2024-12-20 | A 8167Added
The Central Bank of the Argentine Republic updates the Minimum Standards on External Audits for Financial Entities, with modifications to Annexes I through V taking effect on January 1, 2025. The revised rules impose stricter eligibility criteria for external auditors, including a mandatory five-year matriculation period, three years of relevant audit experience, and specific independence requirements regarding credit facilities. The document also establishes detailed procedures for the registration, exclusion, and re-registration of auditors and professional associations, while mandating that associations act as joint guarantors for fines imposed on their members.
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"AÑO DE LA DEFENSA DE LA VIDA, LA LIBERTAD Y LA PROPIEDAD" COMUNICACIÓN “A” 8167 20/12/2024 TO FINANCIAL ENTITIES:
Ref.: Circular
CONAU 1-1658:
Minimum Standards on External Audits for
Financial Entities. Modifications.
___________________________________________________________________________ We address you to deliver to you the new consolidated text of the standards referenced.
In this regard, it is clarified that adjustments were made to Annexes I to V.
The aforementioned adjustments will be effective as of 01/01/2025.
We greet you attentively.
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Mariana A. Diaz Estela M. del Pino Suárez
Manager of Information Regime
Deputy General Manager of Information Regime and Protection of Users of Financial Services
ANNEX
INDEX
B.C.R.A. CONSOLIDATED TEXT OF THE MINIMUM STANDARDS ON EXTERNAL AUDITS FOR FINANCIAL ENTITIES Version: 3rd. COMMUNICATION “A” 8167 Validity:
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General provisions on external audits
B.C.R.A.
MINIMUM STANDARDS ON EXTERNAL AUDITS
FOR FINANCIAL ENTITIES
ANNEX I
Version: 3rd. COMMUNICATION “A” 8167 Validity:
01/01/2025 Page 1
Appointment of external auditors.
Financial entities must inform the Manager of Auditor Control of the Superintendence of Financial and Exchange Entities (SEFYC) of the Central Bank of the Argentine Republic (BCRA) of the name of the independent registered public accountant appointed, according to the criteria established in this communication, to carry out the external audit of their financial statements and other information requested by this Institution, as well as the term of their engagement, indicating the start and end dates, expressed in economic periods to be audited. In the case of professionals acting on behalf of Public Accounting Firms, they must also indicate the name of the latter. Information related to the appointment of auditors, as well as corresponding to subsequent changes, must be reported within fifteen (15) business days of occurrence. All information related to registration or modification of data in the Register of Auditors (point 3) or Register of Associations of University Professionals (point 4) must be sent to the Manager of Auditor Control, through the Reception Desk of the Central Bank of the Argentine Republic (Mesadeentrada@bcra.gob.ar), digitized in "pdf" format.
Conditions for the exercise of the function, registration and permanence in the Register of Auditors
External audits must be carried out by public accountants appointed by financial entities who are in a position to be registered in the "Register of Auditors" enabled at the Superintendence of Financial and Exchange Entities. These professionals may not perform their functions simultaneously in more than one financial entity, nor may they exercise their function for more than five (5) consecutive economic periods. Upon discontinuing their task due to the expiration of that maximum term or a shorter term, a period of at least two (2) consecutive economic periods must elapse before they can be appointed again in that entity. National Public Accountants may provide such services in their own name or through professional firms, provided that they:
2.1. are not partners or shareholders, directors or managers of the entity, or of persons or companies economically linked to it,
2.2. do not work under an employment relationship in the entity or in companies economically linked to it,
2.3. are not subject to any of the disqualifications provided for in Art. 10 of Law 21.526 for trustees,
2.4. have not been expressly excluded from the "Register of Auditors",
2.5. have not been expressly disqualified from practicing the profession by any of the Professional Councils of Economic Sciences in the country,
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2.6. have the independence required by the current audit standards recognized or established by the Professional Council of Economic Sciences of the jurisdiction where they operate. Among other things, it is considered that this requirement is not met when the professional or any of their partners, in the case of acting in an accounting firm, have credit facilities of any nature granted by the entities they audit, under conditions more favorable than those offered to the rest of their clients,
2.7. have a matriculation seniority equal to or greater than five (5) years,
2.8. have three (3) years or more of experience in the performance of external or internal audit tasks in financial entities, which has covered the different subjects subject to verification, and
2.9. do not appear on the list provided in point 4.1 -second paragraph-, or in its eventual update -point 5.3, second paragraph, of accounting firms that are expressly excluded from the “Register of Associations of University Professionals”, due to the application of the provisions of point 4.2.2 in force at the date of signing the opinion and/or special report, which gave rise to the pecuniary sanction, and/or at the date of expiration of the term to effectuate it and/or, in its case, at the date of non-compliance that determines the expiration of the payment facility plan.
When the declared experience corresponds to internal audit tasks in a financial entity, the professional may not serve as external auditor of that entity during the five (5) years following their separation from it.
Likewise, registration and permanence in the register will be conditioned to the analysis and weighting that the Superintendent of Financial and Exchange Entities performs regarding the background, track record and suitability of the professional.
e) Note signed by the partner in charge of the direction or legal representative of the Association of University Professionals, through which it constitutes itself as a joint guarantor for any fines that may be imposed for the exercise of their tasks as auditors of financial entities, as established in articles 41 and 42 of the Financial Entities Law, according to the text indicated in Annex V, which will have the character of a sworn declaration. f) Copy of the agreement signed between the professional and the contracting entity, referred to in point 6. The information mentioned above must bear the signatures of the intervening professionals, certified by the Professional Council of Economic Sciences of the respective jurisdiction. Financial entities may, in case of temporary absences from the country or prolonged illness of the appointed external auditor, appoint and inform the B.C.R.A. of a second external auditor, on an interim basis, who must meet all the requirements required to exercise those functions, solely for the period that the principal's absence lasts, indicating from what date the alternate takes charge and informing, at the appropriate time, the date on which the action concludes due to the principal's reincorporation, or for another reason. In these cases, the entity must present the same documentation required for principal auditors, indicating that the professional's action is "due to the absence of the principal external auditor". The professional appointed in replacement of the principal may not exercise the position of external auditor in another financial entity while the interim period lasts. When their action under these conditions does not exceed one year, compliance with the interval of at least two (2) consecutive economic periods will not be required to be appointed again in that entity. When the professional states in their reports their participation in a professional society, it must be registered in the "Register of Associations of University Professionals". Once the Superintendence of Financial and Exchange Entities has validated all the documentation required in this standard, the registration of the Public Accountant in the Register of Auditors and its notification will proceed. The provisions regarding the appointment of External Auditors and their registration in the register enabled for this purpose at the Superintendence of Financial and Exchange Entities, will take effect from the moment it is communicated that their incorporation in the cited register has proceeded; meanwhile, the appointed auditor may not sign any documentation in such capacity.
3.2. Exclusion from the Register of Auditors
3.2.1. At the discretion of the Superintendent of Financial and Exchange Entities, the auditor may be excluded when the circumstances taken into account to authorize their registration have been modified or disappeared.
In this sense, what is prescribed in point 9 of this annex will apply.
Exclusion from this Register will only have as a consequence the impediment to issue reports on the financial statements of financial entities and/or other reports that must be presented to the Central Bank of the Argentine Republic. This is without prejudice to the summary proceedings that, if applicable, may be initiated against them in accordance with articles 41 and 42 of the Financial Entities Law.
3.2.2. In the case where pecuniary sanctions imposed on the external auditor for non-compliance with current standards in the exercise of their functions - articles 41 and 42 of the Financial Entities Law - remain unpaid after the expiration of the term to effectuate them, their exclusion from the Register will correspond until the total fine has been cancelled, except when payment facilities are requested, as provided for in the disciplinary regime under this Central Bank, Laws 21.526 and 25.065 and their amendments, in which case, the exclusion will apply until the date on which the payment facility plan is approved.
The expiration of the plan - for any reason - also constitutes a cause for exclusion as long as pending balances remain.
Additionally, the remaining partners will be excluded from the “Register of Auditors”, as long as after the expiration of the term to effectuate them, the pecuniary sanctions imposed on external auditors and/or responsible partners for non-compliance with current standards in the exercise of their functions - articles 41 and 42 of the Financial Entities Law - have not been cancelled, or until the payment facility plan requested is approved. This measure will reach partners registered in the cited register on the date the external auditor signed the opinion and/or special report - when applicable - that gave rise to the sanction, and/or at the date of expiration of the term to effectuate it and/or at the date of non-compliance with the clauses that determine the expiration of the payment facility plan and will apply as long as the total fine has not been cancelled or, in its case, until the payment facility plan requested is approved.
3.2.3. After six (6) years from their exclusion, the professional may apply for re-registration in the Register of Auditors. Such re-registration will be subject to the verification of the registration requirements established in points 2 and 3 of this Annex.
3.3. Deregistration from the Register of Auditors
Professionals who do not issue any type of report on financial statements presented to the Central Bank of the Argentine Republic during a period of 6 years will be deregistered from the Register of Auditors. Once deregistration is completed, the re-registration of professionals to said register will be subject to the presentation of a new application and the verification of the registration requirements established in points 2. and 3. of this annex.
