Investment audit

Professional investment audit is inextricably linked to the achievement of success in any business.

Large investments largely determine the effectiveness of commercial activities, allowing companies to improve technology, achieve satisfactory financial performance and sustainable growth.

Investments are the driving force behind the economy, so the use of effective methods and approaches to auditing investment projects is critical.

Such approaches can be applied to all types of projects in the energy sector, real estate construction, mining, agriculture, heavy industry and other areas.

The investor and capital providers must know what financial effects the planned investment will bring, what are the advantages and weaknesses of the project, and where possible threats are hidden.

Participants must understand what rate of return on investment they can expect and whether the financial burden will be adequately offset by revenue in subsequent periods of the project's operation.

The professional team of Skywalk Investment Group helps clients to predict financial performance and determine the feasibility of a project, choosing the best alternative solutions in terms of their effectiveness and benefits for all parties.

What is an audit of investment projects: definition

Many entrepreneurs and managers intuitively feel the need to invest, but they cannot professionally define what a project should look like.

What are the best sources of funding to choose?

Finally, how much profit will the project bring?

In the past, most companies did not take scientifically sound actions to assess whether a particular investment project would be viable or whether there was more profitable alternative way for it. This led to an irrational allocation of financial resources, a loss of profits and unreasonably high risks for the future of companies and entire industries.

Meanwhile, a professional audit is required to obtain critical answers for the investor and for the capital providers who could finance the project.

Each participant strives to achieve the goal in the shortest and safest way.

Before starting an investment project, two conditions must be met:

1. The investment has been studied and found to be safe and reliable in the long term.
2. The project provides a satisfactory return on investment for all participants.

All this can only be confirmed by running a project through a multi-stage audit process.

An investment audit takes into account numerous risks that were not even included in the financial statements (for example, the qualifications of the personnel of the contractor companies). This involves due diligence of the participants and their financial flows, which ultimately has a significant impact on the success of the project.

The term "audit" comes from the Latin word "to listen" and its origin is associated with the very first economic activity carried out by people.

The first recorded audits date back to 4500 BC.

The ancient Sumerians kept a daily record of their economic activities. As a result of the audit, there was a need for control and regulation. For example, the pharaohs of Ancient Egypt received harvest reports for calculating taxes.

Investment audit means the systematic collection and independent verification of investment documentation in order to determine the effectiveness of part or all of the project and / or the organization (company) that manages it.

Modern investment audit refers to a set of measures for evaluating an investment project, which are carried out at the planning stage in order to determine the level of its effectiveness and feasibility. These activities allow potential investors to align a specific project with strategic business objectives, which is critical in the long term.

These activities include numerous approaches and tools, such as technological control, financial analysis, professional expertise of various types, each of which is important to ensure an appropriate level of reliability and safety of the investment process. The analytical and predictive methods applied by specialized expert teams allow clients to reliably assess the viability of investment projects and look for more profitable ways to use financial resources.

The quality of the audit and the accuracy of the forecasts provided depends on the information that is used by experts in the analysis and evaluation of the project.

Sources of information for conducting a project audit include the following:

• Business plan.
• Financial statements of the company.
• Primary and consolidated accounting documentation.
• Detailed technical documentation for the project.
• Cost estimate documentation, invoices from contractors.
• The contractual framework underlying the investment project.
• Results of examinations (engineering, geological and others).
• Conclusion on the compliance of the project with local law.
• Results of comprehensive marketing research.

Some aspects of the audit will always be subjective, depending on the expert's judgment or the particular approach to project evaluation.

However, experts should take into account the positions of all parties involved in the investment process, including investors and financial institutions that receive an application for loan financing.

Types, approaches and stages of investment audit

The classification of investment audit is extremely diverse.

Financial literature identifies various types of audit, depending on the specific object, method of assessment, goals and objectives of the audit. An example of the classification is shown below.



Types of audit of investment projects:

• Audit of completed project stages. The analysis consists of assessing the achievement of results and compliance with applicable legal regulations. A project can be judged, for example, based on effectiveness and other criteria.

• Audit of planned or unfinished milestones. This type of audit is aimed at determining the feasibility of the project (viability), the achievability of its goals, the rational use of resources, compliance with laws, etc.

• Analysis of companies that manage projects. An audit of investment project management entities allows one to assess the current state and prospects of firms or organizations in the context of effective resource allocation, investment security, etc.

When evaluating large investment projects, various approaches have been identified based on efficiency, rational use of resources, and achievement of goals.

Table: Approaches to auditing large investment projects.

