Calls had been made for the Charity Commission to investigate claims of financial mismanagement at Capricorn Animal Rescue in Mold.
The commission confirmed it was looking into the administration of the charity by trustees after a visit revealed "serious" issues.
The charity's trustees said they were working with the commission.
The watchdog said it had given regulatory advice and guidance to trustees on how to improve running the charity.
A spokesman said it had monitored the charity's compliance with its guidance, visited its sites in October 2016 and then inspected its books and records.
It found "clear and on-going serious regulatory issues" including inadequate financial controls, failure to safeguard and properly account for the charity's assets, and potential unauthorised trustee benefit.
The inquiry, which started on 9 February, will examine:
In order to protect the charity's assets, the commission said it has frozen its bank accounts.
In a statement, Capricorn Animal Rescue trustees said: "The trustees are aware of the investigation and are working with the Charity Commission in this matter."
The sanctuary has also been the subject of a BBC Wales Week in Week Out programme which exposed animals being kept in poor conditions.
The watchdog said it was aware of concerns from members of the public about the welfare of animals in its care.
But it said this did not fall within its remit and any concerns should be directed to the RSPCA.
The RSPCA said it had been working to help improve animal welfare standards.
A spokesman added: "The statutory inquiry being undertaken by the Charity Commission for England and Wales into Capricorn Animal Rescue and Sanctuary does not relate to animal welfare and, as such, is not within the remit of the RSPCA.
"However, the RSPCA will provide any appropriate assistance which the Charity Commission requests."
An inquiry into a Flintshire animal sanctuary has been opened by a charity watchdog.