CMVM publishes global results on the audit quality control system for the 2020/2021 cycle

30 September 2021

Today, the CMVM publishes the report with the global results of the quality control system on the audit activity for the 2020/2021 cycle.

The reporting period, between 1 July 2020 and 30 June 2021, was marked by specific supervisory actions that arose from circumstances observed in the market (e.g., the "Luanda Leaks" case) and the Covid-19 pandemic situation.

Highlights in the 2020/2021 cycle pertaining to the supervisory activity on auditors of PIEs, are:

• Commencement of 6 on-site supervisory actions and completion of 3 on-site supervisory actions (started in previous cycles), wherein 93 findings were identified, including 5 more severe situations;

• Commencement of 28 continuous supervisory actions and completion of 110 actions, wherein findings concerning independence and distinct audit services, client acceptance, use of experts and records were identified; and

• Completion of six urgent supervisory actions (with another three actions being completed in the previous cycle), following media news on the "Luanda Leaks" case, which included nine auditors, 27 audited entities and 84 audit files. These supervisory actions generated 53 recommendations for the targeted auditors and 14 cases for determining the administrative infraction merit.
  

Also worthy of note, is the increase, in the last three years, of administrative infraction proceedings on Statutory Auditors and Audit Firms. In 2020, there was a multitude of serious administrative infractions concerning non-compliance with the duty of rotation of the partner responsible for the audit work, with the duty to document the audit evidence obtained and the respective conclusions. As to the administrative infraction proceedings generated by the CMVM's supervisory activity, one pertained to a judicial review in 2020, with a judgment handed down by the Competition, Regulation and Supervision Court on 21 July 2021, which fully confirmed the facts given as proven in the CMVM Decision, which had been challenged by the Statutory Auditors.

Within the scope of measures to strengthen the quality of auditing in Portugal, emphasis is also given to:

• The publication, in April 2021, of the updated version of the Guide for the Application of Audit Quality Indicators, following the analysis of data received from the six largest audit firms in Portugal for 2019. This analysis identified risks that impact audit quality;

• The entry into force, on 5 April 2020, of CMVM Regulation No. 2/2020 on the prevention of money laundering and terrorist financing, which regulates the duties to be followed by obliged entities that are subject to the supervision of the CMVM and by the auditors; and

• The introduction of simplified and efficient measures by the CMVM on the supervision of the auditor activity of public interest entities (PIEs). The use of irregularity grading instruments provided greater focus on high-risk situations and a more adequate response to different situations.
  

Within the context of continuous improvement in audit quality, the CMVM has a number of ongoing initiatives, such as the amendment of the Legal Framework for Audit Supervision (RJSA) and the Statute of Statutory Auditors (EOROC), the AQI results and supervisory actions based on areas with higher risk or weaknesses.

Promoting auditing quality in Portugal is an objective of the CMVM. It is strategic for strengthening the national economy and the confidence of the Portuguese society and, in this sense, the contribution of the auditors, as well as the governing bodies of the audited entities, namely the supervisory bodies, is essential.

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