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CIRCULAR LETTER/CVM/SNC/GNA No. 01/2018

Rio de Janeiro, January 17, 2018.

Subject: Clarifications regarding the performance of auditors within the securities market

Dear Independent Auditor,

As a direct result of our supervision and inspection actions regarding auditing activities within the securities market, we list below certain points related to registration with the CVM, performance in the securities market, and the application of independent auditing professional standards in the execution of work, for which we request special attention from independent auditors registered with this Commission.

1. Periodic Information (Art. 16 – CVM Instruction No. 308/99)

Independent auditors must submit information to the CVM regarding their performance in the securities market by the last business day of April each year, in accordance with Annex VI to CVM Instruction No. 308/99. This information is important support for the CVM to evaluate the auditors' capacity to adequately serve their clients.

Such information must be submitted via the internet, on the CVM website. The submission must be made through the option “CENTRAL DE SISTEMAS” (Systems Center), selecting next the option “SISTEMA CVMWEB” (CVMWEB System) and then the option “ENVIO DE DOCUMENTOS” (Document Submission). At this stage, there are two options for submitting information: i) Submission of documents via form and ii) Upload of documents. Finally, the option “Annual Report of Independent Auditor” must be selected. The “upload of documents” option should be used only by those auditors who have more than 10 (ten) clients that are public companies (or members of the securities market or incentivized companies), as in this case, it is necessary to create a file (XML standard) to submit the required information.

Late submission of this information subjects auditors to a coercive fine, as provided in Art. 18 of CVM Instruction No. 308/99.

We also alert that Annex VI to CVM Instruction No. 308/99 was amended by CVM Instruction No. 591/17, with the elimination of item 8 (Continuing Education). Thus, whether via form submission or document upload, there is no longer a need to report courses and training completed during the reporting year.

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CVM Securities and Exchange Commission

2. Registration Update (CVM Instruction No. 510/11)

Regardless of the submission of periodic information required by CVM Instruction No. 308/99, it is also necessary for independent auditors to keep their registration updated, observing a deadline of up to 07 (seven) business days from the event causing the alteration. To this end, independent auditors must access their registration data on the CVM website and proceed with the appropriate update. In addition to the required update, annually (between May 1st and May 31st), the Independent Auditor must confirm that their registration data remains valid, by issuing the Electronic Conformity Declaration, established by CVM Instruction No. 510/11. The Electronic Conformity Declaration must be issued by accessing the option “CENTRAL DE SISTEMAS” (Systems Center), selecting next the option “SISTEMA CVMWEB” (CVMWEB System) and then the option “ATUALIZAÇÃO CADASTRAL” (Registration Update), followed by “DECLARAÇÃO ELETRÔNICA DE CONFORMIDADE” (Electronic Conformity Declaration), on the CVM website. It is important to emphasize that, even in cases where there are no changes to the data on the website, the Electronic Conformity Declaration must be issued.

To issue the Electronic Conformity Declaration, the independent auditor must be selected (click on the box before the auditor's name), confirming the registration data, or altering it if necessary, and then activating the option “ENVIAR FORMULÁRIO” (Send Form). After sending the Electronic Conformity Declaration, the information “Form already sent? YES” will appear.

Finally, we emphasize that the Electronic Conformity Declaration will only be counted if performed in the month of May, as defined in the cited regulation, and that non-compliance with Art. 1 of CVM Instruction No. 510/11 subjects the participant to a daily coercive fine, provided for in Art. 5 of the said Instruction.

3. Communications regarding Arts. 7 and 7-A of CVM Instruction No. 301/99.

With a view to faithful compliance with CVM Instruction No. 301/99, particularly regarding Arts. 7 and 7-A, we reiterate that in the event that no communication under the caput of said Art. 7 of the mentioned Instruction has been made to the Financial Activities Control Council – COAF, the independent auditor must communicate by the last business day of January, the non-occurrence in the previous calendar year of transactions or proposals for transactions subject to communication, in accordance with Art. 7-A (“negative declaration”), through the SISCOAF system.

Due to an agreement signed with the Federal Council of Accountancy – CFC, the negative declaration (if applicable) must be made in the CFC environment of SISCOAF. Nothing prevents an auditor registered with the CVM from voluntarily, and in a supplementary manner, also sending suspicious communications or negative declarations to the CVM segment of SISCOAF.

