Brazil

The financial reporting framework in Brazil is established under the Corporations Law No. 6404/76 of 1976, amended in 2007 by Law No. 11638/07 to align financial reporting requirements in Brazil with international benchmarks. The Corporations Law requires all companies to prepare financial statements in accordance with Brazilian generally accepted accounting principles (Brazilian GAAP). PIEs are defined in Brazil as listed companies, mutual funds, financial institutions, insurance companies, and large companies. In addition to complying with the requirements of the Corporations Law, PIEs are under the legal obligation to additional financial reporting requirements issued by the respective regulatory bodies.

• The Securities and Exchange Commission (CVM) supervises listed companies and investment funds;
• the Central Bank of Brazil (BCB) oversees the banking sector and financial institutions; and
• the Superintendence of Private Insurance (SUSEP) monitors the insurance and open pension funds markets; and
• the National Superintendence for Complementary Pensions (PREVIC) supervises the closed pension funds.

All corporate entities must comply with the National System of Commercial Registry (SINREM) filing requirements.

As defined in the Corporations Law, a company or group of companies under common control whose total assets in the previous year amounted to over R$240 million or whose total gross annual revenues exceed R$300 million are considered large companies. An entity not meeting one of those thresholds is considered a small- and medium-sized entity (SMEs).

Accounting Framework

The Decree Law 9295/46, amended by the Law 12249/10, delegates the Federal Council of Accounting (CFC) the responsibility for issuing accounting standards. In 2005, the Brazilian Accounting Pronouncements Committee (CPC) was created by the CFC Resolution 1055/05, to systematize and centralize the standard-setting process and promote international convergence of accounting standards. The CPC issues Brazilian GAAP, and its standards are enforced by the CVM, BCB, SUSEP, PREVIC, and CFC. As reported by the CFC, since 2010, Brazilian GAAP has been fully converged with IFRS, with an ongoing system in place to incorporate new and revised IFRS as they become available.

Non-PIEs are obliged to prepare their financial statements in accordance with the Brazilian GAAP but are permitted to use IFRS for the consolidated financial statements, although there are no differences between Brazilian GAAP and IFRS. SMEs are required to apply the Brazilian GAAP for SMEs that is converged with the IFRS for SMEs and are allowed to use full Brazilian GAAP. In 2021, CFC issued a standard for small entities (annual gross less than R$ 78 million) and another for micro-sized companies (annual gross less than R$ 4.8 million). Both standards are aligned with the IFRS for SMEs.

Auditing Framework

The Corporations Law No. 6404/76 of 1976, amended in 2007 by Law No. 11638/07, establishes the requirements for performing audits of financial statements. Audits are to be conducted by an independent auditor registered with the CVM.

The CFC has the legal mandate to set auditing standards for all companies—including PIEs—under Decree Law 9295/46, as amended by Law 12249/10. CFC and the Brazilian Institute of Independent Auditors (IBRACON) report that since 2005, Brazilian auditing standards had been fully converged ISA, with an ongoing system in place to incorporate new and revised ISA as they become available.

In 2020, the CFC published Resolution 1601/20, which mandates the adoption of ISA for all financial audits of public sector standards. The Audit Institutions must adopt them by 2024, and early adoption is permitted.

The accountancy profession in Brazil is self-regulated under the Decree Law 9295/46, as amended by the Law 12249/10. The Law recognizes the Federal Council of Accounting (CFC) as an independent, non-governmental entity responsible for regulating the accountancy profession.

The CFC along with its regional arms—Regional Accounting Councils (CRCs)—carries out the following regulatory activities: (i) monitoring accountancy practices; (ii) setting accounting and auditing standards; (iii) conducting the professional examination; (iv) establishing the requirements for technical qualifications; (v) setting ethical standards for the profession; (vi) establishing and operating a quality assurance (QA) review system for all audits; (vii) setting and enforcing continuing professional development (CPD) requirements; and (viii) implementing an investigation and discipline system for the profession. As subsidiaries of the CFC, the CRCs are responsible for administering the CFC directives, registering professional accountants, and providing support in overseeing the profession.

