of which 53,600 were of small and medium-sized entities (SMEs). This indicates that 88% of audit work is being undertaken for SMEs that are not legally obliged to audit their annual accounts.

As in most countries worldwide, SMEs significantly impact the national economy by contributing to wealth creation and employment. SMEs are also receiving increasing attention from governments, institutions, and researchers. Despite this, SMEs still face challenges in accessing credit as lenders might struggle to evaluate an SME’s credit position. This is often compounded by the fact that SMEs are also challenged to prepare high-quality financial information.

Why then do so many SMEs undergo an audit?

As the national professional accountancy organization in Spain, the Instituto de Censores Jurados de Cuentas de España (ICJCE) was keen to understand this demand in order to better provide services to this important stakeholder group.

In 2018, the ICJCE engaged the Grupo de I+D+I “Contabilidad y Auditoría” (Innovation and Research in Audit and Accounting), which is a research program out of the Cátedra Pyme de la Universidad de Cantabria and an initiative of the Santander Financial Institute, to issue a study about the value of an audit for SMEs.

The study surveyed 225 risk analysts in Spain to address the perception of the value of the audit in the process of granting credit to SMEs. The study analyzed risk analysts’ opinion on: (1) the audit service, the auditor or firm performing the engagement and the content of the auditor’s report; and (2) different variables of interest to the granting credit process based on whether the SME’s financial statements are audited or not.

The study identified some key aspects related to the relevance of an audit in financing SMEs, the new auditor’s report, and the overall value of an audit for SMEs.

  • Risk analysts consider receiving an auditor’s report together with the annual financial statements very important. Furthermore, risk analysts refer to the auditor’s report when determining whether to grant credit to SMEs and consider both the opinion as well as the content of the new auditor’s report, such as the basis for the opinion and the emphasis of matter paragraphs.
  • There is a positive effect on specific variables of interest for risk analysts when SMEs have audited financial statements. SMEs that present audited financial statements are perceived as companies that prepare higher-quality financial information, and that the information is more useful in the decision-making process. This goes a long way in building trust as risk analysts perceive a decreased risk in the financial transaction because the SMEs have openly and willingly provided their audited financial information.
  • Ultimately, this trust enables SMEs with audited financial statements to have a higher likelihood of accessing credit and in a more timely fashion. With audited financial statements, there can be a reduction in processing time by risk analysts and better financial conditions in terms of the credit amount granted, interest rate, and guarantee requirements.


We do acknowledge some limitations to the study, primarily that the study utilized a single financial entity with policies and process that may differ from other entities and that it does not consider the opinion of risk analysts over time. However, grant financial procedures are highly standardized in Spain so that the results could be extrapolated to the entire Spanish financial system. Additionally, the large sample surveyed reduces significantly the likelihood of bias. Finally, risk analysts face decisions regarding SME financing every day, and their answers to the study’s questions were, therefore, based on extensive previous experience and on a consistent behavior over a long time.

This type of study and initiative is one that all professional accountancy organizations (PAOs) might consider undertaking in their jurisdiction. It benefits SMEs to be aware that having their annual accounts subject to audit is a benefit when they go to a bank to ask for a credit or loan. This study will also serve a PAO’s auditor membership by providing new, data-driven information that communicates the value of audits for SMEs and auditor’s services. Thereby providing professionals even more confidence in the interest and significance of the work that they perform and the ability to attract clients. Finally, as the PAO representing and promoting the auditing profession in Spain, the study also allows the ICJCE to raise awareness and speak out on the value of its members’ services to key national, regional, and international accountancy stakeholders.

The full study is available online in Spanish.

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