Brazil

Member Organizations

Member Organization Associate Other PAOs

  Conselho Federal de Contabilidade
  Instituto dos Auditores Independentes do Brasil

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The financial reporting framework in Brazil is established under the Corporations Law No. 6404/76 of 1976, which was amended in 2007 by Law No. 11638/07 to align financial reporting requirements in Brazil with international standards. The Corporations Law requires all companies—other than public interest entities (PIEs)—to prepare financial statements in accordance with Brazilian generally accepted accounting principles (Brazilian GAAP). PIEs are usually defined in Brazil as listed companies, mutual funds, financial institution, insurance companies, and large companies (SGP).

    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 for which some PIE´s requirements are also applicable. An entity that does not meet 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 setting accounting standards for all companies. 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 GAAP and its standards are endorsed 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.

    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.

    According to the IFRS Foundation, since 2010, IFRS have been mandatory for the consolidated financial statements of companies whose debt or equity securities are traded in a public market. Unconsolidated financial statements follow the Brazilian GAAP. Financial institutions regulated by the BCB that are (a) listed or (b) unlisted but required to have an audit committee, have been required to present their consolidated financial statements prepared in accordance with IFRS as supplemental information since 2010. Insurance companies have also been required to prepare consolidated financial statements using IFRS since 2010. All listed companies have to follow CVM regulations.

    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 CVM that supervises listed companies and mutual funds;
    • the BCB that oversees the banking sector and financial institutions;
    • the SUSEP that monitors the insurance and open pension funds markets;
    • the PREVIC that supervises the closed pension funds; and
    • the CFC that supervises the accountant’s activities.

    All corporate entities are required to comply with the filing requirements set by the National System of Commercial Registry (SINREM) and must file all important corporate documents with SINREM.

    Auditing Framework

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

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

  • Regulation of Accountancy Profession

    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 regulation of 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 CVM-registered auditors; (vii) setting and enforcing continuing professional development (CPD) requirements; and (viii) implementing an investigation and discipline system for the profession. The CRCs, subordinated to the CFC, are responsible for administering the CFC directives, as well as for registering professional accountants and providing support in the oversight of 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 successfully complete the CFC’s professional examination, and be a registered member of a CRC in the jurisdiction in which they reside. In addition, regulatory bodies require a Technical Qualification Exam, administered by the CFC, for auditors providing services to regulated companies.

    All auditors are subject to mandatory CPD requirements. In addition, public accountants who prepare or oversee the preparation of financial statements of public interest entities, regulated companies, large companies (SGP) or with a turnover over R$78 million are also subject to mandatory CPD requirements.

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

    The IBRACON is a second, voluntary PAO in Brazil that is comprised of solely auditors. It endeavors to promote the advancement of the audit profession, develops training activities, and drives improvements in the audit activities.

  • Audit Oversight Arrangements

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

    In addition, auditors are subject to CFC regulation: (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 review system for CVM-registered auditors; (vii) setting and enforcing continuing professional development requirements; and (viii) implementing an investigation and discipline system for the profession. The CRCs, subordinated to the CFC, are responsible for administering the CFC directives, as well as for registering auditors and providing support in the oversight of the profession.

  • Professional Accountancy Organizations

    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 regulation of 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 review system for CVM-registered auditors; (vii) setting and enforcing continuing professional development requirements; and (viii) implementing an investigation and discipline system for the profession. The CRCs, subordinated to 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 the oversight of 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), and the Committee of Integration for Latin Europe and America (CILEA).

    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 standards and works towards the enhancement of professional education. IBRACON is the official translator of the IFRS and IFRS for SMEs issued by the IASB in Brazil and also provided translation assistance with the process of issuing Brazilian auditing standards.

    In addition to being an IFAC Member, IBRACON is a member of the AIC and CILEA.

  • Projects or Other Information

    The Superintendence of Private Insurance (SUSEP) and the National Superintendence for Complementary Pensions (PREVIC), were invited to participate in the External Quality Review Managing Committee Program (CRE) as observers. The invitation envisions create awareness on quality assurance (QA), and analysis of potential participation in the program or establish a similar one, which would result in an improvement of the QA reviews in the jurisdiction.

    Also, the Federal Council of Accounting is studying to create a specific register for audit firms to promote enhancement in the regulation and oversight of the profession.

Adoption of International Standards

  • Quality Assurance

    Mandatory quality assurance (QA) reviews are required only for audit firms that provide services to companies participating in the securities market.

    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 numbers 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, during 2019 it is expected to change the requirements for a three-year inspection for all auditors.

    Current Status: Partially Adopted

  • International Education Standards

    In Brazil, the Ministry of Education (MoE), 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 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 MoE. The MoE 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 and member of a CRC in the jurisdiction in which they reside. In addition, regulatory bodies 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 are in line with the international requirements. In regards 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 prior to graduation.

    As to IES 7 and CPD requirements, all auditors are subject to mandatory CPD requirements. Auditors must attend the CFC’s and IBRACON’s CPD programs, which are monitored by the CVM. In addition, public accountants who prepare or oversee the preparation of financial statements of public interest entities (PIEs), regulated companies, large companies (SGP) or with a turnover over R$78 million are also subject to mandatory CPD requirements.

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

    Overall, although many of the requirements of the IES appear to have been adopted in Brazil, the extent of adoption of the revised IES needs to be further clarified.

    Current Status: Partially Adopted

  • International Standards on Auditing

    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. As reported by CFC and the Brazilian Institute of Independent Auditors, since 2005, Brazilian auditing standards have 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 review, translated and republish as Brazilian auditing standards. As of 2018, the 2016–2017 ISA version is being applied.

    ISA were also adopted for Small and Medium Practices for financial statements on or after January 1, 2012.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    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 adopted a Code of Ethics that is in line with the requirements of the 2012 version of the IESBA Code of Ethics. The Code has been effective since March 25, 2014.

    As of 2019, CFC plans to update its code of ethics, including some differences with the 2016 IESBA Code related to the NOCLAR standard.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    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 mixed approach (accrual-cash basis). The public sector regulator is the Tribunal of Accounts of Brazil, a supreme audit institution.

    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.

    Beginning in 2017, a gradual adoption began as follows:

    • In 2017, the IPSAS framework was established and five IPSAS were translated into Portuguese;
    • During 2017 and 2018, 21 IPSAS were translated, 15 will be effective from 2019 and the remaining six from 2021;
    • Another 11 IPSAS will be translated between 2019 to 2021 and will have 2022 as an effective date;
    • 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.

    Current Status: Partially Adopted

  • Investigation and Discipline

    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) as 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 Law 13506/17 establishes penalties/fines to public accountants and auditors providing services to listed companies, mutual funds and financial institutions, after appropriate investigation and due process set in the law and regulations. The extent of alignment of the CVM’s I&D system with the requirements of SMO 6 needs further clarification.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    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 for all companies. 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 endorsed 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 review, translated and republish 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.

    According to the IFRS Foundation, since 2010, IFRS have been mandatory for the consolidated financial statements of companies whose debt or equity securities are traded in a public market. Unconsolidated financial statements follow Brazilian GAAP. Financial institutions regulated by the BCB that are (a) listed or (b) unlisted but required to have an audit committee, have been required to present their consolidated financial statements prepared in accordance with IFRS as supplemental information since 2010. Insurance companies have also been required to prepare consolidated financial statements using IFRS since 2010. All listed companies have to follow CVM regulations.

    Current Status: Adopted

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IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 06/2019
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