Notice No. 09-2021 of July 5

PUBLISHED IN THE OFFICIAL GAZETTE, FIRST SERIES, NO. 124, OF JULY 5, 2021 NOTICE NO. 09/2021 of June 18 SUBJECT: FINANCIAL SYSTEM

• External Audit Considering the importance of External Audit for strengthening confidence in the accounting and prudential information issued by Financial Institutions. Given the need to regulate the provision of External Audit services and the certification of accounts of Financial Institutions supervised by the Banco Nacional de Angola. In accordance with the provisions of Article 21 and Article 51, all of Law No. 16/10 of July 15, Law of the Banco Nacional de Angola, Article 236 of Law No. 14/21 of May 19, Law of the General Regime of Financial Institutions, combined with Law No. 3/01 of March 23, on the practice of Accounting and Audit, and Presidential Decree No. 232/10 of October 11, on the Statute of the Order of Certified Accountants and Accounting Experts. I HEREBY DETERMINE:

Article 1. (Object) This Notice aims to regulate the external audit activity in Financial Institutions authorized by the Banco Nacional de Angola, whose main object is the analysis of financial statements as of the closing date(s) of accounts.

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Article 2. (Scope)

1. This Notice applies to Financial Institutions under the supervision of the Banco Nacional de Angola, provided for in Law No. 14/21 of May 19, Law of the General Regime of Financial Institutions, hereinafter abbreviated as Institutions.
2. Also covered by the provisions of this Notice are the Management Companies of Social Participations, subject to the supervision of the Banco Nacional de Angola, provided for in Law No. 14/21 of May 19, Law of the General Regime of Financial Institutions.

Article 3. (Definitions) Without prejudice to the definitions established in Law No. 14/21 of May 19, Law of the General Regime of Financial Institutions, for the purposes of this Notice, the following shall be understood: a) External Audit: independent examination of financial statements and related services, in accordance with Angolan legislation, notably the Law on the Practice of Accounting and Audit and Presidential Decree No. 232/10 of October 11, and subsidiarily, with internationally accepted standards, notably the International Standards on Auditing - ISA, provided they do not contradict Angolan legislation. b) External Auditor: natural or legal person established in Angola, qualified to practice external audit. c) Audit Committee: body responsible for overseeing the performance of the external auditor of the Financial Institution. d) Parent Company: legal person that exercises a relationship of control or group over another legal person, designated as a subsidiary, when referring to Financial Institutions under the supervision of the Banco Nacional de Angola. e) Administrative Body: person or group of persons elected by partners or shareholders, tasked with representing the company, deliberating on all matters, and performing all acts to achieve its corporate object.

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f) Opinions: the opinions issued by the external auditor on accounts or matters of an accounting or prudential nature. g) Related Natural Person: the spouse and descendants and ascendants of first and second degree.

Article 4. (External Audit)

1. External audit activity must have: a) A minimum annual frequency; and, b) A clear and defined scope, taking into account: i. The size, nature, and complexity of the institution's activity; ii. Preliminary risk assessment; iii. Adequacy of the economic-financial situation; iv. The institution's exposure to risks arising from its operations with other entities; and, v. Results of previously conducted audits.
2. When required by the Banco Nacional de Angola, an extraordinary audit may be conducted.

Article 5. (Hiring and Appointment of the External Auditor)

1. The Institution's Audit Committee must use a solid, objective, and transparent process to approve or recommend to the Administrative Board the hiring, reappointment, dismissal, or remuneration of the external auditor.
2. It is the responsibility of the administrative body to: a) Hire the external auditor, ensuring that the terms and conditions of the contract provide for contract expiration, which must occur by June 30 of the same year; b) Submit to the Banking Supervision Department of the Banco Nacional de Angola: i. Within five business days from the date of hiring, renewal of the contract, or change of representative, the name, address of the external auditor, their representative, and respective registration number as a certified accountant; ii. Within five business days from the date of hiring, a declaration signed by all members of the administrative body regarding compliance with the provisions of Articles 7 to 10 of this Notice; and, iii. Annually, within five business days from the issuance of the opinion referred to in paragraph a) of paragraph 1 of Article 12 of this Notice, a declaration signed by all members of the administrative body regarding compliance with the provisions of Articles 7 to 10 of this Notice. c) Designate one of its members to, before the Banco Nacional de Angola, be responsible for monitoring the external auditor's activity; d) Provide the external auditor with all data, information, and logistical conditions necessary to exercise their activity; e) Ensure that financial statements were prepared in accordance with Notice No. 05/2019 of August 30, on the Accounting Standardization and Harmonization process of the banking sector; and, f) Guarantee the publication of financial statements with an opinion from an external auditor.