3.4. Update of the information in the Register of Auditors.
The information and documentation mentioned in the preceding point 3.1 must be sent annually before the end of the second economic quarter and in case changes occur before the expiration of the engagement term, entities must indicate the causes that gave rise to them.
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4.2. Exclusion from the Register of Associations of University Professionals
4.2.1. Associations in which two or more professionals excluded from the "Register of Auditors" of the Superintendence of Financial and Exchange Entities participate or have participated during the period in which such exclusions are in force will be excluded from this register.
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4.2.2. Exclusion of the association, constituted as a joint guarantor, will also correspond in the case where pecuniary sanctions imposed on the external auditor and/or responsible partner for non-compliance with current standards in the exercise of their functions - articles 41 and 42 of the Financial Entities Law - remain unpaid after the expiration of the term to effectuate them and until the total fine has been cancelled, except when payment facilities are requested, as provided for in the disciplinary regime under this Central Bank, Laws 21.526 and 25.065 and their amendments, in which case, the exclusion will apply until the date on which the payment facility plan is approved. The expiration of the plan - for any reason - also constitutes a cause for exclusion as long as pending balances remain.
4.3. Update of the information in the Register of Associations of University Professionals.
The information and documentation mentioned in the preceding point 4.1 must be sent annually, by September 30 of each year, together with the update of their certified bylaws, in case modifications have occurred in their composition. If there is no type of modification, they must present a note stating such circumstance. Incorporations or withdrawals of members that have been timely informed in the corresponding Application Note for registration must be communicated to the Superintendence of Financial and Exchange Entities within ten (10) days of occurrence, through the rectification of said information or the last presented for these purposes, and will take effect from the day on which the communication is made. For the purpose of informing modifications to the Register of Associations of University Professionals, the same documentation as for the registration indicated in the preceding point 4.1 must be presented. Associations of professionals constituted according to a corporate type, whether civil, commercial or simple association, constituted in the country or abroad and acting in their own name or through a local representation, must additionally attach a copy of the notarized instrument duly legalized, if applicable, by which the society or association assumes the joint liability referred to or, in default, the signatories must prove sufficient representativeness to bind it jointly.
be registered in the “Register of Auditors”,
be in charge of the account/s (financial entities) and maintain permanent contact with the corresponding financial entity,
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appear before the Superintendence of Financial Entities and Currency Exchange to present the working papers supporting the external auditor's reports and provide any expansions and clarifications deemed necessary, and
participate in meetings with the inspectors of the Superintendence of Financial Entities and Currency Exchange in order to provide all data deemed necessary for the determination of the rating to be assigned to the financial entity.
The appointment of the responsible partner must be reported to the Superintendence of Financial Entities and Currency Exchange by submitting the following documentation, which must be countersigned by the legal representative or the Audit Committee of the corresponding financial entity. a) Note signed by the responsible external auditor according to the text indicated in Annex V of this regulation, which shall have the character of a sworn declaration. The note must be countersigned by the legal representative or the Audit Committee of the corresponding financial entity. Such countersigning implies the financial entity's knowledge and approval of the appointment of that responsible partner and of the function assigned to them. b) Note signed by the partner in charge of the direction or legal representative of the Association of University Professionals, through which they constitute themselves as joint guarantor for any fines that may be imposed for the exercise of their tasks as auditors of financial entities, in accordance with Articles 41 and 42 of the Financial Entities Law, according to the text indicated in Annex V, which shall have the character of a sworn declaration.
5.2. Responsibilities.
The responsible partner shall have, with respect to compliance with the standards established by the Superintendence of Financial Entities and Currency Exchange, identical responsibility to that of the Public Accountant appointed to carry out the external audit of the financial statements and other information requested by this Institution.
5.3. Exclusion from the Register of Auditors.
5.3.1. Based on what is established in the preceding point, and if what is provided in point 3.2.1 is applied to the external auditor, the responsible partner shall also be excluded from the "Register of Auditors".
This latter exclusion shall not be taken into account for the effects provided for in point 4.2.1.
5.3.2. In the event that monetary sanctions imposed for non-compliance with current regulations in the exercise of their functions - Articles 41 and 42 of the Financial Entities Law - are pending payment after the deadline for effecting them has expired, the responsible partner appointed shall be excluded from the "Register of Auditors" until the total amount of the fine has been cancelled, except when payment facilities are requested, in accordance with the disciplinary regime under this Central Bank, Laws 21.526 and 25.065 and their amendments, in which case, the exclusion shall apply until the date on which the payment plan is approved. The expiration of the plan - for any reason - also constitutes grounds for exclusion as long as pending balances remain.
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5.4. Update of the responsible partner's information.
The substitution of the responsible partner and the appointment of their replacement must be communicated to the Superintendence of Financial Entities and Currency Exchange within ten (10) days of occurrence and shall take effect from the day the presentation is made.
Mandatory clauses of agreements for the provision of services.
Agreements between financial entities and professionals who accept to provide external audit services must contain express clauses by which:
a) the professionals declare knowledge of and accept the obligations established in this regulation, b) the entities authorize the professionals and the latter, in turn, undertake to answer inquiries, agree to access the working papers and/or provide copies thereof to the Superintendence of Financial Entities and Currency Exchange, c) the entities authorize the professionals to immediately communicate to the Central Bank of the Argentine Republic any matter that, due to its significance, the auditor considers must be brought to the knowledge of said Central Bank, and d) the associations of university professionals constitute themselves as joint guarantors with express waiver of the benefits of division and excussion of the obligations that, as fines, may be imposed by the Central Bank of the Argentine Republic on the external auditor and/or the responsible partner.
Controls under the responsibility of the Superintendence of Financial Entities and Currency Exchange.
The Superintendence of Financial Entities and Currency Exchange will periodically verify compliance, by the external auditors and/or responsible partners of financial entities, with the Minimum Standards on External Audits.
To this end, it may require that the external auditor and/or responsible partner appear before this Institution on the day and time they are formally summoned, in order to present the audit documentation supporting the reports and provide the expansions and clarifications deemed necessary. The intervening professional will always keep the audit documentation in their possession, as evidence of the work performed, for a minimum of six (6) years.
Audit Documentation.
8.1. Characteristics
A record of the audit procedures applied must be maintained, which includes all information supporting the evidence of the work performed. This information may be kept in physical or digitized files and must be protected against risks of destruction or unwanted access, using a system that guarantees the verification of its integrity and immutability.
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The documentation of the external audit procedures must provide a clear understanding of their purpose, source, and conclusions reached, and constitute the evidence supporting the audit reports, in such a way as to allow supervision by the Superintendence of Financial Entities and Currency Exchange.
8.2. Availability of audit documentation.
The audit documentation must be made available to the Superintendence of Financial Entities and Currency Exchange when requested. Audit procedures whose documentation is not made available in a timely manner will be considered as not performed. Within the framework of the function of evaluating the work of external audits, it is at the discretion of the Superintendence of Financial Entities and Currency Exchange to establish the modality of the review (in-person, remote, or a combination of both). The external audit must seek the necessary mechanisms to generate and deliver the required documentation in an electronic format that allows, among other things, the option of downloading all files constituting the audit evidence, in the modality that the Superintendence of Financial Entities and Currency Exchange establishes in each case to ensure the confidentiality, availability, integrity, and immutability of the information in the evaluation process.
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Confidentiality
In matters of confidentiality, external auditors must comply with the obligations established in the Codes of Ethics issued by the Professional Councils of the respective jurisdictions, as well as the following aspects:
a) Do not disclose outside the professional firm or the entity for which they work, confidential information obtained as a result of professional and business relationships, unless adequate and specific authorization exists or there is a legal or professional right or duty to disclose. b) Do not use confidential information obtained as a result of professional and business relationships for their own benefit or that of third parties. c) Maintain confidentiality, even in the non-work environment, being attentive to the possibility of inadvertent disclosure, especially to a close partner, a close relative, or a member of their immediate family. d) Maintain confidentiality of information revealed to them by a potential client or by the entity for which they work. e) Maintain confidentiality of information within the firm or the entity for which they work. f) Adopt reasonable measures to ensure that their collaborators and persons from whom they obtain advice and support comply with their duty of confidentiality. The professional must inform them that they are also obliged to keep professional secrecy. g) The duty of confidentiality persists even after the auditor's separation from the professional firm and the entity for which they have worked.
Quality control of external audits
Associations or public accounting firms (whether sole proprietorships or professional partnerships) that provide external audit services to financial entities must establish and execute a quality control system of their own and in accordance with the complexity of their structure, which allows them to know if their members and staff comply with the professional, legal, and regulatory standards governing that activity, including those issued by this B.C.R.A., and that the reports issued in relation to said services are consistent with the objective of the task entrusted. Each association or firm must establish and execute effective action controls, designed to obtain reasonable assurance that the policies and procedures related to the quality control system are pertinent, adequate, operate efficiently, and are complied with in practice. Such policies and procedures must include a continuous consideration and evaluation of the quality control system, its degree of compliance, and the way to correct departures from internal quality control standards.
