This checklist covers the seven areas that BMC assesses in every audit readiness engagement for a Spanish SME. Use it as a self-assessment tool, as a structured conversation guide with your finance team, or as the starting point for commissioning a professional gap assessment. Each item includes a brief explanation of why it matters and typical findings by area.
For context on the audit framework and who is required to audit in Spain, see the complete audit readiness guide. For the four-phase process that follows this assessment, see audit readiness process phases.
How to Score This Checklist
Assign each item one of three RAG statuses:
- Green: Fully addressed, documented, and current
- Amber: Partially addressed, documentation incomplete, or not reviewed in the past 12 months
- Red: Not addressed, materially deficient, or unknown status
Interpretation:
- 0–3 Reds, 0–5 Ambers: Low audit risk — routine readiness maintenance required
- 4–8 Reds or 6–12 Ambers: Moderate audit risk — targeted remediation required before audit
- 9+ Reds or 13+ Ambers: High audit risk — full audit readiness programme required
Area 1: Accounting Policy Documentation
Accounting policies are the foundation of the audit. Under PGC (RD 1514/2007), policies must be disclosed in the notes to the annual accounts. Under NIA-ES 315, auditors are required to understand accounting policies as part of risk assessment.
| Item | RAG |
|---|---|
| Revenue recognition policy is documented and aligned with PGC section 9 | |
| Inventory valuation method (FIFO, weighted average) is documented and applied consistently | |
| Fixed asset capitalisation threshold and depreciation rates are documented | |
| Provision recognition criteria (PGC section 15) are documented and applied consistently | |
| Lease accounting treatment (finance vs operating) is documented for all material leases | |
| Financial instrument classification and measurement policy is documented | |
| Policy for recognising government grants (PGC section 18) is documented | |
| Accounting policies have been reviewed and updated in the past 12 months |
Common findings: Revenue recognition policy missing or stating only “we follow PGC” without detail. Depreciation rates applied that differ from the documented policy. Provisions recognised ad hoc without a consistent threshold.
Area 2: General Ledger Quality and Close Process
| Item | RAG |
|---|---|
| Trial balance reconciles to balance sheet without manual adjustments | |
| All balance sheet accounts are supported by reconciliations or sub-ledger listings | |
| Intercompany account balances agree between all entities in the group | |
| Aged receivables listing is reviewed monthly; provisions for doubtful debts are calculated and documented | |
| Cash and bank accounts are reconciled monthly; no outstanding items older than 60 days | |
| Year-end close checklist exists and is followed consistently | |
| Average days to close is documented; year-end close can be completed within 30 days | |
| All significant journals are approved and documented |
Common findings by sector: Retail and services SMEs frequently have unreconciled intercompany current accounts from prior years. Construction companies commonly have work-in-progress accounts that cannot be reconciled to project cost reports.
Area 3: Related-Party Transactions and Disclosures
This is consistently the highest-risk area for Spanish SMEs. Article 231 LSC and PGC note 25 require identification and disclosure of all related-party transactions.
| Item | RAG |
|---|---|
| Complete register of related parties exists (shareholders >5%, directors, close family, group entities per LSC art. 231) | |
| All intercompany loans are documented with written agreements at arm’s-length interest rates | |
| Management fees or service agreements between related entities are in writing and priced at market | |
| Property leases from director- or shareholder-owned entities are documented with market-rate evidence | |
| Director current accounts are reviewed, approved, and any remuneration implications considered | |
| PGC note 25 disclosure for the most recent year is complete and materially accurate | |
| Transfer pricing documentation exists for transactions above €250,000 per year with related parties (Modelo 232 obligation) | |
| No related-party transactions have been omitted from the notes |
Common findings: Intercompany loans with no formal agreement and interest calculated at zero or below market rates. Director personal expenses run through the company P&L without a documented policy or recharge. Property rental from a director-owned entity with no lease agreement.