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Article 6. (Profile of the External Auditor)

1. The external auditor must possess: a) Specific knowledge of matters related to financial activity, notably the accounting plan and prudential standards issued by the Banco Nacional de Angola; b) Relevant experience in conducting external audits, preferably in the financial sector; c) Personal and professional integrity; and, d) Sufficient human, material, and financial resources to exercise their function.
2. For the purpose of verifying the experience and integrity of the external auditor, Institutions must collect information on work previously performed by them, their reputation in the financial sector, and the absence of criminal incidents.
3. The external auditor of Banking Financial Institutions must be a legal person authorized to practice in Angola, in accordance with the Law of the General Regime of Financial Institutions.
4. The external auditor of Non-Banking Financial Institutions may be a natural or legal person, in accordance with Law No. 14/21 of May 19, Law of the General Regime of Financial Institutions.
5. The external auditor of the companies referred to in paragraph 2 of Article 2 of this Notice must be a legal person, in the case where these hold subsidiaries with the nature of Banking Financial Institutions.
6. The external auditor must always act in good faith and cannot be held liable for informing the Banco Nacional de Angola of any material issue or misconduct observed during the audit process.

Article 7. (Responsibilities of the External Auditor)

1. The external auditor must: a) Inform the Banco Nacional de Angola about all and any material issues; and, b) Meet regularly with the Banco Nacional de Angola, with a view to obtaining and acquiring all necessary information regarding the external audit work and respective opinions, and to identify and prevent, in advance, any potential adversities and/or contrarieties, in the case of external auditors of systemically important Institutions.
2. Without prejudice to the preceding paragraph, the provisions of Articles 13, 14, and 15 of Regulation No. 02/15 of May 15, on External Auditors and financial information obligation, regarding the duties and responsibilities of the external auditor, shall apply to the external auditor.
3. The objective of the statutory audit is to issue an opinion that is complete, true, and clear regarding the financial situation of the Institution as of a specific date, as presented in the financial statements.

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Article 8. (Independence of the External Auditor)

1. In exercising their activity, the external auditor must act independently, meaning being capable of making objective and impartial judgments on all matters related to their function, considering: a) Ethical rules and international practices of external audit; b) Legislation on external audit, established by the Banco Nacional de Angola and the professional order of their class; and, c) The adequate formalization of their policy of action, demonstrating respect for the principles set forth in this Notice.
2. The independence of the external auditor is reflected, notably: a) In the prohibition of providing services unrelated to external audit, in accordance with Article 6 of this Notice; b) In relationship rules, in accordance with Article 10 of this Notice; and, c) In the absence of financial interests, in accordance with Article 11 of this Notice.
3. The external auditor must act objectively, respecting ethical principles intended to safeguard the independence of their service provision, as established in the code of ethics issued by the International Federation of Accountants.
4. Non-compliance with independence requirements renders audit services null, for the purposes of provisions issued by the Banco Nacional de Angola.
5. Without prejudice to the preceding paragraphs, whenever applicable, the Audit Committee must monitor and evaluate the independence of the external auditor.

Article 9. (Prohibition on Service Provision by the External Auditor)

1. The external auditor cannot provide, or have provided in the last 24 (twenty-four) months, services not strictly related to their function and that imply loss of independence, in the audited institution or in an entity in a relationship of control or group with it, notably: a) Strategy and organizational restructuring advisory; b) Accounting or tax advisory, including tax planning; c) Valuation of assets and liabilities; d) Execution of financial transactions; e) Actuarial advisory; f) Restructuring, including design and implementation, of internal control and risk management systems; g) Legal advisory; h) Hiring, evaluation, and operational management of human resources; i) Subcontracting of key functions of the internal audit, compliance, and risk management internal control system; and, j) Validation of impairment models.
2. For the purposes of the preceding paragraph, audited institutions must consider: a) Related natural persons with the external auditor or their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions; and, b) Legal persons in a relationship of control or group with them.

