Circular Letter CVM/SIN/SNC 02/2013

CIRCULAR LETTER/CVM/SNC/SIN/No. 02/2013
Rio de Janeiro, June 11, 2013
Subject: Conflict of interest between the audit of the financial statements of FIDC and the verification of the collateral of credit rights.

Gentlemen,

1. This Circular Letter aims to clarify to the independent auditors of Credit Rights Investment Funds and Non-Standardized Credit Rights Investment Funds (collectively "FIDC"), and their respective administrators, regarding the existence of a threat to independence in audit work of the financial statements of this segment.

2. We observe that, in some situations, the independent auditors, or firms of their network (as defined in items 13 to 24 of NBC PA 290 – Independence – Audit and Review Engagements, approved by CFC Resolution No. 1,311/10), are hired by the custodian of the FIDC to perform the verification of the collateral of the credit rights referred to in art. 38, items II and III, of CVM Instruction No. 356/01, in the same FIDC in which they provide independent audit services of the annual financial statements.

3. It is important to emphasize that the results of the collateral verification carried out by the FIDC auditor, or firms of their network, as subcontractors of the custodian, are an integral part of the quarterly report referred to in art. 8, paragraph 3, of CVM Instruction No. 356/01. Specifically regarding this topic, we remind you that the independent auditor of the FIDC reviews this quarterly report and considers it in their analysis of the control environment, in the evaluation of significant risks and in defining the extent of their control and substantive tests, given that they must examine the quarterly reports during the annual audit of the FIDC, as provided for in art. 8, §4, of the same Instruction and guidelines contained in Circular Letter/CVM/SIN/SNC/No. 1/2012.

4. Thus, we understand that the self-review threat referred to in item 7, letter "b", of the aforementioned NBC PA 290, approved by CFC Resolution No. 1,311/10, is configured, constituting a threat to the independence of the audit work of the financial statements of FIDC when the same auditor, or firm of their network, also performs the verification of the collateral of the credit rights referred to in art. 38, items II and III, of CVM Instruction No. 356/01, for the reasons already explained above.

5. In view of the facts stated, the independent auditors who, directly or through a firm of their network, are performing both the aforementioned collateral verification and the audit of the financial statements of the same FIDC, must choose to perform only one of these services, within the same deadlines provided for in art. 4, sole paragraph, items I and II, of CVM Instruction No. 531/11, which are:

I – until February 1, 2014; or

II – immediately, if the FIDC subject to both services is to conduct a public offering of shares registered or exempt from registration with the CVM.

6. In this sense, we remind you that the performance of audit work without observing the determinations contained in the aforementioned NBC PA 290, approved by CFC Resolution No. 1,311/10, constitutes a violation of art. 20 of CVM Instruction No. 308/99.

7. Finally, we highlight that, in accordance with art. 27 of CVM Instruction No. 308/99, the administrators of FIDC will be held liable in the case of hiring auditors who do not meet the independence criteria stated in this Circular Letter. We also emphasize that, according to the sole paragraph of this same article 27, if the lack of independence of the auditor is found, the audit work will be considered void for compliance with the law and CVM norms, without prejudice to the legal sanctions eventually applicable to the administrators.

Sincerely,

(Signed original)
Francisco José Bastos Santos
Superintendent of Institutional Investor Relations

(Signed original)
José Carlos Bezerra
Superintendent of Accounting and Audit Standards