Area 4: Internal Controls over Financial Reporting (ICFR)
| Item | RAG |
|---|---|
| Controls over the order-to-cash cycle are documented (authorisation of sales, billing, credit, collections) | |
| Controls over the purchase-to-pay cycle are documented (authorisation of purchases, three-way matching, payment approval) | |
| Payroll controls are documented (authorisation of new hires, changes, and terminations; payroll review and approval) | |
| IT general controls are documented (user access management, change management, backup and recovery) | |
| Journal entry approval controls are documented | |
| Segregation of duties is implemented where feasible; compensating controls documented where it is not | |
| At least one person other than the preparer reviews and approves monthly accounts | |
| Controls have been tested (even informally) in the past 12 months |
Note for micro-SMEs: Perfect segregation of duties is not achievable in a company with fewer than five finance staff. Auditors understand this. What is required is a documented awareness of the limitation, identification of the resulting risks, and compensating controls (e.g., owner review of bank reconciliations, external accountant review of period-end accounts).
Area 5: Tax Provisioning and Compliance
| Item | RAG |
|---|---|
| Current tax provision (impuesto corriente) is calculated and reconciled to the corporate tax return (Modelo 200) | |
| Deferred tax assets and liabilities are identified and calculated under PGC section 13 | |
| Deferred tax asset recoverability is assessed and documented (reversal period, projections) | |
| Tax loss carryforwards (BINs — bases imponibles negativas) are tracked and the recoverability of deferred tax assets assessed | |
| Any material tax contingencies (open inspections, disputed positions) are identified and a provision assessed | |
| Transfer pricing documentation satisfies the Modelo 232 declaration threshold requirements | |
| All filed tax returns (Modelo 200, 303, 390, 347, 232, 720) are current and filed on time | |
| Tax provisions have been reviewed by a tax specialist in the past 12 months |
Common findings: Deferred tax on timing differences from accelerated tax depreciation (amortización acelerada fiscal) not booked. Deferred tax assets on tax losses recognised without a documented recoverability assessment. Tax contingencies (typically open AEAT inspection periods) not disclosed.
Area 6: Financial Statement Disclosures
| Item | RAG |
|---|---|
| Notes to the annual accounts cover all mandatory sections of PGC (at least PGC abreviado sections) | |
| Going concern assessment has been performed and documented for the past 12 months | |
| Events after the reporting date have been reviewed and any material subsequent events disclosed | |
| Contingent liabilities (legal claims, guarantees) are identified and assessed for provision or disclosure | |
| Related-party note (PGC note 25) is complete | |
| Remuneration of directors and senior management is disclosed | |
| Segment information (if applicable) is prepared | |
| Audit committee composition (if applicable for PIE) meets independence requirements of Ley 22/2015 |
Area 7: IFRS Reconciliation (for Foreign-Owned or Consolidating Entities)
This area applies only if the company prepares an IFRS package for group consolidation in addition to PGC accounts.
| Item | RAG |
|---|---|
| IFRS 16 lease adjustments are calculated and documented for all material leases | |
| IFRS 15 revenue recognition adjustments are identified and calculated | |
| IFRS 9 financial instrument reclassifications are documented | |
| PGC-to-IFRS adjustment bridge is prepared and reconciles both balance sheet and P&L | |
| IFRS package is prepared on the same timetable as the PGC accounts | |
| Group reporting instructions are received and followed | |
| Goodwill and purchase price allocation from any acquisition is documented |
Example Findings by Sector
Technology and software: Revenue recognition (SaaS subscriptions, multi-element arrangements under PGC vs. IFRS 15), capitalisation of software development costs under PGC section 6.
Real estate and construction: Percentage-of-completion vs. completed contract, intercompany property transactions, related-party financing.
Distribution and retail: Inventory valuation, cut-off at year-end, sales return provisions.
Professional services: WIP cut-off, deferred revenue, intercompany management fee documentation.
Next Steps
Once you have completed the RAG assessment, the items rated Red represent your highest-priority audit risks. If you have more than eight Red items, a full audit readiness programme is warranted before your next audit. For a breakdown of what that programme involves, see audit readiness services for SMEs.
For companies with limited time or budget, the SME audit readiness quickstart provides a 30-60-90 day action plan for the highest-impact items.
External references:
- ICAC — Plan General de Contabilidad — PGC text and ICAC guidance notes
- BOE — Ley 22/2015 de Auditoría de Cuentas — audit law and independence rules
- IAASB — ISA 315: Identifying and Assessing Risks — international standard underlying NIA-ES 315
