What to keep in mind
The first step is to define the audit's purpose. It may concentrate on governance, contracts, representation, public registry compliance or a combination. The scope should match business size, activity and the reasons for reviewing it: a small company and a diversified group with many long-term contracts have different needs.
In corporate matters, current bylaws are compared with actual resolutions, minutes, shareholder records and registry filings. Directors' appointments, signatory authority and consistency between internal documents and public records should be verified.
Contracts are examined from the perspective of risk and business continuity. Obligations that may be triggered by expiry, breach, share transfer or reorganization deserve attention, as do guarantees, exclusivity, confidentiality and restrictions on assignments or changes of control.
Preventive audits may uncover issues that routine business processes overlook: incomplete minutes, informal understandings inconsistent with written contracts, outdated powers of attorney or resolutions adopted by the wrong corporate body. Each finding requires its own legal assessment. Not all documentary irregularities are equally serious or invalidate related acts.
The report should prioritize findings, explain possible consequences and recommend correction options. It must also identify limitations, particularly where records are unavailable or specialist evidence is needed.
Conducting preventive audits before significant events, such as admitting investors, selling equity or restructuring, can reduce delays and disputes affecting transaction value or feasibility.
Distinctions often confused
A preventive audit is not identical to buyer-side due diligence. The former may be undertaken voluntarily by a company to improve its position; the latter is tied to risk assessment for a particular purchase.
Identifying a risk also does not mean that loss has occurred or liability has been legally determined. Observations, contingent liabilities and due obligations should be distinguished.
Frequently asked questions
Can a preventive audit help prepare a company for sale?
How often should a legal audit be conducted?
Informational content. It is not a substitute for professional advice.