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The aforementioned policies and procedures, and the greater requirements and precautions adopted by each association or firm, with their updates, must be documented and notified in a timely manner to all personnel concerned.
The documentation indicated in the preceding paragraphs must be available to the Superintendence of Financial Entities and Currency Exchange.
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Planning of external audits
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1.2. Formalization of the work plan
For the development of their task, the external auditor must adequately and timely plan the audit work based on the objective of their examination, the characteristics of the entity whose financial statements will be subject to review, (nature, complexity, size, and other elements), and the risk assessment performed. Planning an audit implies establishing a global audit strategy that determines the approach and direction of the audit work and allows the development of the audit plan. Planning must be mainly based on an analysis of the entity's main risk areas and on the selection of audit procedures necessary to verify controls, balancing the application of substantive tests and compliance with internal control procedures. It is important to highlight that, at this stage, the external auditor must consider:
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Any change made to the global audit strategy or the audit plan must be documented, together with the reasons that motivated said change, and brought to the knowledge of the Audit Committee.
2.1. Entity profile and its business.
In this phase, the external auditor must obtain updated information on the corporate governance structure, business lines, activities, operations, plans, information and communication systems, etc. of the entity.
Likewise, they will consider the regulatory and corporate framework that the entity must comply with, as well as information on its shareholders, directors, and main officials.
On the other hand, the external auditor must carry out an analysis of the accounting and financial information, obtaining indicators that allow them to compare the entity's activity with other entities or groups of entities.
The external auditor must identify external or internal facts or circumstances that may impact the entity, both in the current fiscal year and in future fiscal years, as well as significant accounting issues.
2.2. Global evaluation of internal control.
In this phase, the external auditor must evaluate how the Board of Directors and Management of the entity establish and maintain the internal control system as part of their priority responsibility.
Subsequently, within the audit plan, they will consider its functioning as a basis for determining the nature, scope, and timing of the procedures to be applied in relation to their work.
Although this phase is a global review, the external auditor must consider, identify, and evaluate at a minimum:
a. The control environment:
This phase includes the knowledge of the way in which the Entity establishes the structure and authority, how it assigns responsibilities, and determines the segregation of functions.
Likewise, the commitment to competence, integrity, and ethical values. b. The Entity's Risk Analysis Process:
Every entity faces a variety of risks from external and internal sources that must be evaluated. A prerequisite for risk assessment is the determination of objectives, linked to the different existing risks, linked to each other, and to the mission/ vision of the entity.
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Risk assessment must be carried out from a corporate vision that requires considering risks from an integral perspective and not from an individual unit. Corporate risk management also focuses on risk from its dual perspective of inherent and residual, as well as from its probability of occurrence and its impact. Inherent risk is that inherent to the activity to which an entity is exposed without taking into account management's actions to modify its probability or impact. Residual risk is that which remains after management develops its responses to inherent risks. Risk assessment is applied first to inherent risks, and once the risk response has been incorporated, management considers the residual risk. The steps for risk assessment assume: the establishment of objectives, the identification of potential internal and external events that may have an impact on their achievement, the assessment of the risks themselves (using both quantitative and qualitative techniques), and the identification of risk responses, which include: avoiding, accepting, sharing, or reducing risks. Management, when considering the risk response, must evaluate its effect on the probability and impact of the risk, as well as the costs and benefits, in order to select that which places the residual risk within the desired risk tolerances. In addition to the high-level risk assessment performed by Management, the person in charge of each process must evaluate the risks of the process they are in charge of, identify the responses to said risks, and report to general management and/or senior management on the residual risks that could not be mitigated, as well as the probability of occurrence of their related events.
c. The entity's technological infrastructure, its relevant application systems in relation to the audit of financial statements.
This phase includes the knowledge of the following areas: i) processing technological platforms, operating systems, databases, communication links, and business continuity scheme; ii) mapping of information systems and applications, and related interfaces; iii) digital services provided by the entity, iv) transactions resulting from the operations of financial entities that are relevant to the financial statements; d. Managerial or monitoring controls - Organizational Level:
They consist of the controls used by the Entity's Management defined to: provide relevant information, monitor the development of the entity's control structure, establish methods for the physical safeguarding of assets, establish an appropriate planning and budgeting process, etc.
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e. Managerial or monitoring controls - Level of supervision:
These correspond to controls carried out by the entity's management levels, aimed at validating the amounts in the financial statement accounts, evaluating contingencies, protecting the integrity of information, etc.
f. Transaction processing controls:
These consist of both manual and automatic controls carried out by the entity to provide assurance that individual transactions are duly authorized and that the recording of individual transactions is correct and complete. In the case of computerized processing, the effectiveness of general controls must be evaluated.
g. Information systems and application controls:
These consist of controls carried out to ensure that information systems and applications operate according to what was designed by Management, that changes to programs have been authorized, that information and data are processed correctly and completely, and that information is restricted to those persons who genuinely need access to it. In this category, controls related to the information systems that generate the reporting regimes to be submitted and/or made available to this Central Bank must be considered.
h. General information technology and information security controls:
The external audit must encompass the information technology environment in which the entity's information systems and key applications are processed and their relationship with the internal control structure, documenting and updating this understanding for each environment in which one or more key applications are processed. To this end, the evaluation of the information technology environment must include aspects related to compliance with significant controls regarding the management, implementation, and control of risks included in the Minimum Requirements for the Management and Control of Technology and Information Security Risks, as well as those corresponding to digital financial services, as established by the regulations of the Central Bank of the Argentine Republic in force at each moment.
i. Internal audit:
The external auditor must evaluate the organization of the internal audit area, the work methodology, the defined annual audit plan, as well as its adequate compliance in accordance with the minimum standards on internal controls established by the Central Bank of the Argentine Republic. When the external auditor plans to use the work of internal audit to modify the nature or timing of their audit procedures, they will assume all responsibilities generated by this course of action, and must:
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a) Define the areas in which the work of internal audit can be used and the scope of such use, b) Document the evaluation that led to the conclusion that the work of internal audit is adequate for the purposes of the audit. c) Supervise their work, in case of using the direct assistance of internal auditors.
j. Use of service organizations:
In the event that the financial entity is a user of service organizations, the external auditor must, for those cases related to the risk areas of the audit:
a) Obtain sufficient knowledge of the nature and significance of the services provided by the service organization, the effects on the entity's internal controls that are relevant for the audit, with the objective of identifying and assessing the risks of material misstatements, and b) Design and apply audit procedures to respond to such risks. A service organization is understood as: an external organization (or segment of an external organization) that provides financial entities with services that are part of the information systems relevant for the generation of the financial information of said entities. This definition includes sub-service organizations, that is, service organizations used by the service organizations with which the entity has a contract.
2.3 Identification of risk areas and materiality.
After having concluded phases 2.1 and 2.2, the external auditor must be in a position to identify the areas of highest relative risk, which, if not adequately covered by the control environment, have affected, are affecting, or in the future could affect the entity's financial statements. Likewise, the external auditor will define the rotation of emphasis to be applied in those areas of lower relative risk. The auditor's decision regarding which are the areas of lower relative risk that will be subject to a rotation plan, as well as the duration of the period elapsed until the new evaluation of said controls, must be adequately supported and documented. For the purposes of identifying risk areas, the following must be considered:
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2.4 Fraud risk assessment (includes transnational bribery).
As part of the risk assessment process and the activities developed to obtain an understanding of the entity and its control environment, the external auditor must complete procedures directed to identify the risks of material errors due to fraud, including the risk of transnational fraud. To this end, the external auditor must make inquiries with management covering the following aspects:
a) Management's assessment of the risk of material errors in the financial statements due to fraud. b) Process developed by the entity to identify and respond to the risk of fraud. c) Processes that ensure the disclosure among the entity's personnel of ethics and conduct standards. d) Procedures implemented by the entity aimed at preventing and identifying fraud. e) Identification and follow-up of signs of fraud, including the activities developed by internal audit regarding this matter. The aforementioned inquiries must be adequately supported and documented. When carrying out the different audit procedures, the external auditor must pay special attention to ensure that operations recorded in income statement accounts or asset items are related to the financial entity's activity, in terms of its client profile, the nature of its operations, and the geographic zone of its scope of action.
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2.5 Identification and evaluation of specific risks.
Based on the conclusions obtained in the previous phase, the external auditor must carry out a specific analysis of the risks and their impact on the financial statements, evaluating to what extent they will place confidence in the entity's internal control system or will directly carry out a review of the matter (substantive approach), which will be included in their audit plan. Such specific analysis will consist of:
2.6. Audit plan.
In this phase, the external auditor will outline the approach to their audit work, defining an adequate balance between substantive tests and compliance tests of internal control procedures, based on the conclusions obtained in the previous phases.
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The audit plan must include the selection of procedures to be applied, their scope, their distribution in time, as well as an analysis of the necessary and available resources to comply with the plan.