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CVM Securities and Exchange Commission

4. External Quality Review Program (Art. 33 – CVM Instruction No. 308/99)

We remind you that independent auditors must submit to external quality review to be performed by another auditor registered with the CVM, with a view to also evaluating compliance with technical and professional standards, in accordance with a specific standard issued by the CFC. Currently, NBC PA 11 regulates the matter, to be observed by independent auditors.

Specifically regarding the performance of the reviewing auditor, we have observed various problems in the execution of review work. These problems are mostly related to the depth of examinations performed, as well as to obtaining appropriate and sufficient audit evidence to support the opinion issued at the end of the work. It is important to emphasize that, from the sample of reviewing auditors selected for inspections in compliance with the Risk-Based Supervision Program (SBR) adopted by the CVM in recent years, we identified a high recurrence of problems in the execution of review work by reviewing auditors, leading to the adoption of complementary administrative procedures by this Agency, including the initiation of administrative sanctioning processes (Accusation Term).

Non-compliance with the Program established by the CFC by the reviewed auditor also entails the application of administrative sanctions. In this sense, we remind you that §5 of Art. 33 of ICVM 308/99, added by ICVM 591/17, establishes:

“§5 Non-compliance with the caput in at least 2 (two) of the 5 (five) last years will result in the immediate suspension of the registration of the Independent Auditor – Natural Person, or the Independent Auditor – Legal Entity, until a new review of their quality control is presented, according to the guidelines of the Federal Council of Accountancy, with a report issued without reservations, duly approved by the Management Committee of the External Quality Review Program, or equivalent, established by the Federal Council of Accountancy – CFC.”

Thus, an independent auditor suspended for non-compliance with the External Quality Review Program who wishes to reactivate their registration must, by their own act and without prior indication by the External Quality Review Committee – CRE, indicate their reviewing auditor to the CRE, submitting themselves to external quality review, within the deadlines and procedures defined by the regulation governing the Program. At the end of the review, its results, conclusions, and recommendations must be presented to the CRE, so that the Committee can analyze the review performed by the reviewing auditor, approving or not.

It is important to remember that, in any case, the reactivation of the independent auditor's (reviewed) registration with the CVM will only occur if the review process is approved by the CRE and provided that the external quality review report contains no reservations (report of review of adequate quality control system¹). Reports of review issued with reservations (report of review of quality control system with deficiencies), abstention of opinion (report of review of quality control system with scope limitation to the reviewer's work), or adverse (report of review of inadequate quality control system).

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¹ - The review reports cited in parentheses reflect the types of reports contained in the review of NBC PA 11, approved on December 8, 2017, with effects from 01.01.2019.

# CVM Securities and Exchange Commission

even if they meet the requirements provided for in the standard and are approved by the CRE, will not be considered valid for the reactivation of independent auditor registration.

## 5. Continuing Professional Education Program (Art. 34 – CVM Instruction No. 308/99)

With the objective of maintaining a high standard of technical qualification and constant updating regarding professional standards, accounting and auditing procedures, and standards related to the exercise of their activity in the securities market, independent auditors registered with the CVM must maintain, for themselves and their technical staff, a continuing education program in accordance with the guidelines approved by the CFC, contained in NBC PG 12 (R1).

In this regard, we remind you that non-compliance with the Continuing Professional Education Program by independent auditors – natural persons and independent auditors – legal entities, as well as their partners and/or technical managers, entails the application of administrative sanctions. On this subject, we bring §§ 1 and 2 of Art. 34 of ICVM 308/99, added by ICVM 591/17, which establish:

> Ҥ 1 The provisions of the caput apply to Independent Auditors РNatural Persons and partners, whether or not they exercise auditing activities, technical managers, directors, supervisors, and managers of Independent Auditors РLegal Entities.
>
> § 2 Non-compliance with the caput in at least 2 (two) of the 5 (five) last years will result in the immediate suspension of the registration of the Independent Auditor – Natural Person, or the registration as technical manager of Independent Auditor – Legal Entity, until a new certificate of approval in the Technical Qualification Examination, provided for in Art. 30 of this Instruction, is presented, regardless of the adoption of other applicable administrative measures.”

It is worth clarifying that, due to the joint action of this Agency with the Continuing Professional Education Commission – CEPC, established by the CFC for management and monitoring of the Program, **it is not necessary to submit the annual activity report related to Continuing Education to the CVM**. This report must be submitted annually to the respective Regional Council of Accountancy – CRC, as defined in NBC PG 12 (R1). Compliance with the Continuing Professional Education Program is homologated by the CFC/CRCs system.