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Article 10. (Relationship with the External Auditor)

1. Institutions are prohibited from: a) Retaining the same external auditor for a period exceeding that defined in Law No. 14/21 of May 19, Law of the General Regime of Financial Institutions, with re-hiring only possible after an equal period has elapsed following replacement; b) Electing the external auditor, as well as their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the external audit team with management functions, to positions in their corporate bodies; c) Hiring the external auditor, as well as their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions, for positions that allow influence over the administration's decisions of the audited institution, notably including those responsible for accounting, risk management, compliance, and internal audit functions; and, d) Hiring services provided for in Article 9 of this Notice from the external auditor, as well as their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions.
2. The provisions of paragraph 1 of this article cover: a) Related natural persons with the external auditor or their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions; and, b) Legal persons in a relationship of control or group with them.
3. The provisions of paragraphs b), c), and d) of paragraph 1 of this article cover natural or legal persons who have exercised or have exercised external audit functions in the last 24 (twenty-four) months, counted from the date of issuance of the last opinion, in the audited institution or in entities in a relationship of control or group with it.
4. Institutions must ensure the absence, in the audit team, of persons who have exercised functions in their corporate bodies in the last 24 (twenty-four) months.

Article 11. (Financial Interests)

1. The external auditor cannot possess direct or indirect financial interests in the audited institution, notably including: a) Active liability operations or with guarantee of the external auditor; b) Provision of guarantees in favor of the external auditor; c) Qualified shareholding participation of the external auditor; or, d) Payment of fees and reimbursement of expenses to the external auditor representing equal to or greater than 25% (twenty-five percent) of the external auditor's total billing.
2. For the purposes of paragraph 1 of this article, indirect financial interests of the external auditor are considered to relate to: a) Companies in a relationship of control with the audited institution; b) Their partners or shareholders, technical managers, directors, managers, supervisors, or any other members with management functions in the team involved in audit work; c) Related natural persons with the external auditor or their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions; and, d) Legal persons in a relationship of control or group with them.
3. The incompatibilities provided for in paragraphs a) and b) of paragraph 1 of this article, existing on the date of hiring, must be regularized within a maximum period of 3 (three) months counted from this date.

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Article 12. (Opinions Issued by the External Auditor)

1. The Institution's external auditor must prepare the following opinions: a) On annual and/or interim accounts, including their adequacy to accounting standards issued by the Banco Nacional de Angola in accordance with Notice No. 05/2019 of August 30, on the Accounting Standardization and Harmonization process of the banking sector; b) Without prejudice to the preceding paragraph, the auditor may conduct a limited review of interim accounts; and, c) On matters of an accounting or prudential nature, provided for in regulation issued by the Banco Nacional de Angola, notably regarding liquidity, solvency, major risks, and other capital adequacy requirements, administrative and accounting organization, internal control, risk governance, corporate governance.
2. Without prejudice to the preceding paragraph, the Banco Nacional de Angola may request the external auditor to prepare opinions on specific matters within the scope of supervisory functions.
3. The parent company's external auditor, considering the consolidation scopes for accounting and prudential purposes provided for in Notices No. 14/07 of September 28 and No. 08/21, respectively, is responsible for the opinions provided for in paragraphs 1 and 2 of this article on a consolidated basis.
4. The opinions provided for in the preceding paragraphs must contain the explicit identification of the certified accountant responsible for the audit.
5. The opinions of the auditors referred to in paragraph a) of paragraph 1 of this article, on an individual and consolidated basis, must specify the respective total of the balance sheet and net position of the Institution, including the net result as of the accounts date, and must be submitted to the Banco Nacional de Angola on the date they are made available to shareholders.
6. The opinions provided for in paragraph c) of paragraph 1 of this article may be prepared by the Institution's external auditor or by others with the same qualification, appointed and acting on behalf of the Banco Nacional de Angola. The audited institution will bear the cost of the audit if it results from: a) Indications of fraud or serious liquidity or solvency problems; and, b) Sanitation processes, capital reinforcement, and others with economic interest for the Institution.