Annex III includes a detail of the minimum substantive procedures to be carried out by the auditor, which do not represent a taxative description, since the auditor must expand the scope of their task when, in their judgment, the minimum audit procedures detailed in the aforementioned Annex are not sufficient to fulfill their audit objective. Likewise, they may refrain from applying any minimum procedure when the figures involved, the accounts or operations corresponding are not significant in relation to the financial statements taken as a whole, or when as a result of the balance between the substantive tests and the compliance tests, mentioned in the previous paragraph, they conclude that such procedure is not necessary.
In the application of substantive audit tests and compliance tests of controls, the latter to prove the functioning of the controls arising from the surveys carried out of the different cycles, the external auditor must take into account that they can act on selective bases determined according to their professional judgment or supported by the use of statistical or statistically based methods. In all cases, they must adequately support why they employ each of the criteria. In case of using their professional judgment, the auditor must support the determined scope with the confidence placed in internal control. In case of using statistical or statistically based methods, the auditor must support the degree of confidence, tolerable error, and expected error used, and relate the level of these parameters with the confidence placed in the internal control system. In addition, the criterion for selecting the cases subject to review must be established, applying methodologies that allow any component of the sampled universe to have the same possibility of being chosen. To be able to place confidence in the internal control of some cycle or account, these must have been evaluated in an integrated manner and satisfactory conclusions must have been obtained from said evaluation. However, the statistical methodology must be applied when the universes to be analyzed are significant and atomized. This, with the objective of determining the necessary and/or sufficient samples that allow the auditor to extrapolate the conclusions and/or adjustments detected from their analysis to the universe subject to verification and to form an opinion on it. Additionally, the auditor may need to obtain, together with the entity or independently, audit judgment elements that may take the form of reports, opinions, valuations, and/or declarations from an expert. When the auditor plans to use the work of an expert, they must evaluate the objectivity and professional competence of the same. The latter will imply the consideration of the following aspects of the expert:
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2.7. Initial Audits
In the case of an initial audit, the audit plan must provide for the carrying out of tasks aimed at obtaining evidence that validates the opening balances, in order to determine if:
a) The opening balances contain errors that could materially affect the financial statements of the current period, and b) Adequate accounting policies reflected in the opening balances have been applied uniformly in the financial statements of the current period, or if the changes made to them have been recorded, presented, and disclosed adequately in accordance with the accounting standards of the Central Bank of the Argentine Republic.
2.8. Issuance of reports
Regarding the preparation of reports, the external auditor must observe, regarding the scope and objectives of their report, the provisions contained in Annex IV.
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Minimum audit procedures
A. General
A.1 Control tests on the functioning of the internal control system A.2 Variance analysis A.3 Review of outsourced services B. Information technology and security procedures.
B.1 Procedures on general controls
B.2 Procedures on application systems
C. Substantive tests
C.1 Annual procedures
C.2 Quarterly procedures
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A. General
A.1. Control tests on the functioning of the internal control system The identification of existing control activities for each cycle is not sufficient for an adequate evaluation of the internal control system of the entities.
When the external auditor plans their work, in order to define the reliability in the internal control of certain risk areas and/or processes, they must evaluate if the control activities have been correctly designed to fulfill their purposes and if they function adequately, according to their design. To this end, they must obtain from the entity, for those risk areas defined by the auditor, the manuals of operational, accounting, and internal control procedures and carry out the identification of relevant control activities, on which the detailed tests mentioned below will be performed:
Design tests
The test of design effectiveness of a control activity corresponds to the evaluation of whether the activity is designed adequately to fulfill the defined controls and, if its adequate functioning, allows avoiding or detecting errors in accounting and financial information. These tests will vary depending on the specific control activity, the documentation of the control activity, and the complexity of the entity's operations.
Compliance tests
Compliance tests refer to the manner in which the control activity is applied, the consistency with which it is applied, and who applies it throughout the entire period. The testing procedures include carrying out inquiries, investigations, inspection of documentation, and observation of activities and operations.
A.2. Variance analysis
The external auditor must carry out a quarterly variance analysis of the financial statements of the financial entities, with respect to the last quarter or closing of the fiscal year. This analysis will include obtaining variations, control indicators, and any other relationship, such as average balances, that allows them to become aware of the changes that have occurred since their last review and to confirm or rethink the decisions taken in the initial audit planning. This procedure must be adequately documented in the working papers with the explanations, calculations, and comparisons made. Basically, the aforementioned analysis must include:
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A.3. Review of outsourced services
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B. Information Technology and Security Procedures.
B.1 Procedures on General Controls
Based on the overall assessment of internal control related to the entity's technological infrastructure obtained in the planning process, and the general controls of information technology and security, as well as those corresponding to digital financial services, included in the Minimum Requirements established by the regulations of the Central Bank of the Argentine Republic in effect at any given time, the external audit must perform design and operating effectiveness tests for those controls identified as critical and must consider at least the following:
Information technology and security governance.
Information technology and security risk management.
Information technology management.
Information technology strategy.
Enterprise architecture.
Project management.
Data management.
Information asset management.
Information security management.
Information security management framework.
Information security strategy.
Management controls and reports.
Physical and environmental security.
Access controls and privilege management.
Security operations.
Business continuity management.
Continuity management framework.
Business impact analysis.
Business continuity strategies.
Business continuity plans.
Exercises and tests of business continuity plans.
Technological infrastructure and processing.
Change management.
Technological infrastructure updates.
Communications management.
Data processing.
Cyber incident management.
Cyber incident management framework.
Cyber incident registry and repository.
Management controls and reports.
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Development, acquisition, and maintenance of “software”.
Requirements for systems and applications.
Requirements for the generation of reporting regimes.
Software lifecycle management.
Third-party relationship management.
Third-party relationship management framework.
Formalization of delegation.
Control and monitoring.
Risk management of financial services provided via digital means.
Protection of financial services provided via digital means.
Guidelines to consider in digital financial transactions.
Digital identification of clients.
Access controls. Requirements for authentication factors.
Detection and monitoring.
Event detection and analysis.
B.2 Procedures on Application Systems
Based on the information systems and applications identified as relevant to the business in the planning process, evaluate controls related to access profiles and adequate segregation of duties, input and output interfaces, and audit logs, being able to consider what was done in the evaluation of “B.1 Procedures on General Controls. Requirements for systems and applications”.
C. Substantive Tests
C.1. Annual Procedures
Pending balances from clearing house operations and securities exchange, by comparing their cancellation with statements and settlements within the corresponding deadlines or investigating the reasons for their delay.
Balances corresponding to payments made on behalf of third parties, by comparing with the supporting documentation of the expenditures made and their cancellations within reasonable deadlines.
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Other credits not mentioned previously, by analyzing the reasonableness of the concepts included, verifying that no items have been capitalized that do not correspond according to B.C.R.A. standards, and evaluating the need to apply additional procedures, such as verification of the corresponding supporting documentation, request for balance confirmations, etc.
Review of period movements for the item property, plant, and equipment and other non-financial assets by comparing additions and disposals with the corresponding supporting documentation. Verification of the existence of the most significant assets.
Review of the reasonableness of the valuation of the item property, plant, and equipment, as well as the calculation of the corresponding depreciation, according to B.C.R.A. standards.
Review of the reasonableness of the valuation of other non-financial assets, as well as the calculation of the corresponding depreciation, verifying the original value of the assets taken in defense of credits according to B.C.R.A. standards.
Review of period movements and valuation of intangible assets, by comparing additions and disposals with the corresponding supporting documentation, verifying that no items have been capitalized that do not correspond according to B.C.R.A. standards and that the amortization recorded during the period is reasonable.
Review of balances corresponding to accounts with branches and agencies, inquiring about their origin and verifying especially that there are no significant pending items that represent adjustments in the determination of the year's results, calculation of minimum liquidity requirements, technical ratios established by the B.C.R.A., etc.
Review of the adequate compilation of lists of creditors for deposits; derivative instruments, repo operations, and other financial liabilities (in pesos and in foreign currency) and their comparison with accounting records, as a basis for the application of audit procedures designed to obtain reliable and relevant audit evidence on the existence and valuation of the operations. These procedures must include the comparison of supporting documentation or the verification of subsequent cancellations.
Review of the supporting documentation corresponding to the issuance of negotiable bonds, subordinated or not, and other obligations.
Review of collection balances and other operations on behalf of third parties (in pesos and in foreign currency), as well as unapplied collections, by comparing with the corresponding supporting documentation and their cancellations within reasonable deadlines.
Review of the supporting documentation corresponding to obligations with international organizations and the entity's compliance with the conditions agreed upon in the respective conventions.
Review of the reasonableness of social and tax debts and comparison of their cancellation in due time with the respective supporting documentation. In the case of taxes, additionally verify that the corresponding advances have been paid on time.
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Review of other obligations not mentioned previously, evaluating the reasonableness of the concepts included and the need to apply additional procedures, such as verification of the corresponding supporting documentation, request for balance confirmations, etc.
Review of the entity's compliance with the provisions of articles 28 and 29 of Law 21.526. In particular, it will correspond to evaluate the reasonableness of the valuations corresponding to investments made in accordance with the provisions contained in article 28, item a) of Law 21.526 and regulatory standards.
Review of the entity's compliance with the provisions established by the Central Bank of the Argentine Republic in matters of prevention of money laundering, financing of terrorism, and other illicit activities.
