Circular No. 004 of 2024 on the Approval and Exercise of the Audit Function in Payment Institutions

BANQUE DE LA REPUBLIQUE

DU BURUNDI

LE GOUVERNEUR

CIRCULAR NO. 004/SP/2024 ON THE APPROVAL AND EXERCISE OF THE STATUTORY AUDITOR FUNCTION IN PAYMENT INSTITUTIONS, ISSUED PURSUANT TO REGULATION NO. 002/2024 AMENDING REGULATION NO. 001/2017 RELATING TO PAYMENT SERVICES AND THE ACTIVITIES OF PAYMENT INSTITUTIONS.

Having regard to Law No. 1/34 of December 2, 2008 establishing the Statutes of the Banque de la République du Burundi; Having regard to Law No. 1/17 of August 22, 2017 governing banking activities; Having regard to Law No. 1/07 of May 11, 2018 establishing the national payment system; Having regard to Regulation No. 002/2024 amending Regulation No. 001/2017 relating to payment services and the activities of payment institutions.

The Banque de la République du Burundi, hereinafter referred to as the "Central Bank", enacts:

Article 1: Purpose and Scope

This circular aims to clarify the procedures for the approval and exercise of the statutory auditor function within payment institutions.

Article 2: Obligation of Approval

Before assuming their duties, statutory auditors of payment institutions must be approved by the Central Bank.

Article 3: Term of Office of the Statutory Auditor

The term of office of the statutory auditor is limited to two (02) years.

A statutory auditor may not serve more than two (02) successive terms with the same payment institution.

Article 4: Renewal of Term

The request for renewal of the statutory auditor's term must be submitted to the Central Bank for prior authorization at least three (03) calendar months before the end of the current term.

A statutory auditor may not resume the same functions within the payment institution they audited for a period of two (02) years following the end of their last term.

The vacancy of a statutory auditor position may not exceed three (03) months.

Article 5: Required Education Level and Professional Experience

The statutory auditor or members of the audit team performing the statutory audit work must hold at least a bachelor's degree (bac+3) in accounting and finance, management, economics, or an equivalent qualification, accompanied by three (03) years of experience in statutory auditing or accounting and/or financial audit.

Article 6: Conditions and Documents Required for Approval as a Statutory Auditor (Natural Person)

To be approved as a statutory auditor of a payment institution, the following documents and information are required:

1. A certified true copy of the diploma;
2. A copy of a valid National Identity Card or Passport;
3. A detailed curriculum vitae accompanied by supporting documents;
4. An original extract of the criminal record dated less than three (03) months ago for residents;
5. A certificate serving as an extract of the criminal record issued by the competent authority of the country where the non-resident person resides or conducts business in Burundi;
6. An approval act from the Order of Chartered Accountants as an auditor (Table A);
7. A certificate of non-bankruptcy issued by the competent authority dated less than three (03) months ago;
8. The draft contract agreed upon with the payment institution;
9. The Minutes of the Board of Directors and the General Meeting having respectively proposed and approved the appointment of the statutory auditor;
10. Technical references concerning statutory audit work already performed;
11. A commitment signed by the statutory auditor justifying their independence vis-à-vis the Management of the payment institution;
12. A document attesting that the statutory auditor does not hold any other function than that of statutory auditor with a company in which the payment institution, its Management, or its Directors hold, individually or collectively, a participation equal to or greater than five percent (05%).

Natural persons must not appear on the list of defaulting clients.

The Central Bank may require, for approval purposes, any additional information it deems useful to base its decision.

Unless a derogation is granted by the Central Bank, statutory auditors must have their domicile in Burundi for the duration of their term.

Article 7: Documents Required for Approval as a Statutory Auditor (Legal Entity)

For legal entities constituted as accounting or audit firms, the following documents and information are required to be approved as statutory auditors:

1. A copy of the notarized articles of association;
2. A list of partners and Management;
3. The curriculum vitae of the Management;
4. The list of personnel aligned by the firm;
5. The approval act from the Order of Chartered Accountants;
6. Technical references concerning statutory audit work already performed;
7. A certificate of non-bankruptcy issued by the competent authority dated less than three (03) months ago.