Article 13. (Duty of Diligence of the External Auditor) The external auditor must communicate in writing to the Banco Nacional de Angola, as soon as they come to their knowledge: a) Facts of which they have knowledge that evidence the existence of: i. Non-compliance with legal and regulatory standards, which may affect the achievement of the corporate object or the economic-financial situation of the audited institution; ii. Frauds of any value committed by the Institution's administration; iii. Relevant frauds committed by Institution employees or third parties, but with influence on the Institution; and, iv. Errors that result in material misstatements in the Institution's financial statements. b) Situations detected by them, indicating serious liquidity or solvency problems in the Institution.

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Article 14. (Replacement of the External Auditor)

1. The Banco Nacional de Angola may determine that an Institution replace the external auditor when: a) It considers that the auditor lacks integrity, availability, and sufficient levels of knowledge, experience, and technical resources to exercise the function in the financial sector; b) There is no independence of the auditor in relation to the Institution, considering, notably, the provisions of Article 8 of this Notice; and, c) The opinions provided for in paragraphs a) and b) of paragraph 1 of Article 9 of this Notice are not prepared.
2. The hiring of the external auditor, referred to in paragraph a) of paragraph 2 of Article 5 of this Notice, is considered fully in force if the Banco Nacional de Angola does not contest it within 30 (thirty) days, counted from the date of receipt of the respective communication, provided for in sub-paragraph i of paragraph b) of paragraph 2 of Article 5 of this Notice, or, in case complementary information was requested, within 30 (thirty) days after receipt thereof.

Article 15. (Early Termination of External Audit Services) In the event of early termination of the external audit service contract, external auditors must deliver a written declaration to the Banco Nacional de Angola clearly stating the reasons for such termination.

Article 16. (Financial Statements)

1. The closing financial statements of the fiscal year, accompanied by the respective audit report, must be disclosed to partners or shareholders by Institutions with a minimum advance of 10 (ten) days from the date of the respective ordinary general meeting.
2. The other reports resulting from external audit must be kept available to partners or shareholders whenever requested.

Article 17. (Relationship with the Banco Nacional de Angola)

1. The Banco Nacional de Angola and the external auditor must have an effective, continuous, stable, and transparent relationship that includes appropriate communication channels for the exchange of relevant information to carry out and execute their respective statutory responsibilities.
2. The external auditor must report directly to the Banco Nacional de Angola all matters of material significance.
3. There must be open, timely, and regular communication between the Banco Nacional de Angola, external audit firms, and the professional accountant regarding major risks and systemic issues, as well as regular exchange of opinions/perspectives on appropriate accounting techniques and audit topics.

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Article 18. (Communication with the Audit Committee)

1. Communication between external audit and the audit committee of the Banking Financial Institution must be efficient, aiming to ensure that the aforementioned committee carries out and executes its supervisory responsibilities and improves audit quality.
2. The audit committee must request that the external auditor report all material issues in a manner that allows the audit committee to carry out and execute its supervisory responsibilities.
3. The provisions of the preceding paragraphs are mandatory for all Institutions that have, in their structure and organizational model, an audit committee.

Article 19. (Reporting to the Banco Nacional de Angola)

1. External auditors must send to the Banco Nacional de Angola an extensive report on the audited financial statements containing the following information: a) Of an accounting nature: i. Description of the mandate, audit strategy, and procedures; ii. Description and evaluation of main accounting policies and valuation methods, including accounting classifications related to structured and complex instruments or products; iii. Description of significant events occurring during the period under analysis; iv. Description of material changes in the legal, financial, and organizational situation of the Financial Institution; v. Description of internal controls over procedures and internal control functions; vi. Business performance evaluation; vii. Evaluation of the evolution of the net asset position, especially the nature and extent of off-balance sheet assets and liabilities; viii. Comments and explanations on balance sheet accounts and income statement accounts, considering the principle of materiality; ix. Comments on whether balance sheet items were properly