But what is most striking is the increase in the number of very serious administrative violations, which rose from 1 to 19 between the 2022 cycle and the current 2023 cycle (the cycles run from July to June).
José Miguel Almeida, Director of the CMVM, presented the “Overall Results of the Audit Quality Control System for the 2023/2024 Cycle”, this Wednesday, the date on which the report on audit activity in that cycle was published.
The auditors’ control activity in the 2023/2024 cycle was distinguished by the opening of 48 control procedures, including 7 regular procedures, 23 deferred procedures, one review procedure, and 17 ongoing procedures.
But what is most striking is the increase in the number of very serious administrative offences, which has risen from one, in the previous 2022 cycle, to 19 in the current 2023 cycle (cycles run from July of one year to June of the following year). José Miguel Almeida justified this significant increase by: gap Between supervisory procedures and processes that go to litigation. Therefore, it is the positions coming from the past that explain this rise in the current cycle.
“Today, the risk is relatively low,” said the CMVM director.
In contrast, serious violations decreased from 62 to 27.
The CMVM revealed that the fines applied in this round amount to 9 fines and the amount reaches 315 thousand euros, compared to 8 and 280 thousand euros in the previous round.
“The annual report aims to communicate the results of the CMVM’s audit oversight activity and allow auditors to have greater predictability and adaptability regarding the expectations of the CMVM’s oversight,” according to the regulator’s context.
CMVM completed 46 supervisory actions, including 1 regular action, 21 specific, 21 ongoing, 2 review actions, and 1 supervisory action related to OROC (Order of Legal Auditors) quality control.
91 violations were recorded.Results) in closed supervisory proceedings, with 27 cases classified as more serious, the Securities and Exchange Commission revealed.
“The 2023/2024 cycle was marked by an intensification of specific supervisory actions, driven by certain market events, such as complaints and other situations relating to auditors,” explains the CMVM.
These specific measures targeted 13 auditors, and an analysis of specific areas of 177 audit work carried out on the accounts of 99 entities, with reference to the years between 2018 and 2022, revealed market monitoring and audit activity.
The 21 specific oversight procedures completed in the 2023/24 cycle focused on professional ethics and professional conduct, independence duties, quality of audit documentation and compliance with the duties inherent in the audit file. Here, irregularities were detected, among other aspects, in relation to matters relating to independence, accounting estimates, related parties, risk response and audit evidence.
The CMVM has conducted a re-evaluation of the quality control supervision process exercised by the Order of Official Auditors (OROC) over auditors of entities not qualified as public interest entities, having decided to include independent and direct bodies in the verification of eight of these files with the aim of improving the effectiveness of the recommendations addressed to this Order in the audit quality control activity.
In detail, in 2023, the CMVM applied 19 very serious administrative violations, for failure to comply, in particular, with the duties to assess and document the existence of threats to independence; independence due to the threat of self-review; for not having adequate and effective internal organisational mechanisms to prevent, identify, eliminate, manage and detect any threats to its independence; and for not recording all relevant threats that could affect its independence in the audit working documents, as well as the preventive measures implemented to mitigate them.
During the same period, 27 serious administrative violations were detected.
Within the scope of the Anti-Money Laundering and Counter-Terrorism Financing Act, 10 administrative offences related to non-compliance with the duty of examination and the duty to identify the beneficial owner have been applied, the CMVM reveals.
“The CMVM aims to contribute to improving the quality of auditing in Portugal by strengthening the supervision of auditors and their audit services and, in this way, increasing the confidence of economic agents,” highlights the regulatory body.
Supervisory procedures in numbers
Regular supervision: seven new; one closed
Close supervision: 23 new, 14 urgent; 21 closed
Ongoing supervision: 17 new supervisions; 21 closed
Cross-over supervision: 1 new; 2 closed
OROC Quality Control Supervision: One action from the previous cycle was closed
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