Individuals wishing to qualify as a public accountant or auditor—the only regulated categories of professional accountants in the jurisdiction—are required to complete a bachelor’s degree in accounting sciences offered by an institution recognized by the Ministry of Education. Subsequently, candidates must complete the CFC’s professional examination and be registered members of a CRC in the jurisdiction in which they reside. In addition, regulatory bodies (i.e., the Securities and Exchange Commission (CVM), Central Bank of Brazil (BCB), Superintendence of Private Insurance (SUSEP), and/or the National Superintendence for Complementary Pensions (PREVIC)) require a Technical Qualification Exam, administered by the CFC, for auditors providing services to regulated companies.

Auditors registered on the CFC’s Cadastro Nacional dos Auditores Independentes (CNAI) and those providing services to companies participating in the securities market and companies with a turnover over R$78 million are subject to mandatory CPD requirements. In addition, in 2015, CFC issued a new regulation that requires public accountants who prepare or oversee the preparation of financial statements of public interest entities (PIEs) to also fulfill CPD obligations.

In accordance with Securities Law No 6385/76, the Securities and Exchange Commission (CVM) is authorized to regulate the activities of CVM-registered auditors. This includes maintaining a registry of auditors, establishing and operating systems of quality assurance (QA) and investigation and discipline (I&D), and prescribing CPD requirements. These auditors must attend the CFC’s and IBRACON’s CPD programs, which are monitored by the CVM.

Only auditors providing services to companies participating in the securities market are subject to independent audit oversight. In accordance with Securities Law No 6385/76, the Securities and Exchange Commission (CVM) is authorized to regulate the activities of these registered auditors. This includes maintaining a registry of auditors, establishing and operating quality assurance systems (QA) and investigation and discipline (I&D), and prescribing CPD requirements. The CVM is a member of the International Forum of Independent Audit Regulators.

All other auditors are subject to regulation by the Federal Council of Accounting (CFC) which is further described in the

The Federal Council of Accounting (CFC)

The CFC, established by the Decree Law 9295/46, as amended by Law 12249/10, is an independent, non-governmental entity responsible for regulating the accountancy profession. The CFC, along with its regional arms—Regional Accounting Councils (CRCs)—carries out regulatory activities throughout the country.

The CFC's responsibilities include: (i) monitoring accountancy practices; (ii) setting accounting and auditing standards; (iii) conducting the professional examination; (iv) establishing the requirements for technical qualifications; (v) setting ethical standards for the profession; (vi) establishing and operating a quality assurance (QA) review system; (vii) setting and enforcing continuing professional development (CPD) requirements; and (viii) implementing an investigation and discipline system for the profession. The CRCs, as subsidiaries of the CFC, are responsible for administering the CFC directives, as well as for registering professional accountants (as either one of the two qualifications: public accountant or auditor) and providing support in overseeing the profession.

In addition to being an IFAC Member, the CFC is a member of the Inter-American Accounting Association (AIC), the Group of Latin American Accounting Standard Setters (GLENIF), the Committee of Integration for Latin Europe and America (CILEA), and the Union of Accountants and Auditors of Portuguese Language (UCALP).

The Brazilian Institute of Independent Auditors (IBRACON)

IBRACON is a private organization established in 1971 to promote the advancement of the audit profession. As a voluntary professional organization comprised of auditors, IBRACON represents and promotes the audit profession, develops training activities, and drives improvements to professional practices.

IBRACON cooperates with the CFC regarding technical and ethical issues involving the accountancy profession, assists with the translation and interpretation of accounting and auditing standards, supports the implementation of quality control/management standards, and works towards enhancing professional education. IBRACON is the official translator of the IFRS and IFRS for SMEs issued by the IASB in Brazil and provides translation assistance for the Brazilian auditing standards.