Review of the settlement of remuneration to personnel.
Review of the adequate recording of unused balances corresponding to agreed credits, guarantees granted and received by the entity, rediscounted documents, securities for collection, securities compensation operations, etc.
In the event that the reliability of internal control does not reach the expected levels, additional audit evidence must be obtained, so the frequency for performing the following substantive tests must be quarterly: 3, compilation of lists referred to in test 1,5, 7, 8, 11 and 12, (excluding the request for balance confirmations). Additionally, the auditor must expand the scope of their task, when in their judgment the minimum audit procedures detailed above are not sufficient to achieve the objectives of their review according to what is stipulated in Annex IV.
Evaluate the reasonableness of the entity's insurance coverage (fire, cash in box and in transit, employee fidelity, etc.).
Review of the reasonableness of the estimation of Expected Credit Losses (ECL) recorded at the end of the fiscal year. To this end, it must:
In the event that the auditor has used the work of an expert to obtain sufficient and appropriate audit evidence, the auditor must evaluate the expert's work including: a) the relevance and reasonableness of the expert's findings or conclusions, as well as their consistency with other audit evidence and b) the reasonableness of the assumptions, methods, and significant source data used by the expert, as well as their relevance, integrity, and accuracy taking into account the circumstances. The documentation of the expert's work must include all information supporting the evidence of the work performed and will form part of the audit documentation.
C.2. Quarterly Procedures
Review of the adequate valuation of the items debt securities at fair value with change in results; other debt securities; investments in equity instruments and investments in subsidiaries, associates, and joint ventures, according to the respective B.C.R.A. standards.
Review of the reasonableness of capitalizations, quotation differences, premiums, and accrued interest and credits for financial leases according to the procedures established by the B.C.R.A., corresponding to all assets that generated them, testing for a sample of them the correctness of the interest rates applied and the corresponding calculations.
Evaluation of the reasonableness of the provisions for uncollectibility risk and devaluation recorded by the entity. Likewise, in the event that the entity has introduced changes in its ECL model, the reasonableness of the changes considered relevant must be evaluated.
Evaluation of the reasonableness of provisions for contingencies. The external auditor will design and apply audit procedures in order to identify lawsuits and claims that affect the entity and that may originate a risk of material misstatement, including the following:
a) Inquiries of management and, if applicable, of other persons of the entity, including internal legal advisors. b) Review of minutes of Board of Directors meetings or similar bodies and of correspondence between the entity and its external legal advisors. c) Review of legal expense accounts. If the auditor assesses that there is a risk of material misstatement with respect to identified lawsuits or claims, or in cases where the audit procedures applied indicate that there may be other material lawsuits or claims, the auditor will request direct confirmations from the entity's external legal advisors, and, if necessary, will make direct communications with them.
Review of repo operations, pledges, cash and forward purchases and sales of public or private bonds, foreign currency, and other financial derivative instruments, by comparing balances with the corresponding supporting documentation. Verification of their adequate exposure, valuation, and cancellation within the agreed deadlines.
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Review of the reasonable consolidation of the financial statements of subsidiaries abroad at the end of the corresponding period, according to B.C.R.A. standards and based on the financial statements of said subsidiaries, which must be examined with the scope that, in the judgment of the external auditor, is necessary, taking into account the significance of the corresponding balances.
Review of the adequate valuation of other assets, whose significance justifies it, according to B.C.R.A. standards.
Review of the reasonableness of capitalizations, premiums, quotation differences, and accrued interest, according to the procedures established by the B.C.R.A., corresponding to all those obligations that generated them, testing for a sample of them the correctness of the interest rates applied and the calculations made.
Review of balances owed to the B.C.R.A. for any concept.
Review of the adequate valuation of other liabilities, whose significance justifies it, according to B.C.R.A. standards.
Analysis of the movement produced during the period in the items comprising the entity's net equity through:
11.1. Comparison with the minutes of Shareholders' Meetings, Board of Directors meetings, or similar bodies of the entities.
11.2. Review of the effective receipt of funds corresponding to capital increases and irrevocable contributions for future increases, as well as of the amounts committed in due time by shareholders, with the respective supporting documentation.
11.3. Review of the recording and payment of dividends and other profit distributions approved by the entity's bodies, verification of whether they are in accordance with legal provisions and B.C.R.A. standards, as well as with those arising from the statutes or similar documents regulating the operation of the entity.
11.4. Review of the reasonableness of adjustments of results from previous periods recorded during the period.
11.5. Review of significant changes in the composition of the entity's share package and its corresponding information to the B.C.R.A.
Review of other movements not mentioned previously with the corresponding supporting documentation.
Review of compliance with B.C.R.A. standards in matters of monetary regulations and technical ratios, as well as the requirement and integration of minimum capital. Additionally, review of the increase in the minimum capital requirement for credit risk derived from the non-compliance - even if they originate in periods prior to the one under review - of the following regulations: immobilized assets and other concepts, large exposures to credit risk, and fragmentation of credit risk to the public sector, financings to related clients, and credit grading.
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Comparison of supporting documentation and detailed verification of the most significant amounts charged to the year's results of the accounts that:
14.1. Have abnormal significant variations between months within the year without apparent justification.
14.2. Have significant differences in the global tests performed or that do not relate to the balances of the equity accounts that generated them.
14.3. By their nature and/or significance require a detailed examination in the judgment of the external auditor.
Review of events and transactions occurring after the end of the fiscal year or period and up to the date of the auditor's report, in order to determine if they significantly affect the figures of the financial statements at that date or require additional disclosure within the corresponding complementary information.
Reading of the minutes of Shareholders' Meetings, Board of Directors meetings, or similar bodies of the entity, relating the matters discussed with the work performed in other areas of the review.
Review that all mandatory accounting books are updated and are kept in accordance with current legal provisions and B.C.R.A. regulatory standards.
Verification that the entity has duly complied with the observations made during the last B.C.R.A. inspection.
Review of the reasonable preparation of the financial statements at the end of the fiscal year or period according to the classification and disclosure guidelines established by the B.C.R.A., as well as the corresponding complementary information. The verification includes the evaluation that the notes to the entity's financial statements are in accordance with the accounting information presentation scheme required by this Central Bank.
Review of the compliance with rehabilitation plans, if any.
The auditor must request the Board of Directors or equivalent authority of the financial entities to provide a written representation in which it indicates that:
21.1 They recognize and understand that they have fulfilled their responsibility in the preparation and presentation of the publication financial statements.
21.2 They have provided all relevant information pertinent for the preparation and presentation of the publication financial statements.
21.3 All transactions were recorded accounting and have been reflected in the publication financial statements, in accordance with the accounting standards of the B.C.R.A.
The date of the written representation must coincide with the date of the auditor's report on the publication financial statements.
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In the event that the written representation referred to has not been made available, or if it is not consistent with the audit evidence obtained, the auditor must evaluate the impact of such a situation when issuing their opinion on the publication financial statements.
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REPORTS
As a conclusion of the task performed, external auditors must send the following reports to the financial entities:
1.1 Objective of the report.
Based on the audit work performed, the auditor must express their opinion or declare that they abstain from issuing it regarding the information contained in the financial statements.
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1.2 Scope and review procedures.
The scope of the work performed must be carried out in accordance with the current audit standards established by the provisions of the Central Bank of the Republic of Argentina, contained in Annexes II and III of the Minimum Standards on External Audits for Financial Entities.
1.3 Content of the report.
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This section of the report must also express management's responsibilities regarding the assessment of the entity's ability to continue as a going concern and whether it is appropriate to use the going concern accounting principle, as well as the disclosure, if applicable, of issues related thereto.
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1.4 Modified opinions.
1.4.1. Qualified opinion.
The auditor will express a qualified opinion when:
a) they conclude that, based on valid and sufficient evidence obtained, the financial statements contain misstatements that, individually or in aggregate, are material but not pervasive. b) they are unable to obtain valid and sufficient evidence on which to base their opinion, but conclude that the possible effects on the financial statements of undetected misstatements, if any, could be material but not pervasive.
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If there were limitations on the scope of the audit task that prevented the issuance of an opinion or implied qualifications to it, such limitations must be clearly stated in the “Basis for qualified opinion” section. Such scope limitations must indicate the procedures not applied, noting the following:
a) if the restriction was imposed by the entity. b) if the restriction is a consequence of other circumstances.
The qualifications must be adequately justified, specifying the accounts or items involved, the nature of the exception, and its amount.
When it is impossible to reasonably quantify the corresponding amounts, the external auditor must explain the reasons for this in their report. The disclosure of the causes of the qualifications in the notes to the entity's financial statements will excuse their repetition in the report, but the report must clearly and expressly indicate the existence of the qualification and refer to the respective notes. Regardless of this, the auditor in their report will refer to the notes and determine what influence the corresponding qualifications have on their opinion or report.
1.4.2. Adverse opinion.
The auditor will express an adverse opinion when, having obtained valid and sufficient evidence, they conclude that the misstatements, individually or in aggregate, are material and pervasive in the financial statements. In this case, they will state that the financial statements do not present fairly or have not been prepared, in all material respects, in accordance with the accounting information framework established by the Central Bank of the Republic of Argentina, explaining the reasons justifying their opinion in a paragraph with a title called “Basis for adverse opinion”, located immediately after the opinion paragraph.