We emphasize that, regardless of participation in external courses and activities, independent auditors must have mechanisms for timely monitoring of changes to independent auditing professional standards issued by the CFC and, when applicable, by the Institute of Independent Auditors of Brazil - IBRACON, and standards that regulate the independent auditing activity within the securities market.

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# CVM Securities and Exchange Commission

## 6. Auditor Rotation (Art. 31 – CVM Instruction No. 308/99)

In recent fiscal years, occurrences of non-compliance with Art. 31 of CVM Instruction No. 308/99, which deals with auditor rotation, have been identified: “the Independent Auditor – Natural Person and the Independent Auditor – Legal Entity cannot provide services to the same client for a period exceeding five consecutive years, counted from the date of this Instruction, requiring a minimum interval of three years for their re-hiring”, regardless of the period for which the auditor provided services to the audited entity.

On this subject, we highlight that the only permitted exception is that in which the audited company has a Statutory Audit Committee – CAE, installed and operating, **on a date prior to the hiring of the independent auditor**; and that this auditor is a legal entity, as provided for in Art. 31-A of the same Instruction, conditioning, furthermore, compliance with the requirements contained in Arts. 31-B to 31-F, all of the same Instruction. It must be emphasized that the primary responsibility of the auditor is to comply with the rotation requirement, **waiving the client when a situation characterizing non-compliance with the standard is verified**, notwithstanding the responsibility of the audited entity's administrators for the eventual hiring and maintenance of independent auditors who do not meet the conditions provided for in the Instruction (Art. 27 – CVM Instruction No. 308/99).

We also alert that auditor rotation cannot be performed with another audit firm with which the replaced auditor has common interests, nor can they use the same physical and operational structure as the previous auditors. Below, we cite some examples of situations that may characterize non-compliance with the auditor rotation rule, as well as others of the same nature:

a) existence of common partners;
b) existence of common technical managers;
c) use of the same address (headquarters and offices, if any);
d) direct kinship relationship between partners and technical managers of the audit firms (replaced and current); or
e) creation of “new” audit firms to provide services, with the existence of partners previously linked to the replaced auditor.

Additionally, we draw attention to the eventual re-hiring of the replaced auditor. Regardless of whether or not the period defined in the standard for providing consecutive audit services to the same client is reached (five years in normal situations; up to ten years for cases where there is a CAE), their re-hiring can only occur after a period of 03 (three) years. For example, if AUDITOR “A”, after 02 (two) years of providing services to the audited entity, was replaced by AUDITOR “B”, AUDITOR “A” can only return to provide audit services after 03 (three) years have passed since their replacement, **in any case**.

## 7. Issuance of Detailed Report (Art. 25, item II, CVM Instruction No. 308/99)

Art. 25, item II, of ICVM 308/99, as amended by ICVM 591/17, provides that the independent auditor must “prepare and submit to the management and the Fiscal Council, a detailed report containing their observations regarding the internal controls and

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accounting procedures of the audited entity, describing, furthermore, any deficiencies or inefficiencies identified during the course of the work”.

In this sense, ratifying the provisions of the cited normative text, we clarify that the issuance of said detailed report at the end of the work is expressly mandatory in any case, regardless of whether deficiencies or inefficiencies were identified in the examined environment. That is, although the independent auditing professional standard dealing with the subject (NBC TA 265) determines mention in the report only of significant deficiencies, if any, the detailed report required by ICVM 308/99 is more comprehensive, requiring the issuance of the report at the end of each work.

Furthermore, it is important to emphasize that said report, in consonance with the cited professional standard, must segregate significant deficiencies from non-significant ones. In those extremely rare situations where the independent auditor concludes that no internal control deficiencies (significant or not) were identified, the report to be issued will be affirmative, that is, it must state the **non-identification of internal control deficiencies**, whether significant or not, during the performance of the work.

Such procedure allows minimal proof that the independent auditor executed the evaluation of internal controls and accounting procedures provided for in the standard issued by the CVM and by independent auditing professional standards. It is always important to remember that it is the responsibility of the audited entity's management to ensure the adequacy of the internal controls they deemed necessary to allow the preparation of financial statements free from material misstatement, and for the auditor to consider internal control to plan audit procedures that are appropriate in the circumstances; **but not for the purpose of expressing an opinion on the effectiveness of internal control**.

