Auditor in a Company: a Formality or a Genuine Instrument for Protecting the Owner’s Interests?

09.03.2026

For many Belarusian companies, the annual general meeting of participants is a familiar, almost routine procedure.

The financial statements are approved, profits are distributed, the management bodies are re-elected — the “items” are ticked off, and business can continue. But is this formality really so harmless? And could it conceal a threat to the owners’ capital?

We suggest looking at the institution of the auditor not as a mandatory but useless attribute of corporate governance, but as a genuine instrument for protecting the interests of the company’s participants, especially when preparing for and conducting annual general meetings.

What the Law Says About the Auditor: Briefly and to the Point

The Law on Business Companies (Article 59) expressly requires the election of an auditor or an audit commission.

The task of this body is to supervise the company’s financial and business activities and to confirm the accuracy of the information presented to the participants.

Moreover, the law provides that the annual financial statements and the distribution of profits are to be approved by the general meeting only taking into account the auditor’s opinion. In other words, without the auditor’s opinion, the resolution of the meeting is, de jure, incomplete.

But from the owner’s perspective, the key issue is something else entirely: who, and in what manner, in your company exercises independent oversight over management decisions that directly affect the value of the business?

Where day-to-day management is delegated to a hired management team, the absence of genuine internal control is not merely a formal breach; it is a strategic risk of loss of value.

The institution of the auditor appeared in Belarusian law as early as 1993, when the first corporate law came into force. At that time, the legislator deliberately created a counterbalance to the executive body in order to protect the interests of the participants.

However, over the course of three decades, the situation has paradoxically reversed by 180 degrees. None of the versions of the law, nor the Code of Administrative Offences, introduced liability for the absence of an auditor. Nor has any body of case law developed in which annual financial statements were set aside due to the absence of an auditor’s opinion.

All of this has led to a persistent belief that the auditor is an optional, almost decorative figure. The development of the audit profession has shifted the focus entirely from internal control to external auditors engaged under contract. The thinking goes: if external auditors check the company once a year, that is enough.

For business, this means the following: control exists on paper, but it does not function as a mechanism for protecting capital.

As a result, the owner learns about problems not at the stage when they arise, but at the stage of loss, conflict or transaction.

When the Auditor Becomes Practically Useful: Two Business Models

In Belarusian practice, two fundamentally different management models have emerged.

1. Model one: the owner manages the business personally. He or she is a participant, personally holds the office of director, is deeply involved in operating processes and sees the financial indicators in real time. In such a configuration, the auditor genuinely appears to be a formality. Why have a controller if you already control everything yourself?

2. Model two: the owners are investors. Day-to-day management has been delegated to a hired CEO and the finance function. The participants may appear at the office once a quarter, or even less often. It is here that the auditor ceases to be a mere “tick-box” requirement and becomes an instrument of capital protection.

It is precisely the auditor who, on a lawful basis, gains access to all documentation, may review transactions, assess risks and report to the owners what management would prefer to conceal. With the help of the auditor, the participants obtain:

• an independent assessment of the company’s financial position;
• reduced risks of abuse;
• additional discipline for hired management.

In circumstances where requirements for transparency and business accountability are increasing, this becomes especially relevant.

Practical Case: a 15% Discount on the Sale of a Business

Theory is theory, but let us look at a real-life situation.

The owners of a manufacturing company decided to sell a 100% interest to a strategic investor.

During due diligence, it emerged that, six months before the transaction, the company had spent a significant amount of money. Funds had been transferred for expensive consulting and marketing services; supplemental agreements had been entered into under lease contracts at rates that were clearly non-market (moreover, without any right of unilateral termination and with lengthy terms); and bonus payments under commercial contracts had been substantially increased.

Formally, the company did have an auditor — the function was performed by an accountant providing outsourced services. No reviews were carried out, he had no real information, and the owners did not monitor the movement of funds under transactions unrelated to the core asset.

The investor characterised the circumstances discovered as a high corporate risk. As a result, the valuation of the business was reduced by 15% from the price initially agreed.

Could the auditor have changed the situation? Had the auditor genuinely performed a control function, he or she could have:

• checked whether the services had in fact been provided and whether supporting documents existed;
• assessed whether the lease rates were at market level and whether the contractual terms were high-risk;
• analysed the economic justification for the bonus payments;
• notified the participants in a timely manner about atypical transactions.

This is not about interfering in day-to-day management, but about an independent review of material decisions. This case clearly shows that an auditor can be an instrument of regular oversight of business transactions and of asset protection.

Broadening the Scope: the Auditor Is Not Only About Accounting

In our view, it may be effective for business to vest the auditor with extended powers going far beyond a simple review of accounting statements. The auditor can and should become the link that closes the “grey areas” of responsibility — issues that neither the director, nor the accountant, nor the managers wish to deal with.

There is no need to reinvent the wheel. The legal basis already exists in the Law on Business Companies. Article 59 grants the auditor the right to conduct inspections in respect of all or several areas of the company’s activities. The key word here is “activities”, and that is not limited to “accounting”. The auditor has access to all documentation and may require explanations from any employees.

The company’s charter and internal regulations (for example, the Regulation on the Auditor) can and should provide for extended control functions, including:

• oversight of major and non-standard transactions;
• review of compliance with internal regulations;
• oversight of high-risk areas (personal data, IT infrastructure, occupational health and safety).

Accordingly, the owners receive a universal supervisory body — the participants’ “eyes and ears” in all areas where hired managers lack either the competence or the willingness to deal with “non-core” matters.

The Key Condition Is Independence

For the auditor to work effectively, one simple but critically important rule must be observed: the auditor must report directly to the general meeting of participants, not to the director. The auditor’s remuneration must be determined by the owners.

Only then is it possible to achieve independence and ensure the receipt of information about the true state of affairs.

A properly structured internal control system is not a bureaucratic burden, but an investment in the sustainability of the business.

It makes it possible to:

• prevent internal conflicts;
• increase trust on the part of investors and partners;
• minimise claims from regulatory authorities;
• protect capital from the “human factor” (negligence, unwillingness to assume responsibility, and sometimes outright bad faith).

When should the internal control system be reconsidered?

1. before the sale of the business or the attraction of an investor;
2. when scaling up and increasing turnover;
3. when delegating day-to-day management;
4. when conflicts arise between participants;
5. when the CEO or finance director changes.

At these points, the risk of loss of business value is at its highest.

By Way of Conclusion

An auditor in a Belarusian company may be anything: a “sleeping” figure remembered once a year, or a real protector of the owners’ interests. The choice lies with the participants of the company.

But if the business is managed by hired managers, if the participants do not see the finances on a day-to-day basis, and if a sale of the business or the raising of investment is being planned, there is reason to reflect. Perhaps the formal auditor required by law should finally become an instrument that preserves your money.

What protects it is a functioning internal control system.

If you want to be confident that hired management is managing the asset in your interests, discuss with us the control architecture appropriate for your business.

REVERA works with owners who value capital and think one step ahead:

1. it diagnoses the internal control system;
2. it designs an audit control model taking into account the specifics of the business;
3. it prepares the company for due diligence and transactions;
4. it helps minimise the risks of management abuses.

A strong internal control system is not a formality, but a factor in the capitalisation of the business.

Authors: Maryna Matsiuk, Artem Handriko.