1.4.3. Disclaimer of opinion.
The auditor will disclaim an opinion when:
a) they are unable to obtain valid and sufficient evidence to base their opinion and conclude that the possible effects on the financial statements of undetected misstatements, if any, could be material and pervasive. b) in rare circumstances involving multiple uncertainties, leading the auditor to conclude that, despite having obtained valid and sufficient evidence regarding each of them, it is not possible to form an opinion on the financial statements, due to the possible interaction of the uncertainties and their potential cumulative effect on the financial statements. The auditor must point out in their report the reasons justifying their disclaimer of opinion in a paragraph with a title called “Basis for disclaimer of opinion”.
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1.4.4. Other matters on modified opinions.
Even if the external audit has expressed an adverse opinion or disclaimed an opinion on the financial statements, they will describe in the “Basis for opinion” section the reasons for any other matter of which they are aware that would have required a modified opinion, as well as the corresponding effects. If it is not practicable to quantify the effects of a departure from the BCRA accounting information framework, but it is still estimated that those effects justify a qualification or an adverse opinion, the auditor must state the matter giving rise to the modification of the opinion.
1.5 Emphasis of matter paragraphs.
If the audit considers it necessary to draw the users' attention to a matter disclosed in the financial statements that, in their judgment, is of such importance that it is fundamental for the understanding of said statements, they will include an emphasis of matter paragraph in the audit report provided that, as a result of the matter, it would not be required to express a qualified opinion, an adverse opinion, or to disclaim an opinion. However, the widespread use of emphasis of matter paragraphs may reduce the effectiveness of the auditor's communication regarding this type of matter. When the auditor incorporates an emphasis of matter paragraph in their report, they will include the paragraph in a separate section of the report with an appropriate title including the term “emphasis”; they will include in the paragraph a clear reference to the matter emphasized and to the location in the financial statements of the corresponding information in which said matter is described in detail; and they will indicate that the matter emphasized does not modify their opinion. The emphasis of matter paragraph does not affect the audit opinion and is not a substitute for:
1.6 Paragraphs on other matters.
The external auditor will add a highlighted paragraph with the title “Paragraph on other matters” to their report when there are situations other than those disclosed in the financial statements that are relevant for users to understand the audit, the auditor's responsibilities, or the audit report. Such a paragraph will clearly reflect that those other matters are not required to be disclosed in the financial statements and will not include information that is required to be provided by management.
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1.7 Comparative information.
When financial statements are presented with figures corresponding to prior periods, the auditor's opinion must refer only to the current period and will not mention the figures of prior periods, because the auditor's opinion is on the financial statements of the current period as a whole, including the figures corresponding to prior periods. As an exception to this rule, the auditor will refer in their opinion to the figures of prior periods when they had issued a modified opinion in the prior period and the problem that gave rise to such modification has not been resolved, or when the external audit identifies a material misstatement in the prior period that has not been appropriately disclosed but the effects, or possible effects, of the matter on the figures of the current period are not material, and only the comparability between the figures of the current period and the figures corresponding to prior periods is, or could be, materially affected. When the financial statements of the prior period were audited by another professional, the current auditor will include in their report, whether the approach used is that of corresponding figures of prior periods or that of comparative financial statements, a paragraph on other matters indicating the type of opinion expressed by that auditor and, (if it was a modified opinion, the reasons that motivated it), and the date of the other professional's audit report.
2.1 Objective of the report
The external audit must gather valid and sufficient evidence to allow them to issue a report regarding the review of financial statements for interim periods with a scope lower than that necessary to issue an audit opinion and to conclude on the existence of facts or circumstances that would draw the auditor's attention and lead them to think that the interim financial statements are not prepared, in all material respects, in accordance with the BCRA accounting standards.
2.2 Scope and Review Procedures
The scope of the work performed must be carried out in accordance with the current audit standards established by the provisions of the Central Bank of the Republic of Argentina, contained in Annexes II and III of the Minimum Standards on External Audits for Financial Entities, applicable to the review of financial statements for interim periods.
2.3 Content of the report
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The special data required to comply with national, provincial, and municipal legal and regulatory provisions or those of public bodies or the profession, where applicable (for example, if the financial statements agree with the entries made in the entity's accounting records and if the latter are kept in accordance with current legal provisions and regulatory standards of the Central Bank of the Argentine Republic, provincial and tax debts, requirements of the Financial Information Unit and/or National Securities Commission, etc.).
2.4 Comparative Information
When interim period financial statements are presented with figures corresponding to previous periods, the auditor's conclusion must refer only to the current period and will not mention the figures of previous periods.
a) The audit must report the weaknesses resulting from its evaluation of the following aspects:
B.C.R.A.
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b) The auditor must issue their opinion on the following aspects:
c) The audit must also report those issues that required significant attention from the auditor when performing the audit of the current period's financial statements and that were communicated to the entity's Management. A description of each key audit matter will be included with a reference to the related disclosure(s) that management may have included on the topic, if any, in the financial statements, addressing 1) the elements considered to deem the matter as most significant in the audit and 2) How the matter was addressed in the audit, indicating what audit procedures were performed in relation to the topic.
This memorandum must be sent whenever the external auditor deems it necessary and, at least, once a year upon the presentation of the publication financial statements at the end of the fiscal year.
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The Board of Directors, the Board of Administration, or the competent local authority, as applicable, will be responsible for analyzing the received memorandum and, in case of sharing the external auditor's opinion, develop a plan with the intervention of the internal audit responsible parties so that within ninety (90) calendar days of the end of the fiscal year, measures are taken to correct the observed deficiencies.
Within one hundred eighty (180) calendar days counted from the end of the fiscal year, the external auditor must send a letter to the entity informing about the degree of compliance with the recommendations made (*), which must be forwarded to the Superintendence of Financial Entities and Currency in the Supervision reporting regime. ()
If the external auditor had not observed deficiencies in the internal control system, they must equally send a letter to the entity informing about this situation.
Special reports must contain, at a minimum, the following:
The content of each section of the report must be headed with an appropriate title.
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4.1. Verification of debtors of financial entities.
4.1.1. Objective of the report
The external auditor will verify the information on "Debtors of the Financial System," corresponding to the last month of each calendar quarter. The review will cover the following debtors:
a) Main debtors of financial entities (P.D.E.F.):
Report any potential differences - debtor by debtor - between the data supplied by the entity and those obtained from the review of existing documentation or other elements deemed appropriate, linked to Sections:
A
B – points 2 to 9 of the information on "Debtors of the Financial System" These include debtors whose review scope is established in point 4.1.2. a).
b) Main debtors not included in point a):
Report any potential differences – debtor by debtor – between the data supplied by the entity and those obtained from their review of the documentation on file or other elements deemed appropriate, linked to sections A B – points 2 to 9 of the information on "Debtors of the Financial System". These include debtors whose review scope is established in point 4.1.2. b).
c) Rest of the debtors of financial entities:
Issue an opinion regarding the reasonableness of provisions for uncollectible risk for clients not included in points a) and b) above.
These include debtors whose review scope is established in point 4.1.2.c).
4.1.2. Scope of the Review
a) Main debtors of financial entities (P.D.E.F.):
The external auditor must analyze each of the main debtors that meet the following characteristics:
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Additionally, according to the economic quarter to which those debtors falling within the following parameters refer:
First quarter: those with a debt balance equal to or greater than 1% of the integration of the minimum capital of the month prior to the end of that period. The review may be interrupted when the sum of the balances of the analyzed debtors reaches 80% of the total assistance granted by the entity to the Non-Financial Private Sector - Commercial Portfolio - (assistance is understood as all concepts included in the information on debtors of the financial system.) The external auditor must also analyze debtors from the non-financial public sector and financial sector whose debt amount is higher than the last non-financial private sector debtor that corresponds to be analyzed, taking into account what is expressed in the previous paragraph.
Second quarter: those with a debt balance equal to or greater than 5% of the integration of the minimum capital of the last month prior to the end of that period.
Third quarter: those with a debt balance equal to or greater than 1% of the integration of the minimum capital of the month prior to the end of that period. The review may be interrupted when the sum of the balances of the analyzed debtors reaches 80% of the total assistance granted by the entity to the Non-Financial Private Sector - Commercial Portfolio - (assistance is understood as all concepts included in the information on debtors of the financial system.) The external auditor must also analyze debtors from the non-financial public sector and financial sector whose debt amount is higher than the last non-financial private sector debtor that corresponds to be analyzed, taking into account what is expressed in the previous paragraph.
Fourth quarter (closing balance): those with a debt balance equal to or greater than 5% of the integration of the minimum capital of the month prior to the end of that period.
Observations arising from the analysis of clients considered in the previous quarter and not included in this review, whose variations in debt balances have been significant, will also be recorded.
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The external auditor must analyze debtors cumulatively, eliminating fully provisioned clients, starting with the first debtor based on their debt, and cannot fail to analyze any until reaching the scope fixed for each quarter by the standard. In no case shall the scope of this required verification be less than 50 main debtors reported by the entity.