On the other hand, within the scope of our Risk-Based Supervision, we have observed that, although formally issued, some presented reports are superficial, with generic information and without any relevant content for management to use it as a tool for improving internal controls, the main objective of its preparation. Additionally, it was verified that, in some reports, the segregation of significant deficiencies from others was not done expressly. In this sense, despite recognizing that the professional auditing standard itself (NBC TA 265) does not present a report model, we emphasize that the detailed report must contain a detailed description of the deficiencies and inefficiencies of the internal controls and accounting procedures adopted by the audited entity, followed by recommendations for the required corrections, as defined in items A15 and A28 of the cited standard, and the express segregation of significant deficiencies from others is still indispensable. It is important to emphasize that, although the NBC TA 265 standard allows for verbal communications with the management of the audited entity in these cases, it is our understanding that the performance of written communications provides the auditor with formal evidence of their performance, and is therefore the recommended option for communication.

In this context, we reinforce that the auditor must, furthermore, during the audit work of subsequent years, establish specific monitoring of those deficiencies pointed out in the previous report, as well as their outcome regarding management's actions, to determine whether such deficiencies should continue to be communicated in the detailed

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report, or whether those initially considered “non-significant” have changed their status due to their recurrence, without actions by the management of the audited entity over the examined periods.

Regarding said report, we also remind you that, according to NBC TA 265 – Communication of Internal Control Deficiencies, the deadline for issuing written communication is detailed in item A13, as follows:

> “When determining when to issue written communication, the auditor may consider whether the receipt of this communication would be an important factor to allow those responsible for governance to perform their general supervision responsibilities. Furthermore, for entities listed on stock exchanges in certain jurisdictions, those responsible for governance may have to receive written communication from the auditor before the date of approval of the financial statements to perform specific responsibilities regarding internal control, for regulatory purposes, or to meet other purposes. For other entities, the auditor may issue written communication at a later date. However, in the latter case, considering that the auditor's written communication on significant deficiencies is part of the final audit file, **the written communication is subject to the requirement of item 14 of NBC TA 230**, which requires the auditor to timely assemble the final audit file. NBC TA 230 establishes that the appropriate time limit for concluding the assembly of the final audit file is normally **no more than 60 days after the date of the independent auditor's report** (NBC TA 230, item A21)”. (our emphasis)

Therefore, the independent auditor must make efforts to receive management's comments within 60 (sixty) days after the date of the respective audit report. In cases where there is no response from management, the fact must be recorded in that final audit file, along with the discussion version sent, being considered “final” from that moment.

## 8. New Audit Report and Key Audit Matters

As is widely known, in 2016, the audit report was altered in form and content. There was doubt and discussion in this first year of application of the standard regarding the scope of the new section, given that the standard treated the inclusion of key audit matters as mandatory for **listed companies**. In response to a consultation from IBRACON regarding the scope of this term, the CVM Collegiate decided:

> “After discussion of the subject, the Collegiate unanimously decided to partially grant IBRACON's appeal in order to fix the understanding that, within the scope of the market regulated by the CVM and for the purposes of NBC TA 701, the concept of listed entities encompasses entities authorized by a market administrator to trade their securities in an organized market. Notwithstanding, in line with the understanding of the SNC, the Collegiate recognized the importance and the

# CVM Securities and Exchange Commission

convenience that the innovations brought by that auditing standard be observed by all entities registered with the CVM. Thus, the Collegiate decided to return the subject to the SNC to prioritize a normative alteration process in order to expressly provide for the disclosure of KAMs for all entities registered with the CVM already regarding fiscal years to be closed from 31.12.2017”.

Following the recommendation of the collegiate board, ICVM 308/99 was revisited, and after a public hearing process, it was amended by the issuance of CVM Instruction 591, which provides, from 2017, the inclusion of Key Audit Matters (KAMs) for all entities regulated or supervised by the CVM, including investment funds (for fiscal years closed on or after 31.12.2017), as determined by item VIII, of Art. 25 of CVM Instruction 308:

> “VIII – communicate key audit matters in audit reports of financial statements of all entities regulated or supervised by the CVM, in accordance with independent auditing professional standards approved by the Federal Council of Accountancy - CFC.”

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For its part, in connection with international discussions on the subject, the Institute of Independent Auditors of Brazil – IBRACON, issued Circular No. 07/2017 – DN, which strongly recommends the explicit inclusion of the results of audit procedures in Key Audit Matters (KAMs) and provides some examples of their presentation, making it clear that these are merely illustrative examples without the purpose of suggesting any standardized wording, which would be incompatible with the main objectives of the new report, which ultimately aim to make it more informative and transparent to its users.

