The irregularities detected by the Securities Market Commission (CMVM) in supervisory actions for auditors carried out in the 2021/2022 cycle more than doubled compared to the 2020/2021 cycle, going from 199 to 488.
The report “Global Results of the Audit Quality Control System”, released this Tuesday by the regulator, registers 48 significant irregularities to which another 440 irregularities are added in the 2021/2022 cycle, between June 1, 2021 and June 30, 2021. 2022, facing six major irregularities and another 193 in the previous cycle.
The director of the CMVM, Miguel Almeida, in the presentation of the report, justified this increase with the increase in supervisory actions, since in the previous cycle the “Luanda Leaks” case was presented, whose supervisory actions were triggered at the beginning of 2020, absorbed almost 40% of the resources, now applied in other actions, but pointed out that the average number per report has decreased.
In the 2021/2022 cycle, 13 on-site supervision actions were opened by the CMVM —against 6 in the 2020/2021 cycle and one in the 2019/2020 cycle—, 174 continuous supervision actions (against 28 and 138, respectively) and, in the same period, 21 on-site supervision actions were concluded (actions initiated in previous cycles).
Among the irregularities detected, the regulator highlights, in the report presented, inappropriate documentation on the analyzes and challenges made to the relevant hypotheses on which the significant accounting estimates are based, insufficiencies in the identification of threats to the auditor’s independence, non-existent procedures /insufficient in terms of the audit of economic groups, insufficient procedures to respond to the risks of material misstatement, failures in the process of filing work papers and insufficient documentation of the participation of the quality control reviewer, the person responsible for monitoring and the responsible partner.
In 2021, three very serious infractions were imposed, related to the non-communication to the CMVM of information on situations that could lead to the issuance of an opinion with qualifications (two infractions) and the duty to issue a reasoned disclaimer when the subject evaluation is non-existent, materially insufficient, or covert (an administrative infraction).
In the same period, 52 serious infractions and 10 less serious infractions were applied, highlighting in the serious infractions the lack of adequate documentation of the audit evidence and conclusions of said evidence, including the documentation of important facts that are known to the auditor (32 faults) and the duty to rotate the partner in charge of directing or carrying out the legal audit of the accounts (11 faults).
In 2021, 11 administrative infractions related to the Law to Fight Money Laundering and the Financing of Terrorism were also applied, highlighting the report the breach of the duty of control (8 infractions).
According to the report, the global value of audit fees (EIP and NEIP) increased by 4% in this cycle, mainly due to the increase in the number of reports issued.
“However, the average fees per report issued remain, in some cases, at very low levels, which confirms the persistent low remuneration of the audit services provided,” the document reads.
The CMVM report also indicates that, in order to obtain useful information for audit supervision purposes, in the 2021/2022 cycle interactions were carried out with the auditors of the Public Interest Entities (EIP) which concluded that 24 of the audit firms (52%) invested less than €20,000 (accumulated value in 2020 and 2021) in audit technology, with nine firms (20%) not investing.
Source: Observadora