When in a quarter there are debtors included in the universe analyzed in the immediately preceding economic quarter, the auditor may disregard their analysis, with the following exceptions:
b) Main debtors not included in the previous point From the rest of the main debtors not included in subsection a), a sample must be determined with a statistical method or based on statistics, eliminating fully provisioned clients from it. The external auditor must evaluate the way in which the portfolio must be segmented to arrive at satisfactory conclusions.
To determine the aforementioned sample, the auditor must justify the degree of confidence, tolerable error, and expected error used, and relate the level of these parameters to the confidence placed in the internal control system.
Additionally, the selection criteria for cases subject to review must be established, applying methodologies that allow any component of the universe to have the same chance of being chosen.
For the external auditor to place confidence in the internal control system, they must have carried out all procedures provided for this purpose in the minimum standards on external audits.
Likewise, the reporting professional must project the provision defects arising from the analyzed portfolio as indicated in this point, to the non-analyzed portfolio, indicating the methodology used.
Review of this segment will not be necessary if the review scope of the debtors mentioned in subsection a) reached 80% of the Non-Financial Private Sector – Commercial Portfolio.
When in a quarter there are debtors included in the universe analyzed in the immediately preceding economic quarter, the auditor may disregard their analysis, with the following exceptions:
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c) Rest of the debtors of financial entities:
Comprises the rest of the debtors not included in the scope established in subsections a) and b) of point 4.1.1.
A sample must be determined with a statistical method or based on statistics, eliminating fully provisioned clients from it. The external auditor must evaluate the way in which the portfolio must be segmented to arrive at satisfactory conclusions.
To determine the aforementioned sample, the auditor must justify the degree of confidence, tolerable error, and expected error used, and relate the level of these parameters to the confidence placed in the internal control system.
Additionally, the selection criteria for cases subject to review must be established, applying methodologies that allow any component of the universe to have the same chance of being chosen.
4.1.3. Other aspects of the report
The report prepared by the auditor must be accompanied by:
a) A description of the information used to analyze the data of the debtors subject to the review. b) It must include the identification code for the analyzed debtors and, if discrepancies exist:
4.1.4. Procedures for the review:
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The external auditor must evaluate, at least annually, the internal control system related to the loan cycle, in accordance with what is established in points 2.5. “Identification and evaluation of specific risks” and 2.6. “Audit plan”, of Annex II. The task indicated in the previous paragraph must consider the following aspects:
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d) Procedures on the expected credit losses estimation model In the reports corresponding to the closing of the economic year, the external audit must inform the observations that have arisen from the evaluation carried out of the methodology for estimating expected credit losses (ECL) implemented by the entity, as established in Annex III, quantifying, if applicable, its effect on the expected credit loss provisions accounted for by the entity.
4.2. Verification of information on rejected checks.
The external auditor must verify compliance with the requirements and procedures established in the relevant standard and issue – with annual periodicity - a special report, with the conclusions reached.
4.2.1 The objective of this special report includes the following aspects:
a) Perform verification procedures of the existence and functioning of the internal control procedures that the entity applies, to comply with the standards of the Central Bank of the Argentine Republic, in relation to the information included in the Information Regime corresponding. b) Perform a review on the modifications of the records of rejected checks timely reported to the BCRA, in order to verify that they were carried out in accordance with the supporting documentation held by the entity and reported within the timeframes established in the current regulations.
4.2.2. Scope and Review Procedures
The external auditor must apply review procedures to obtain valid and sufficient elements of judgment to support its report on compliance with the requirements and procedures established in the relevant standard and issue a special report, manifesting the findings based on the results obtained from those procedures. Observations found as a result of the aforementioned review and the course of action to be followed by the entity for their solution must be recorded in this special report. Observations found as a result of the aforementioned review and the course of action to be followed by the entity for their solution must be recorded in this special report.
4.3. Verification of information on consolidated financial statements
4.3.1. Objective of the report
The objective of this report is that the auditor, based on its review, issues a specific opinion on the reasonableness of the consolidated financial statements, taking into account the consolidation guidelines established by the B.C.R.A. and an opinion on the entity's compliance with monetary regulations and technical relationships, established on consolidated bases.
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4.3.2. Other considerations
The report must contain special clarifications prior to the opinion that allow adequate interpretation of the information or referral, if applicable, to the disclosure made of them through a note to these statements.
4.4. Verification of information on related companies or entities
4.4.1 Objective of the report
The objective of this report is that the audit verifies the information contained in the "Detail of Related Companies or Entities" (point 1.7.1. of Section 1 of Chapter I of Circular CREFI-2), and the carrying out of operations with financial entities and/or local and foreign natural and legal persons not reported by the entity as subject to the supervision regime on consolidated bases, which indicate or may presume the existence of direct or indirect affiliation with the audited entity. In this special report, related companies or entities not contained in the "Detail of Related Companies or Entities" mentioned in the previous paragraph must be reported quarterly, as well as the characteristics and significance of the operations must be specified and if they are adequately considered in the financial statements.
4.4.2 Scope and Review Procedures
To issue the special report, the external auditor must perform at least the following procedures:
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4.5. On the capitalization of liabilities.
4.5.1 Objective of the report
This report aims for the external auditor to issue an opinion on the compliance with all aspects required by the regulations for the capitalization of liabilities.
This report must accompany the capitalization request that the entity makes to the Superintendence of Financial and Currency Entities and be sent -in paper- to the respective Supervision and Auditor Control Manageries.
4.5.2 Scope and Review Procedures
To issue the report, the external auditor must perform the necessary procedures to verify:
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The external auditor must inform on each of the points individually, the presentation by the entity of reports that include limitations of any kind in the scope of the tasks is not admitted.
4.6 On the requirements established in the regulations on Financing to the Public Sector of the Central Bank of the Argentine Republic, for financial assistance to Financial Trusts under Law 24.441 or fiduciary funds for infrastructure works of the Wholesale Electricity Market ("MEM") or the subscription of debt instruments issued by them.
4.6.1 Objective of the report
This report aims for the external auditor to issue a conclusion based on its review, on the compliance by the financial entity of each of the requirements, individually, established in the TO on Financing to the Public Sector of the Central Bank of the Argentine Republic, for financial assistance to Financial Trusts under Law 24.441 or fiduciary funds for infrastructure works of the Wholesale Electricity Market ("MEM") or the subscription of debt instruments issued by them.
4.6.2 Scope and Review Procedures
The external auditor must apply review procedures to obtain valid and sufficient elements of judgment to support its report on compliance with the requirements established in the relevant standard, the presentation by the financial entity of reports that include limitations of any kind in the scope of the tasks or statements that imply the lack of compliance with any of said requirements is not admitted.
4.7 On the Application of funds to financings included in sections b.1 and b.2 of point 1 of Communication “A” 4995 (OCT-MAE Swap Operation – Bidding)
4.7.1. Objective of the report
Verify that the net nominal increase of the financings included in sections b.1) and b.2) of point 1. of Communication “A” 4995 is at least equivalent to the notional capital of the swap, for the period between the date of award of the swap and the last day of the next calendar quarter to the date of award of the swap.
4.7.2. Scope and Review Procedures
For the purposes of issuance, the external auditor of the entity must apply, at a minimum, the following procedures:
a) Verify the amount of the notional capital of the swap operation in which the Entity was awarded in accordance with Communication “A” 4776 and amendments. b) Obtain from the entity a detail of the financings granted as a consequence of the bidding mentioned in the previous section I), which includes the data of the granting date, financing line, name of the borrower, company CUIT, amount of financing granted, interest rate, average term and maturity. Version: 4th. COMMUNICATION “A” 8167 Validity:
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c) Obtain from the entity a detail of the capital amortizations corresponding to the financings included in sections b.1) and b.2) of point 1. of Communication “A” 4995, which includes the data of the granting date, financing line, name of the borrower, company CUIT, amount of financing granted, payment date, amount of amortized capital, amount of maturity payment. d) Control that the net nominal increase of the financings included in sections b.1) and b.2) of Communication “A” 4995, according to the details indicated in points II) and III) above, is equal to or greater than the notional capital of the swap. e) Check the coincidence of the totals of the financing inventories at .... of ................. of 20..... with the accounting balances at that date and verify that the financings indicated in point II) are included in the respective inventories. f) Select by statistical bases a sample of financings granted affected by the swap and for the selected financings:
4.8. Regarding the granting of financing under section 7.2.1 of the consolidated text of Minimum Cash.
4.8.1. Objective of the report
Verify compliance with the conditions established in section 7.2.1 of the consolidated text of Minimum Cash regarding the financing granted to Micro, Small, and Medium Enterprises as of the reporting date.
