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Belgium

Financial Ratio Analysis in Belgium — ISA 520 / ISA 570

Financial ratio analysis in Belgium is performed by réviseurs d'entreprises / bedrijfsrevisoren applying ISA as adopted through EU regulation and supplemented by national guidance from the Institut des Réviseurs d'Entreprises / Instituut van de Bedrijfsrevisoren (IBR-IRE). Belgium's bilingual regulatory environment means that professional standards and guidance are published in both French and Dutch, and practitioners must be familiar with terminology in both languages. The Financial Services and Markets Authority (FSMA) supervises auditors of public interest entities and has included analytical procedures in its quality inspection programme. Belgian financial statements prepared under Belgian GAAP follow the standardised format prescribed by the Banque Nationale de Belgique, which facilitates inter-company ratio comparison through the Centrale des Bilans. This standardised filing system provides Belgian auditors with an exceptionally rich dataset for benchmarking financial ratios.

Regulatory Context — IBR-IRE / FSMA

The IBR-IRE has issued guidance on the application of ISA 520 within the Belgian context, emphasising the need for auditors to leverage the extensive financial data available through the Centrale des Bilans of the Banque Nationale de Belgique. FSMA quality inspections have examined how auditors of public interest entities apply analytical procedures, with findings indicating room for improvement in the precision of expectations, the documentation of investigation procedures, and the linkage between ratio analysis and risk assessment. Belgian corporate law, particularly the Code des sociétés et des associations / Wetboek van vennootschappen en verenigingen (CSA/WVV), includes specific financial tests that create a direct connection between financial ratios and statutory compliance. The IBR-IRE expects that auditors consider these legal requirements when designing their analytical procedures.

Practical Guidance for Belgium

Belgian auditors have a significant advantage in benchmark data availability. The Centrale des Bilans of the Banque Nationale de Belgique collects standardised annual accounts from all Belgian companies, and makes comprehensive sectoral ratio statistics available through its website and statistical publications. The Bel-first database (provided by Bureau van Dijk) offers detailed company-level financial data. Graydon Belgium provides credit assessment data incorporating financial ratios. When computing ratios from Belgian GAAP financial statements, auditors should note the standardised account structure (volledig schema / schéma complet versus verkort schema / schéma abrégé) and the impact of Belgian-specific items such as regularisation accounts (overlopende rekeningen / comptes de régularisation) and provisions for risks and charges measured under Belgian rules. The mandatory filing of standardised accounts in XBRL format further enhances the accessibility and comparability of financial data for ratio benchmarking.

Audit Expectations

The IBR-IRE and FSMA expect Belgian auditors to demonstrate a rigorous approach to analytical procedures that leverages the rich data environment. Specific expectations include the use of Centrale des Bilans benchmark data to inform ratio expectations, documentation of how the auditor's understanding of the entity and its industry informed the ratio selection and expected values, evidence that variance investigation went beyond management inquiry to include corroborative procedures, and clear linkage between ratio analysis findings and the audit risk assessment. For going concern assessments, the alarmbelprocedure (procédure de sonnette d'alarme) under the CSA/WVV creates specific ratio-based triggers that auditors must evaluate. The IBR-IRE has published technical notes on how auditors should assess the net asset position and related financial indicators in the context of this statutory mechanism.

Belgium-Specific Considerations

Belgium's corporate law includes the alarmbelprocedure (Articles 5:153 and 7:228 CSA/WVV), a distinctive mechanism that requires the board of directors to convene a general meeting when net assets fall below certain thresholds relative to share capital. For SA/NV companies, the meeting must be convened if net assets fall below half of the share capital, and the board must propose either dissolution or remedial measures. This statutory test makes the equity ratio and net asset position critical ratios in Belgian going concern assessments. The Belgian insolvency framework under Boek XX of the Wetboek van Economisch Recht / Code de droit économique provides for judicial reorganisation (gerechtelijke reorganisatie / réorganisation judiciaire) and bankruptcy (faillissement / faillite). The cessation of payments test (staking van betaling / cessation de paiements) combined with a shaken credit standing (geschokt krediet / crédit ébranlé) triggers bankruptcy, making liquidity ratios and credit-related metrics directly relevant. Belgian auditors should also consider the Crossroads Bank for Enterprises (Kruispuntbank van Ondernemingen) data when evaluating entity-level risk indicators.

Common Inspection Findings

Auditors did not utilise the Centrale des Bilans benchmark data despite its public availability and direct relevance to the entity's sector.

The alarmbelprocedure thresholds under the CSA/WVV were not evaluated as part of the going concern ratio analysis.

Expectations for substantive analytical procedures were based solely on prior-year figures without external benchmarking or adjustment for known changes in the business.

Variance investigation consisted only of management inquiry, with no corroborative documentary evidence in the audit file.

Ratio analysis was performed at an aggregated level that failed to identify divergent trends across distinct business segments of the audited entity.