In addition to being an IFAC Member, IBRACON is a member of the Inter-American Accounting Association (AIC), the Committee of Integration for Latin Europe and America (CILEA), and the Union of Accountants and Auditors of Portuguese Language (UCALP).

Mandatory quality assurance (QA) reviews are required only for audit firms that provide services to listed companies, the banking sector, financial institutions, and insurance companies.

Under the Securities Law No 6385/76, the Securities Exchange Commission (CVM) is responsible for conducting the reviews; however, in practice, it oversees the system operated by the Federal Council of Accounting (CFC) and the Brazilian Institute of Independent Auditors (IBRACON). Under the Law, the CVM and the CFC have shared responsibility for QA review of audit firms.

The CFC and IBRACON set up the External Quality Review Managing Committee Program (CRE) to manage the QA review system in the jurisdiction. The CFC and IBRACON report that the peer review system incorporates most of the SMO 1 requirements; however, reviews of audits for PIEs are subject to a four-year cycle instead of three. Nonetheless, the CFC and IBRACON state that a significant number of auditors or audit firms are in a cycle of less than four years since reviews with non-clean conclusions are automatically rescheduled for the following year. In addition, as reported by CFC, in 2022 it is expected that the requirement will be changed to a three-year cycle for PIEs.

In 2019, CFC created the Cadastro Nacional dos Auditores Independentes Pessoa Jurídica (CNAIPJ), a voluntary register of audit firms providing services to non-PIEs. Firms in the CNAIPJ registry are subject to QA reviews as of 2021.

Current Status: Partially Adopted

In Brazil, the Ministry of Education (MEC), the Federal Council of Accounting (CFC), the CFC’s Regional Accounting Councils (CRCs), under Decree Law 9295/46, amended by the Law 12249/10, and the Securities Exchange Commission (CVM), under the Securities Law No 6385/76, are all involved in setting initial professional development (IPD) and continuing professional development (CPD) requirements for professional accountants.

Individuals wishing to qualify as a public accountant or auditor—the only regulated categories of professional accountants in the jurisdiction—are required to complete a bachelor’s degree in accounting sciences offered by an institution recognized by the MEC. The MEC regulates the content of the curriculum of undergraduate courses in accounting sciences.

Subsequently, candidates must successfully complete the CFC’s professional examination, and be registered as a member of a CRC in the jurisdiction in which they reside. In addition, other regulatory bodies (i.e., the Securities and Exchange Commission (CVM), Central Bank of Brazil (BCB), Superintendence of Private Insurance (SUSEP), and/or the National Superintendence for Complementary Pensions (PREVIC)) require a Technical Qualification Exam, administered by the CFC, for auditors providing services to regulated companies.

The CFC and the Brazilian Institute of Independent Auditors (IBRACON) report that the IES 1–4, and IES 6 requirements align with the international requirements. In regard to IES 5, CFC and IBRACON report that due to legal restrictions, IES 5 cannot be complied with; however, CFC and IBRACON indicate that, in practice, the majority of university programs require supervised internships before graduation.

As to IES 7 and CPD requirements, auditors registered with CFC on its Cadastro Nacional dos Auditores Independentes (CNAI) and those providing services to companies participating in the securities market, and companies with a turnover over R$78 million are subject to mandatory CPD requirements. The CVM also prescribes CPD requirements for CVM-registered auditors. These auditors must participate in the CPD programs of the CFC or IBRACON, which are monitored by the CVM.

In addition, since 2021, the CFC created a new CNAI for auditors of complementary pension plans supervised by the National Superintendence for Complementary Pensions (PREVIC). Audit professionals working in these entities must be registered with the CNAI and comply with CPD requirements. Lastly, the CFC issued the NBC PA 12, which updated the procedures and documentation of compliance with the CPD program.

The CFC has also issued a regulation that requires accountants who prepare or oversee the preparation of financial statements of any public interest entity (PIE) to fulfill CPD obligations. In 2020, CPD obligations came into effect for accountants of closed pension funds. The CFC reports it is planning to gradually extend the CPD requirement to all public accountants.

