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    Country by Country Financial Reporting and Auditing Framework

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    Brazil, Crowe Horwath Brazil (prepared July 2014)

    Preparation of and Filing of Statutory Financial Statements

    Corporations and Limited Liability Companies (Limitadas) are required to prepare annual financial statements.

     

    Corporations and limited liability companies with assets above the amount of R$ 240 million or sales over R$ 300 million are considered as large companies and have the same obligations of listed companies.

     

    Listed companies are required to file their financial statements with the Brazilian Securities Commission (CVM) within 3 months after the balance sheet date. Private corporations are required to file their financial statements with the State Official Press before their General Meeting 4 months after the balance sheet date, where the shareholders have their approval.

     

    All corporations and Limitadas are required to prepare full financial statements comprising a balance sheet, an income statement, a statement of changes in financial position, a statement of cash flows and explanatory notes to the financial statements. Listed Corporations are also required to prepare a statement of value added and file a management report. Certain small and medium sized companies have an option to file abbreviated financial statements with local Newspaper but have to file the full set in the State Official Press. Abbreviated financial statements provide for some reduced disclosure, e.g. a condensed balance sheet and less notes disclosures.

     

    Economic groups are required to prepare and file consolidated financial statements that also comprise a group management report.

     

    Financial Reporting Framework

    Listed companies in Brazil are required to prepare their group financial statements in accordance with the accounting principles generally accepted in Brazil (BrGAAP) that is fully in line with the International Financial Reporting Standards (IFRS) except for some specific industries.

     

    Listed companies are required to present condensed financial statements quarterly.  Financial institutions and insurance companies are required to present and publish condensed financial statements semi-annually. The condensed financial statements are also subject to a statutory audit.

     

    Actually the Brazilian regulatory environment has 4 financial reporting frameworks. The framework established by CVM is applicable for listed companies, large limited Liability Companies and insurance companies. The framework established by the Brazilian Central Bank (Bacen) is applicable for financial institutions as banks and brokers. Small and medium size companies apply the SMEs Standards, issued by Federal Board of Accountants (CFC). Investment funds have a specific financial reporting framework, considering each kind of investment.

     

    Brazilian GAAP statutory financial statements are the starting point for determining the taxable income of an entity for corporation and trade tax purposes in Brazil, but have to be adjusted to the tax rules that conflict to the accounting principles.

     

    Audit Requirements for Corporations and Limited Liability Companies (Limitadas) Registered in Brazil

    In general, all medium and large sized corporations and Limitadas although not mandatory have an audit on their statutory financial statements. Regardless of their size, all listed companies, financial institutions, insurance companies and other regulated industries are subject to a statutory audit.

     

    Large sized limited liability companies (limitadas) with assets above R$ 240 million and/or sales over R$ 300 million are also subject to a statutory audit.

     

    Audit Exemption

    Subject to the above, small private corporations and limitadas may not need an audit of their annual accounts - unless the company's articles of association say it must or enough shareholders ask for one.  Alternatively, there may be a requirement specified by other third parties for an audit (i.e. in a bank loan/ suppliers).

     

    Audit Appointment, Rotation and Joint Audits

    Auditors are elected by the shareholders and appointed by management or the audit board, if it exists, usually for one year.  Brazil has specific rules set by regulatory bodies as Brazilian Stock Exchange Commission (CVM); Brazilian Central Bank (Bacen) and other regulatory bodies with specific rules relating to mandatory rotation of audit firms. The most common is after 5 years of continuous service provided with the minimum period of 3 years for rehiring. Some define auditors rotation as CVM and others just partner rotation. Joint audits are very rare in Brazil. Most of them are related to public companies that are registered in other stock exchange markets like the NYSE and Nasdaq having to comply with local and international rules.

     

    Auditing Standards

    Crowe Horwath Brazil member firms are required to carry out their audits and express an opinion on the financial statements in accordance with auditing standards promulgated by the Brazilian Institute of Accountants (IBRACON) and the Federal Board of Accountants (CFC). Those standards require us to comply with the Ethical Standards for Auditors in Brazil. The auditing standards issued by the IBRACON and CFC are largely consistent with the ISA issued by the IAASB.

     

    The standards on review engagements, on assurance engagements, on related services and on quality control were issued by CFC are also largely consistent with the ISREs, ISAEs, ISRSs and ISQCs  issued by the IAASB.

     

    Ethical Framework

    Crowe Horwath Brazil member firms are bound by the Code of Ethics promulgated by the IBRACON and CFC that is based on the IFAC Code of Ethics.

     

    Audit Regulation

    All Crowe Horwath Brazil member firms are subject to the following external and internal monitoring processes with regard to their audit practice.

     

    External Monitoring

    The audit practices in Brazil are subject to periodic external peer reviews. The peer reviews have to be completed successfully every two years.

     

    In addition to the external monitoring through obligatory peer reviews, audit practices that are carrying out statutory audits of public interest entities are additionally subject to inspections performed by the Brazilian Stock Exchange Commission (CVM), Brazilian Central Bank (Bacen) and other regulatory bodies.


    Internal Monitoring

    Each member firm establishes an annual monitoring process known as internal inspections. The internal inspections are led by the Quality Assurance Partner within each firm. The results of the annual internal inspections are used to develop and further enhance the quality of the audit processes.

     

    Transparency Report

    The Brazilian member firms are not preparing a transparency report yet.


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