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Policy of Operation

POLICY OF OPERATION

Law n. 6.385, of December 7th 1976, which rules the market of securities and created the Comissão de Valores Mobiliários (Security and Exchange Commission), determines in art.26 that only companies of accounting auditing or independent accounting auditors registered in the Comissão de Valores Mobiliários can audit the accounting statements of open companies, institutions, societies or companies which make up the system of distribution and intermediation of securities.

Exercising the power that was given it in the law, the Comissão de Valores Mobiliários pushed forward CVM Instruction n. 04 initially in October 24th 1978, instituting the first standards for registration of independent auditors and defining the conditions in which they can occasion refusal, suspension or cancellation.

It is important to emphasize that, many years later and having introduced various alterations in standards, the basic principles which guide the initial position of the CVM continue valid and updated. They are:

  • the importance of an independent auditing system as indispensable support for the regulating organ;
  • the figure of independent auditor as an indispensable element for market credibility and as instrument of inestimable value in protecting investors, in the measure that their function is to watch over the accountability and trustworthiness of the accounting demonstrations of the audited entity;
  • the exactitude and clarity of the accounting statements, including the divulgation of explanatory notes for information indispensable to the visualization of the assets and financial situation and results of the audited entity, depend on an efficient auditing system and fundamentally on the auditor’s realization of their true role within this context; and
  • the necessity that the market makes use of highly qualified independent auditors and that, at the same time, enjoy an elevated degree of independence in the exercise of their activity.

The reformulation then implemented has become imperative in face of recent facts amply divulged, which have lead society in general to question the capacity of independent auditors to serve the basic principles mentioned, putting into doubt the validity of the obligatory auditing system.

Considering that market reliability in relation to the competence and the independence of the independent auditors is a fundamental requirement to be maintained, normative organizations, such as CVM, understand that they must revise their standards and institute new mechanisms that aim at the maintenance of those attributes, having as objective the introduction into this regulation of new mechanisms, such as exam of technical qualification, the program of continued education and internal and external quality controls, in addition to exemplifying activities which characterize the conflict of interests when they are exercised concomitantly with the provision of independent auditing services to the same client.

In sum, with the reformulation, the CFC and CVM have as objective to promote this market of auditors who have elevated technical qualification, and at the same time, the attributes of competence, ethics and independence which are required of these professionals, which include:


  1. Independent auditors must maintain a policy of continued education for their entire functional team and for themselves, accordingly, according to the directives approved by the Federal Accounting Council - CFC and by the Brazilian Institute of Accountants - IBRACON, with aims to guarantee quality and fulfillment of standards which govern the exercise of the activity of auditing of accounting statements.
  2. The independent auditor, in the exercise of their activity must fulfill, on the part of their employees and managers, the internal and external standards applicable to each auditing.
  3. The Auditor, and all their associated and members of the technical team, must also observe the standards set by the Federal Accounting Council - CFC and technical pronouncements of the Institute of Independent Auditors of Brazil - IBRACON, in what refers to as professional conduct, the exercise of activity and emission of legal opinions and auditing reports.
  4. In the exercise of their activities within the ambit of the security and exchange commission, the independent auditor must additionally:
    1. Verify:
      • Whether the accounting statements and the auditing opinion were divulged in the journals in which their publication was obligatory and whether these correspond to the audited accounting statements and the report or legal opinion originally emitted;
      • Whether the information and financial and accounting analyses presented in the entity’s administration report are in consonance with the audited accounting statements;
      • Whether the destinations of the entity’s result are in accord with the clauses of corporate law, with its articles of incorporation and with the standards set by CVM; and
      • The eventual non-fulfillment of legal clauses and regulations applicable to the activities of the audited entity and/or relative to their condition of member entity of the security and exchange commission, which have or can come to have relevant reflexes in the accounting statements or operations of the audited entity.
    2. Draw up and send to the administration and to the Audit Committee a detailed report when solicited which contains their observations with respect to the deficiencies or inefficacy of the internal controls and accounting procedures of the audited entity;
  5. Keep safe for the minimum period of five years all documentation, correspondence, work papers, reports and legal opinions related to the exercise of its functions;
  6. Indicate with clarity and to what degree the accounts or subgroups of the asset, liability, result and net worth accounts which are affected by the adoption of accounting procedures conflicting with the Fundamental Principals of Accounting, as well as the effects on the compulsory and profit dividends or loss per share, accordingly, whenever emitting a report of special review or adverse legal opinion or with reservation;
  7. In the case of substitution by another auditor, allow for the safe maintenance of confidentiality aspects through previous agreement of the audited entity, and the access of the new contracted auditor to documents and information which serve as a basis for the emission of reports of special reviews and legal opinions from auditing of previous exercises.