4.8.2. Scope and Review Procedures
For the purpose of issuance, the external auditor of the entity must apply, at a minimum, the following procedures:
a) compare the balance of the financing with the entity's inventories opened by operation, () b) verify that the financing has been granted to MSME clients in accordance with the certification of accreditation of the condition of micro, small, or medium enterprise issued by the National Directorate of Competitiveness and SME Financing (dependent on the Ministry of Production and Labor) and do not exceed the maximum financing rate fixed in the norms mentioned in section 1. Precedent, c) verify that the financing selected in point b) has been granted within 10 business days of receiving the assistance from {Bank YYY} detailed in Annex II, and d) compare the date of receipt and the balance of the financing received with the entity's bank statements. Clarification (): Depending on the number of financing granted, the external audit may use sampling techniques, documenting the aspects taken into account for the determination of the sample size and the criterion for the selection of cases. For the case of atomized universes, statistical methods must be used with adequate justification of the criteria used, based on the degree of confidence in internal control, significance, and audit experience.
4.9. Any other report that the Central Bank of the Argentine Republic requires normatively.
5. Note on matters of immediate communication
A note must be issued, containing those matters that, due to their significance, the auditor considers should be brought to the knowledge of the entity and the Central Bank of the Argentine Republic immediately.
The auditor must:
Communicate immediately and reliably to the entity, regarding all those matters that due to their relevance could affect it.
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Send a copy of the aforementioned note to the Manager of Auditor Control of the Superintendence of Financial Entities and Currency.
NOTE FROM THE ENTITY SUBJECT TO THE CONTROL OF THE B.C.R.A. INFORMING THE DESIGNATION OF THE PRINCIPAL/ALTERNATE EXTERNAL AUDITOR(S).
Buenos Aires (or corresponding city), …..of…………….of……… CENTRAL BANK OF THE ARGENTINE REPUBLIC Autonomous City of Buenos Aires At. Auditor Control Manager.
Ref.: Auditor Registry.
Dear Sirs:
In virtue of what is provided by the Minimum Standards on External Audits for Financial Entities - current - issued by the B.C.R.A, I address you on behalf of (indicate the full name of the Entity), with the purpose of informing you that in the meeting of the Board of Directors (or corresponding corporate body), held on (indicate dd/mm/aa), the designation of the following external auditors was approved:
NOTE FROM THE PUBLIC ACCOUNTANT FOR THEIR REGISTRATION AS EXTERNAL AUDITOR OF ENTITIES SUBJECT TO THE CONTROL OF THE B.C.R.A. (also applicable to AUDITOR “RESPONSIBLE”) Buenos Aires (or corresponding city), ……of…………… of……...
CENTRAL BANK OF THE ARGENTINE REPUBLIC
Autonomous City of Buenos Aires
At. Auditor Control Manager.
Ref.: Request for registration in the Auditor Registry.
Dear Sirs:
I address you, with the purpose of requesting registration in the “Auditor Registry” of the B.C.R.A. in virtue of what is provided by the current Minimum Standards on External Audits issued by that Institution.
To this end and considering the provisions of Annex I of the aforementioned normative, I hereby detail the information and documentation attached, and declare that:
a) I have been designated external auditor (clarify: principal or alternate), by an entity subject to the control of the B.C.R.A.
Attached to this is the note from (indicate the full name of the entity), in which my designation as external auditor is recorded, along with a simple copy of the Board of Directors Act (or corresponding corporate body) that accredits my designation. b) I have a registration age of no less than FIVE (5) years. Regarding this, I inform that I am registered in the Professional Council of Economic Sciences of (indicate the jurisdiction to which the Professional Council belongs) since (indicate dd/mm/aa), with the N° of registration (indicate N°), Volume (indicate Volume) and Folio (indicate Folio). I attach the Certificate/s of the Professional Council/s of Economic Sciences of (indicate the jurisdiction to which the Professional Council belongs) in which the registration date and volume and folio are recorded. c) I have a minimum experience of THREE (3) years in the performance of auditing activities. Regarding this, I inform that I have worked as external/internal auditor in the following entities:
(list the entities in which you worked as auditor, period in which you developed the activity, and supporting documentation of your performance).
I attach a note that reliably accredits the experience in external or internal auditing in financial entities, mentioned above. d) I am not disqualified from practicing the profession by the Professional Council/s of Economic Sciences in which I am registered. Version: 1st COMMUNICATION “A” 8167 Validity:
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I attach the Certificate/s of the Professional Council/s of Economic Sciences of (indicate the jurisdiction to which the Professional Council belongs) in which it is stated that I am not disqualified from practicing the profession. e) I am not excluded by the Superintendence of Financial Entities and Currency from the “Auditor Registry”. f) (In the event of being part of a professional association) The professional association I am part of (indicate full name and CUIT of the professional association) is not expressly excluded from the Registry of University Professional Associations of the Superintendence of Financial Entities and Currency. (In the event of not being part of a professional association) I am not part of a professional association registered in the Registry of University Professional Associations of the Superintendence of Financial Entities and Currency. g) I comply with the independence criteria and other requirements for public accountants established by the current Auditing Standards recognized or established by the Professional Council of Economic Sciences of the jurisdiction corresponding to the legal domicile of the entity. h) I am not a partner or shareholder, director or administrator of the entity, nor of persons or companies economically linked to it. i) I do not work in an employment relationship with the entity or companies economically linked to it. j) I do not fall under any of the following disqualifications provided for in article 10 of Law 21.526, as detailed below:
j.1. Those affected by the disqualifications or incompatibilities established by article 264 of Law 19.550, namely:
j.2. Those disqualified from exercising public office. j.3. Those who are delinquent debtors of financial entities. j.4. Those disqualified from being holders of current accounts or others that participate in their nature, until three years after such measure has ceased. j.5. Those disqualified by application of item 5) of article 41 of Law 21.526, while the time of their sanction lasts, that is to say to perform as promoters, founders, directors, administrators, members of the supervisory boards, trustees, liquidators, managers, auditors, partners or shareholders of financial entities included in said Law. j.6. Those who by decision of a competent authority have been declared responsible for irregularities in the governance and administration of financial entities, and j.7. Those who are subject to the incompatibilities that, for the performance as trustee, are determined by article 286, items 2) and 3) of Law 19.550, which refer respectively to:
Additionally, I inform:
Professional address: (indicate street, number, floor and department, locality, province, postal code) Professional phone:
Professional email:
Sincerely yours.
I declare under oath that the data recorded in this note are correct and complete and that I have not omitted or falsified any data, being a faithful expression of the truth, and I commit to proceed to its update when appropriate, as established in the Minimum Standards on External Audits current. SIGNATURE OF THE DECLARING AUDITOR:
CLARIFICATION: (indicate name/s and surname/s as they appear on the national identity document) DNI:
CUIT/CUIL:
In the case of a Responsible Partner, the signature of the Legal Representative/Audit Committee of the financial entity must be recorded.
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NOTE FROM UNIVERSITY PROFESSIONAL ASSOCIATION CONSTITUTING ITSELF AS JOINT AND SEVERAL GUARANTOR Buenos Aires (or corresponding city), …of…………………of…… CENTRAL BANK OF THE ARGENTINE REPUBLIC Autonomous City of Buenos Aires At. Auditor Control Manager. Ref.: Joint liability for potential fines Dear Sirs:
In virtue of what is provided by the Minimum Standards on External Audits for Financial Entities -current- issued by the B.C.R.A., I address you with the purpose of informing you that (indicate the full name of the University Professional Association), represented at this act by (indicate partner's name in charge of the direction / legal representative, type and N° of document), according to (indicate: special power/statute or social contract and board of directors or administration council act) attached whose validity is declared at this act, constituting domicile for the purposes of the present in (indicate social address), constitutes itself as joint and several guarantor, with express waiver of the benefits of division and excussion, of the obligations that in the concept of fine could be imposed on Mr./Srs (indicate Name and Surname, type and N° of identity document of the designated auditors or responsible auditor) by the Central Bank of the Argentine Republic as a consequence of summaries by which their performance as external auditor/responsible partner, respectively, of financial entities subject to the control of the Central Bank of the Argentine Republic is evaluated. Likewise, I inform:
NOTE FOR REGISTRATION / MODIFICATION OF INFORMATION OF UNIVERSITY PROFESSIONAL ASSOCIATIONS WITH PARTNERS REGISTERED IN THE B.C.R.A. AUDITOR REGISTRY Buenos Aires (or corresponding city), …of…………………of…… CENTRAL BANK OF THE ARGENTINE REPUBLIC Autonomous City of Buenos Aires At. Auditor Control Manager. Ref.: Request for registration in the Registry of Auditor Professional Associations. Dear Sirs:
I address you, with the purpose of requesting the registration / update the information of the Professional Association (indicate the full name of the professional association) in the Registry of University Professional Associations of the B.C.R.A., in virtue of what is provided by the Minimum Standards on External Audits of the B.C.R.A. To this end and considering what is provided by the current B.C.R.A. normative, below, it is detailed:
I declare under oath that the data recorded in this note are correct and complete and that I have not omitted or falsified any data, being a faithful expression of the truth, and I commit to proceed to its update when appropriate, in accordance with what is prescribed in the normative - current- B.C.R.A. Sincerely yours. SIGNATURE (Partner in charge of the Direction/ Legal Representative):
CLARIFICATION: (name/s and surname/s as they appear on the national identity document) DNI:
B.C.R.A.
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FOR FINANCIAL ENTITIES
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