It is relevant to highlight that, in order to achieve such objectives, it is essential that the description of the procedures carried out by the auditor and the results achieved present information content relevant to users, not restricting themselves to generic presentations of what was done and vague assertions regarding the adequacy of the subject matter as a whole to the financial statements.

In an analysis of reports issued in the first year of their application – fiscal year ended on 12/31/2016 – a tendency towards generic descriptions of procedures was verified. Below, we have an example of a generic description, which in our understanding should be avoided:

> “Consequently, we performed specific audit procedures, which include, but are not limited to, understanding internal controls and substantive detail tests based on sampling to verify the documentation supporting said transactions.”

From the negative example transcribed above, we see that such a description could apply to any risk, of any company, of any sector, bringing no relevant informational content for the reader of the report, completely deviating from the objective of the new auditor’s report.

Additionally, regarding the description of results, we have observed that the reported account is quite similar to the description of the procedures carried out discussed above. Such

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as in the case of procedures, the results (described only in a small portion of the audit reports issued for the fiscal year ended on 12/31/2016) also do not present useful information to the reader, as can be seen in the following excerpt, which represents almost the entire sample identified:

> “The result of our procedures was considered adequate in the context of the financial statements taken as a whole.”

In this sense, considering that an audit matter should only be described as a KAM if it is not subject to modification in the auditor’s report, it is obvious that the matter was considered by the auditor as appropriate at the end of the work. Therefore, there is no relevant information in that statement. In this sense, it is important to remember item 12 of NBC TA 701:

> “The auditor **shall not communicate a matter** in the section ‘Key Audit Matters’ of the report when, in accordance with NBC TA 705, he should issue a modified opinion as a result of that matter.”

Consistent with the understanding of this technical area, in discussions with institutional investors, we noticed similarities in perceptions regarding the content of audit reports issued in the first year of validity of NBC TA 701, as well as in their opportunities for improvement, compared to the provisions of independent audit professional standards.

Therefore, it is reasonable to conclude that users expect, just as this technical area does, that the following items be described in the Key Audit Matters section, even if not fully required by NBC TA 701, and among other possible ones, which we understand as improvements applicable by the auditor when preparing his audit report:

- specific audit procedures for the risk under discussion;  
- information about the use of the work of specialists and/or internal auditors;  
- specific audit procedures related to applicable internal controls and whether, as a result of the application of the procedures carried out by the auditor, possible deficiencies in their effectiveness were detected;  
- any difficulties in applying planned procedures;  
- changes in the planning of procedures executed, in the scope or depth of audit testing;  
- whether adjustments were identified during the execution of audit procedures, recorded or not by the entity’s administration, even if they are not considered material by the auditor.

Additionally, considering the dynamics of the economic and business environment, as well as the diversity of activities, processes, and systems of the audited entities, it is expected that audit reports be **effectively individualized**, not being mere repetitions of the key audit matters of the previous exercise, nor composed of standardized KAMs, established internally by the audit firm, for the firm as a whole or by the sector of activity of the audited entities. Thus, we understand that the effective achievement of the objectives of the new audit standards will be guaranteed,

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providing greater transparency about the audit work performed and greater utility to various users for their decision-making.

## 9. Examination of Technical Qualification (art. 30, Instruction CVM n.º 308/99)

On 08/21/2015, NBCPA 13 (R2) was approved, which deals with the Technical Qualification Examination, instituted by the Federal Council of Accounting – CFC. Thus, considering that the aforementioned NBCPA 13 (R2) altered the functioning model of said Examination, creating a specific test for acting in entities regulated by this Autarchy, it is worth remembering the provision in article 30 of ICVM 308/99, which determines that the Technical Qualification Examination will be carried out with a view to qualifying the independent auditor for the exercise of the activity of auditing financial statements for all entities included in the securities market.

NBCPA 13 (R2), in its item 3, letter “b”, instituted the specific test for acting in entities regulated by the Securities and Exchange Commission (CVM). That is, from the entry into force of NBCPA 13 (R2), the Technical Qualification Examination – “CVM” became the necessary technical qualification exam for registration with this Autarchy.

Additionally, it is advisable to clarify that approval in a specific technical qualification examination “CVM” constitutes, only, **as one of the necessary requirements for registration with the CVM**. The fact of being active in the National Register of Independent Auditors (CNAI), maintained by the Federal Council of Accounting, does not guarantee, by itself, compliance with this requirement, given that many professionals integrated into the CNAI were not approved in the Technical Qualification Examination, but migrated from the CVM register when it was created.