Legal entities must not appear on the list of defaulting clients.

The Central Bank may require, for approval purposes, any additional information it deems useful to base its decision.

Unless a derogation is granted by the Central Bank, the Firm and the aligned personnel must have their domicile in Burundi for the duration of their term.

Article 8: Documents Required to be Aligned by a Statutory Audit Firm

Personnel aligned by the firm must transmit the following documents:

1. A certified true copy of the diploma;
2. A copy of a valid National Identity Card or Passport;
3. A detailed curriculum vitae accompanied by supporting documents, notably certificates of services rendered;
4. An original extract of the criminal record dated less than three (03) months ago for residents;
5. A signed commitment justifying their independence vis-à-vis the Management of the payment institution;
6. A document attesting that the aligned person does not hold any other function than that of statutory auditor with a company in which the payment institution, its Management, or its Directors hold, individually or collectively, a participation equal to or greater than five percent (05%).

Aligned personnel must not appear on the list of defaulting clients.

The Central Bank may require, for approval purposes, any additional information it deems useful to base its decision.

Article 9: Scope of Statutory Audit Work

The obligations of the statutory auditor must meet the requirements of professional rules.

The specific requirements of the Central Bank regarding aspects of the statutory audit work are set out in the Annex to this circular.

Article 10: Alert Obligations

Statutory auditors are obligated to alert the Central Bank without delay as soon as they observe, during the exercise of their mission, any fact:

1. Likely to significantly influence the financial situation of the payment institution, its administrative and accounting organization, and its internal control;
2. Likely to compromise the continuity of the payment institution's operations;
3. Likely to result in a refusal or significant reservations regarding the certification of accounts;
4. Likely to lead to a violation of laws and regulations that could call into question the liability of the payment institution or its Management.

Article 11: Deadline for Transmission of the Statutory Auditor's Report

The statutory auditor must transmit to the Governor of the Central Bank, at least one (1) month before the holding of the General Meeting of Shareholders, a verification report of the accounts covering the entire accounting period related to the previous year, accompanied by explanatory notes.

Article 12: Sanctions, Suspension, or Withdrawal of Approval

Statutory auditors exercise their controls in accordance with standards accepted by the profession.

In case of breaches, the Central Bank may apply the following sanctions to them, without prejudice to other disciplinary or criminal proceedings:

1. Request for explanations;
2. Warning;
3. Censure;
4. Prohibition to continue the control mission of the payment institution;
5. Prohibition to perform the functions of statutory auditor of payment institutions for at least three (03) financial years;
6. Permanent prohibition to exercise in this capacity in payment institutions, microfinance institutions, and credit institutions.

The Central Bank may also suspend or withdraw the approval of a statutory auditor who no longer meets the conditions of their approval, who deviates from legal and regulatory requirements, or who tolerates a payment institution providing inaccurate information about its financial situation.

Article 13: Entry into Force

This circular enters into force on the day of its publication in the Official Bulletin of Burundi and on the website of the Banque de la République du Burundi.

Done in Bujumbura, on July 30, 2024

Edouard Normand BIGENDAKO Governor

1, Avenue du Gouvernement - P.O. Box 705 BUJUMBURA Tel: (257) 22204000 – (257) 22222744 - Fax: (257) 22 22 3128 - Email: www.brb.bi

ANNEX

I. GENERAL ASPECTS

1. Objective of the Statutory Audit

The statutory auditor is required to formulate an opinion on the accounting situation of a payment institution at the end of the financial year.

2. Scope of Work

The statutory audit work must be conducted in conformity with international audit standards and must include the tests and controls that the statutory auditor considers necessary according to the circumstances.