Lastly, IES 8 has not been adopted; however, the CFC, IBRACON, and CVM stated in 2017 that they are working on enhancing the educational requirements for auditors.

Current Status: Partially Adopted

The Decree Law 9295/46, as amended by Law 12249/10 empowers the Federal Council of Accounting (CFC) to set auditing standards for audits of all companies—including public interest entities. CFC and the Brazilian Institute of Independent Auditors (IBRACON) reported that since 2005, Brazilian auditing standards had been fully converged ISA, with an ongoing system in place to incorporate new and revised ISA as they become available. New and revised ISA, are reviewed, translated, and republished as Brazilian auditing standards. As of 2022, the 2020 ISA is being applied.

Current Status: Adopted

The Decree Law 9295/46, as amended by Law 12249/10, grants authority to the Federal Council of Accounting (CFC) to adopt ethical requirements for the accountancy profession in Brazil. The CFC, in collaboration with the Brazilian Institute of Independent Auditors (IBRACON) adopted a Code of Ethics that is mostly in line with the requirements of the 2016 version of the IESBA Code of Ethics.

As of 2022, CFC plans to update its Code of Ethics—including addressing some differences with the 2016 IESBA Code related to the NOCLAR standard—once national legislative changes are implemented.

Current Status: Partially Adopted

In accordance with the Decree Law 9295/46, as amended by Law 12249/10, the Federal Council of Accounting (CFC) is authorized to set public sector accounting standards. Federal, state, and municipality governments are ultimately responsible for implementing public sector accounting standards, which currently follow a hybrid approach (accrual-cash basis).

In 2015, CFC reconstituted the Convergence Management Committee—which had previously made the decision to converge Brazilian public sector standards with IPSAS as issued by the IPSASB—through Act 112/2015 with the objective of further driving the convergence process. The convergence process started in 2017 and is expected to be completed by 2024:

• In 2017, the IPSAS framework was established and 5 IPSAS were translated into Portuguese;
• During 2017 and 2018, 15 IPSAS were translated and will be effective from 2019;
• In 2019, 5 IPSAS were translated and will be effective from 2021;
• In 2020, 3 IPSAS were issued. IPSAS 18 and 22 will be effective as of 2022 and IPSAS 42 will be effective from 2024.
• In 2021, 4 IPSAS about financial instruments were issued and will be effective from 2024;
• CFC will issue IPSAS 43 – Leases in 2022.
• New IPSAS issued by IPSASB since 2016 will be translated and adopted after 2022; and
• Amendments to the standards already adopted will be translated during the year of issuance and become effective in the following year.

In October 2021, CFC updated its Advisory Board for Public Sector Accounting Standards (GA/NBC TSP) into a Permanent Committee for Standards Applied to the Public Sector (CP CASP). This change will improve the committee's governance and ensure an ongoing system is in place to incorporate new and revised IPSAS as they become available.

Current Status: Partially Adopted

In Brazil, the Federal Council of Accounting (CFC) and its the Regional Accounting Councils (CRCs), under Decree Law 9295/46, as amended by Law 12249/10, have the authority for investigating and disciplining (I&D) professional accountants. Accordingly, the CFC and its CRCs have established I&D systems; however, the CFC reports that the I&D systems operating under its ultimate supervision are not fully in line with the SMO 6 requirements due to a legal impediment that prevents the inclusion of include non-accountants as members of the disciplinary committee.

In addition, the Securities and Exchange Commission (CVM), empowered by the Securities Law No 6385/76, is responsible for the I&D of auditors providing services to companies participating in the securities market. The CFC reports that the CVM’s I&D system it is aligned with the requirements of the SMO 6.