Approach	Brief description
Efficiency analysis	In completed programs, projects or stages, performance will be measured through the relationship between results and planned objectives.
	In work-in-progress programs, projects, or stages, their effectiveness will be determined by the ability of the associated systems to achieve objectives, as well as the effectiveness of the associated control tools.
	In organizations and companies managing large investment projects, efficiency is assessed taking into account the potential of administrative, informational and control systems.
Analysis of the effectiveness of the use of financial resources	The end results of any investment project are closely related to its ability to achieve the intended goals using minimal resources. The purpose of the audit is also to improve its efficiency and find more profitable alternatives.
Analysis of compliance with the obligations of participants in the framework of projects or their stages	In completed programs, projects or project stages, this approach is closely linked to compliance with the administrative legal system and other applicable legal and industry standards.
	In work-in-progress programs, projects or stages, the emphasis is on compliance with applicable legal regulations, development and introduction of internal control systems.
	In the case of organizations or companies managing investment projects, this approach implies an assessment of compliance with the requirements and norms related to the achievement of institutional goals.

One of the tasks of an investment audit is an objective assessment of the economic efficiency of investment projects, based on a comparison of costs with project revenues or other potential non-economic benefits (for example, reputation effect).

The assessment of an investment project should include a number of quantitative and qualitative aspects, including economic indicators (net worth, average rate of return on investment, modified internal rate of return, payback period, etc.)

The most important steps in this study include the following:

• Assessment of the legal component.
• Technical and organizational analysis of the project.
• Analysis of profitability and financial stability.
• Analysis of the sensitivity of the project, etc.

Ideally, this process should be carried out in several stages.

The transition to the next stage should be preceded by a positive assessment of the investment project at an earlier stage. Correctly organized and carried out audit significantly increases the chances of achieving the planned indicators and the success of the business as a whole.



A negative result at any stage makes further costly and time-consuming studies meaningless.

For a potential investor, the reason for the failure does not really matter, whether it is a lack of funding or low profitability.

Table: Stages of the investment audit depending the project phase.

Stages	Brief description
Audit of expert forecasts and estimates	Checking the results of marketing research, investment demand and supply
	Verification of methods for assessing the life cycle of the investment project using complex mathematical methods and modeling
	Validation of methods for analyzing projected profitability.
Checking the readiness of the company for the implementation of a major project	Assessment of methods of forming the investment attractiveness of a company or organization
	Control over the development of an investment project
	Assessment of the methods of project presentation to potential investors and the effectiveness of these methods
	Assessment of methods of negotiating with participants (contractors) and entering into contractual relations
	Assessment of methods for the development of investment resources
	Expert conclusion on the company's readiness to implement the project
Audit of current operations	Control over the accounting system for the receipt and use of investment resources
	Monitoring the system for accounting for the receipt and use of investment resources
	Assessment of the current state of the investment project
	Identification of deviations in the project relative to the planned goals and individual stages
Monitoring the results of investment activities	Comparison and assessment of the compliance of the achieved result and planned goals
	Verification of methods for assessing investment efficiency
	Reports comparison and project control

At any stage, the expert team auditing a large project must comply with the following obvious rules.

On the one hand, it is critically important to evaluate facts and figures in such a way as to avoid overestimating future cash flows and business opportunities. On the other hand, future costs, investment risks should not be underestimated.

Our investment audit services for enterprises and large businesses

Skywalk Investment Group brings together finance and legal professionals who have worked for more than 20 years for the benefit of corporate clients in Spain and around the world.

We offer long-term financing for large projects, develop individual financial models and provide other services to large businesses, ensuring investment safety and sustainable growth of companies.

The investment audit used by our experts focuses on the root causes of crises in companies and projects. These, in addition to a lack of financial resources, include factors such as unfavorable market prospects, poor organization and management, conflicts in decision-making, and others.

Who can benefit from our investment audit services:

• Companies that raise capital and seek to demonstrate independent investment audit results to potential investors, increasing their credibility and expanding their investment opportunities.

• Managers of companies participating in projects who need an independent assessment of the project in order to minimize the risks of their investment decisions and choose the most suitable alternative.

• Companies interested in a merger or acquisition of another business and in dire need of a reliable assessment of the situation and prospects of the upcoming transaction.

• Listed companies that are required to publish audit results to investors may have additional opportunities to gain interest in the stock market.

• Investors who wish to gain access to professionally processed information about the company that is not available to other market participants.

An investment project audit from Skywalk Investment Group is a powerful tool for verifying the data and forecasts provided by your potential partners.

This tool reveals the current state of any business (project) from an alternative point of view, complementing financial audit and other sources of information. Valuable information obtained as a result of investment audits allows our clients to reduce the risk of capital loss.

All our services are based on a confidentiality guarantee.

The reports prepared by us and our partners are provided directly to the client and are not available to others.

Contact SWIG consultants for detailed information on services.