The financial statements certified by the statutory auditor include: a. the balance sheet; b. the income statement; c. the statement of changes in equity; d. the cash flow statement; e. the explanatory notes.

The explanatory notes of the accounting statements must be sufficiently detailed to allow users to understand their scope.

If applicable, the statutory auditor must visit a representative number of branches/service points each year.

The statutory auditor must pay particular attention to major accounts, notably the global or special (trust) account and the electronic money account.

The statutory audit report must highlight comments on the following aspects: a. The analysis of the evolution of balance sheet, off-balance sheet, and income statement items; b. The quality of assets; c. The adequacy of resources to uses; d. The risks incurred by payment institutions and, generally, compliance with legal and regulatory provisions.

3. Audit Opinion

The statutory auditor must express an opinion on the financial statements of the payment institution.

When formulating their opinion, the statutory auditor declares that, in their opinion, the financial information has been prepared, or not, in all material respects, in accordance with International Standards on Auditing (ISA).

In all cases, the statutory auditor formulates either: a. an unqualified favorable opinion; b. a qualified favorable opinion; c. an adverse opinion; d. an inability to express an opinion.

Unqualified favorable opinion: The statutory auditor formulates an unqualified favorable opinion when the audit of the financial information implemented has allowed them to obtain reasonable assurance that these, taken as a whole, do not contain material misstatements.

Qualified favorable opinion: The statutory auditor formulates a qualified favorable opinion when they have identified, during their audit, material misstatements that have not been corrected, or when the implications on the financial information reveal material misstatements clearly circumscribed and the formulation of the qualification is sufficient to allow the user of the financial information to base their judgment in full knowledge of the facts.

The statutory auditor specifies, in this case, the reasons for the qualification. They quantify to the best of their ability the implications of the identified and uncorrected material misstatements or indicate the reasons why they cannot quantify them.

Adverse opinion: The statutory auditor formulates an adverse opinion when they have detected, during their work, material misstatements that have not been corrected, and either the implications on the financial information reveal material misstatements that cannot be clearly circumscribed and the formulation of a qualification is not sufficient to allow the user of the financial information to base their judgment in full knowledge of the facts.

Inability to express an opinion: The statutory auditor expresses their inability to express an opinion when they have not been able to implement all the necessary verification procedures to base their opinion, either the implications on the financial information of the limitations to their work cannot be clearly circumscribed and the formulation of a qualification is not sufficient to allow the user of the financial information to base their judgment in full knowledge of the facts.

The statutory auditor also expresses an inability to express an opinion when there are multiple uncertainties whose implications on the financial information cannot be clearly circumscribed.

4. Note to Management

In addition to the financial statements and the opinion, the statutory auditor must draft a note to the management of the payment institution.

This note contains notably: a. a comment on the functioning of the Board of Directors and Management; b. a comment on the functioning of internal control; c. a comment on compliance with any legal and regulatory provision; d. a comment on any other problem identified during the work that could affect the continuation of activities or that the statutory auditor considers relevant; e. recommendations for improving identified weaknesses.

II. FINANCIAL ASPECTS

1. Information on the Previous Year

The financial statements must include financial information from the previous year and the current year. If the financial statements of the previous year were not audited, the statutory auditor must pay particular attention to opening balances and mention this in their report.

III. ORGANIZATIONAL ASPECTS

1. Internal Control

Tests on internal control procedures performed by the statutory auditor must be the subject of a detailed description. The results obtained must also be explicitly mentioned.

The statutory auditor must give their opinion on the most important internal control procedures, notably administrative and accounting procedures and the management of the information system.

Weaknesses identified during the evaluation must be reported, even if they have not resulted in material errors.

2. Recovery Plan

When the payment institution is subject to a recovery plan, the statutory auditor must comment on the progress made in the execution of said plan.

3. Communication

If the statutory auditor discovers malpractices, frauds, or serious governance crises during their work, they must immediately notify the Central Bank as well as the Board of Directors.

The statutory auditor must present the results of their work to the Board of Directors.