For its part, with the adoption of the specific technical qualification examination “CVM”, we highlight that, after passing that contest, and until his registration or record with the CVM, the professional interested in obtaining such prerogative must remain up to date with the requirements of the Continuing Professional Education Program, proving its regularity through a specific certificate issued by the Federal Council of Accounting.

## 10. Composition of audit teams (art. 25, item VII, Instruction CVM n.º 308/99)

One of the novelties presented in the alteration of ICVM 308/99 concerns the composition of the teams that carry out audit activities. Item VII, art. 25 of ICVM 308/99 determines that the auditor must:

> “VII – ensure that participation in the team destined for the exercise of the audit activity in entities regulated by the CVM is exclusive of partners, directors, managers, supervisors, or any other members, with management functions, who have been approved in the Specific Technical Qualification Examination for the CVM.”

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# CVM Securities and Exchange Commission

Thus, when planning audit teams, auditors must pay attention to the fact that all those components that perform management functions, such as partners, directors, managers, or supervisors, among other possible positions, have been approved in the Specific Technical Qualification Examination for the CVM.

It is important to emphasize that item VII of art. 25 combined with the provisions in the *caput* and §1º of art. 34, all of the aforementioned ICVM 308/99, ratifies the obligation that such professionals pay attention to the annual compliance with the Continuing Professional Education Program, after their approval in said examination. Non-compliance with the guidelines imposed by the Federal Council of Accounting regarding the Continuing Professional Education Program by the cited professionals may lead to the adoption of administrative measures against the independent auditors linked to them.

## 11. Single Registry (art. 11, sole paragraph, Instruction CVM n.º 308/99)

The alteration introduced in art. 11, sole paragraph, of ICVM 308/99 seeks to establish a relationship of equity between the treatment given to the independent auditor – natural person and the independent auditor – legal entity and their technical responsible persons. As stated in the norm, it is not allowed to register, in the category of Independent Auditor - Natural Person, an accountant who is a partner, director, or technical responsible person or who has an employment link with Independent Auditor - Legal Entity. However, for the partner, or technical responsible person, of an independent auditor – legal entity registered with the CVM, this impediment did not exist. We therefore had an asymmetric situation that benefited one participant to the detriment of another.

In this sense, it is convenient to clarify that our understanding is that participation in more than one audit society, whether as a partner or as a technical responsible person, may provide, for example, the adoption of procedures, or agreements, aimed at providing eventual circumvention of the auditor rotation rule.

This understanding, incidentally, had already been manifested in item 6 of Circular Letter/CVM/SNC/GNA/nº 01/2017. It contains the interpretation that the existence of common partners and technical responsible persons, use of the same address, or direct kinship relationship between partners of independent auditors – legal entities, may indicate eventual non-observance of the auditor rotation rule.

Still in this context, it is worth mentioning that the limitation of participation of a partner in only one audit society registered with the CVM does not characterize non-observance of the constitutional right of free association. In truth, there is no impediment to the free association of the professional; he may have as many associations and participations as he desires, even within the same economic group. However, participation in an independent auditor – legal entity **registered with the CVM**, whether as a partner or technical responsible person, will be limited to only 01 (one) audit society.

However, recognizing that the implementation of this new requirement will demand time for its implementation and adaptation by audit societies that present such

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# CVM Securities and Exchange Commission

situation, the beginning of the validity of this limitation was established for 01/01/2019, as provided in art. 4º of ICVM 591/17, the amending instruction of ICVM 308/99.

It is worth noting that the SNC, after surveying the audit societies affected by this measure, will send notification warnings and requests for providences for the regularization of the society's registration before the end of 2018. If the audit societies affected by the new requirement do not make efforts for said regularization until the beginning of the validity of the new requirement, their registration with the CVM will be cancelled. It is never too much to remember that for the granting of a new registration, the cancelled audit society will have to comply with all the requirements provided for in ICVM 308/99.

Finally, we inform that doubts related to registration and performance within the securities market can be resolved through the phones (21) 3554-8397 or 3554-8615, or by email: gna@cvm.gov.br.

Sincerely,

MADSON DE GUSMÃO VASCONCELOS
Manager of Audit Standards

PAULO ROBERTO GONÇALVES FERREIRA
Superintendent of Accounting and Audit Standards – in office