Current Status: Partially Adopted

The Corporations Law requires all companies to prepare financial statements in accordance with Brazilian generally accepted accounting principles (Brazilian GAAP). Public interest entities (PIEs) are defined in Brazil as listed companies, mutual funds, financial institutions, insurance companies, and large companies. In addition to complying with the requirements of the Corporations Law, PIEs are under the legal obligation to additional financial reporting requirements issued by the respective regulatory bodies

In accordance with the Decree Law 9295/46, as amended by Law 12249/10, the Federal Council of Accounting (CFC) has the responsibility for setting accounting standards. In 2005, the Brazilian Accounting Pronouncements Committee (CPC) was created by the CFC Resolution 1055/05, with the goal of systematizing and centralizing the standard-setting process and promoting international convergence of accounting standards. The CPC issues Brazilian generally accepted accounting principles (Brazilian GAAP) and its standards are enforced by the Securities and Exchange Commission (CVM), Central Bank of Brazil (BCB), Superintendence of Private Insurance (SUSEP), National Superintendence for Complementary Pensions (PREVIC) and CFC. As reported by the CFC, since 2010, Brazilian GAAP have been fully converged with IFRS, with an ongoing system in place to incorporate new and revised IFRS as they become available. The IFRS are reviewed, translated, and republished as Brazilian GAAP.

Non-PIEs are obliged to prepare their financial statements in accordance with the Brazilian GAAP but are permitted to use IFRS for the consolidated financial statements, although there are no differences between Brazilian GAAP and IFRS. SMEs are required to apply the Brazilian GAAP for SMEs that is converged with the IFRS for SMEs and are allowed to use full Brazilian GAAP. In 2021, CFC issued a standard for small entities (annual gross less than R$ 78 million) and another for micro-sized companies (annual gross less than R$ 4.8 million). Both standards are aligned with the IFRS for SMEs.

Current Status: Adopted

Relevant Organizations

• Brazilian Institute of Independent Auditors (IBRACON)
• Brazilian Accounting Pronouncements Committee (CPC)
• Central Bank of Brazil (BCB)
• Federal Council of Accounting (CFC)
• International Forum of Independent Audit Regulators (IFIAR)
• National Superintendence for Complementary Pensions (PREVIC)
• Securities and Exchange Commission (CVM)
• Superintendence of Private Insurance (SUSEP)

Relevant Legislation

• Brazilian Presidency, Decree Law 9295/46, 1946
• Brazilian Presidency, Decree Law 12249/10, 2010
• CFC, Brazilian Accounting Pronouncements
• HYPERLINK "https://www2.cfc.org.br/sisweb/sre/detalhes_sre.aspx?Codigo=2021/001638&arquivo=Res_1638.doc" CFC, Resolution 1638/21
• CFC, Resolution 1601/20
• CFC, Resolution 1055/05
• CPC, Brazilian GAAP
• CPC, Brazilian GAAP for SMEs
• CPC, Brazilian auditing standards
• CVM, Resolution 308/99
• Securities Law No 6385/76

Relevant Publications

• CFC–IBRACON, SMO Action Plan, March 2019.
• CFC, Code of Ethics, April 2017.
• Crowe Horwath, Country by Country Financial Reporting and Auditing Framework, Brazil, July 2014.
• IASB, Memorandum of Understanding CFC, CPC, and IASB, 2010.
• IFRS Foundation, “IFRS Application Around the World, Jurisdictional Profile: Brazil,” March 2017.
• IFIAR, IFIAR 2022 Member Profile – CVM, 2022.
• PWC, Doing Business and Investing in Brazil, March 2013.
• National Treasury Secretary (NTS), “The move to accrual accounting and IPSASs Adoption in Brazil: Challenges and Perspectives.”
• Revista de Educação e Pesquisa em Contabilidade, “Brazilian and International Accounting Standards Applied to the Public Sector and the Challenge of Convergence: a Comparative Analysis - IPSAS and NBCTSP,” December 2012.
• World Bank, Report on the Observance of Standards and Codes (ROSC), Accounting and Auditing: Brazil, June 2013.