CVM Instruction No. 216 of June 29, 1994 (Revoked)

FULL TEXT OF CVM INSTRUCTION NO. 216, OF JUNE 29, 1994, WITH CHANGES INTRODUCED BY CVM INSTRUCTION NO. 275/98.

Independent Auditors - Provides for the registration and exercise of the independent audit activity within the securities market, defines the duties and responsibilities of independent auditors, as well as the cases in which registration may be refused, suspended, or cancelled, and revokes CVM Instruction No. 204, of December 7, 1993.

THE PRESIDENT OF THE SECURITIES AND EXCHANGE COMMISSION - CVM, makes public that the Collegiate Body, in a meeting held on June 27, 1994, based on articles 1, item V, 22, sole paragraph, item IV, and 26, §§ 1 and 2, of LAW NO. 6,385, of December 7, 1976, and taking into account the provisions of article 177, § 3 of LAW NO. 6,404, of December 15, 1976, HAS DECIDED to issue the following Instruction:

REGISTRATION, ITS CATEGORIES AND CONDITIONS

Art. 1. The independent auditor, to exercise activity within the securities market, is subject to registration with the Securities and Exchange Commission - CVM, regulated by this Instruction.

Art. 2. The registration of independent auditor with the Securities and Exchange Commission - CVM is exclusive to the accountant and the civil society constituted exclusively for the provision of professional audit services and other services inherent to the accounting profession, respectively registered and enrolled in a Regional Council of Accounting, and which satisfy the conditions set forth in this Instruction.

Art. 3. The registration of independent auditor comprises two categories:
I - Independent Auditor - Natural Person, granted to the accountant who satisfies the requirements set forth in articles 4 and 11 or 13 of this Instruction.
II - Independent Auditor - Legal Entity, granted to the society constituted in the form of a civil society that satisfies the requirements set forth in articles 5 and 12 of this Instruction.

§1. The Securities and Exchange Commission shall maintain, furthermore, a registry of technical managers with powers to sign audit reports, on behalf of each society, within the securities market.

§2. For the purposes of this Instruction, the registry of technical managers comprises the partners, directors, and other accountants forming the technical staff of each society, who have demonstrated the exercise of audit activity as required in article 14.

Art. 4. For the purposes of registration in the category of Independent Auditor - Natural Person, the interested party must prove, cumulatively:
I - being registered with the Regional Council of Accounting, in the category of accountant; II - having exercised the activity of auditing financial statements, within the National Territory, for a period of no less than 5 (five) years, consecutive or not, counted from the date of registration with the Regional Council of Accounting, in the category of accountant, except as provided in article 6; III - being engaged in the activity of independent audit, maintaining a professional office legally licensed, in his own name, with facilities compatible with the exercise of the activity, under conditions that guarantee the custody, security, and confidentiality of documents and information resulting from this activity, as well as absolute privacy in dealings with its clients.

Art. 5. For the purposes of registration in the category of Independent Auditor - Legal Entity, the interested party must prove, cumulatively:
I - being enrolled in the Civil Registry of Legal Entities, in the form of a civil society, constituted exclusively for the provision of professional audit services and other services inherent to the accounting profession; II - all partners being accountants; III - appearing in the articles of association, or equivalent constitutive act, a clause providing that the society shall be liable for the repair of damage caused to third parties, due to fault or intent, in the exercise of professional activity, and that the partners shall be jointly and unlimitedly liable for social obligations, after the exhaustion of the society's assets; IV - being enrolled, as well as its partners and registered technical managers, with the Regional Council of Accounting; V - having the technical managers with powers to issue and sign audit reports on behalf of the society, exercised the activity of auditing financial statements within the National Territory, for a period of no less than 5 (five) years, consecutive or not, counted from the date of registration with the Regional Council of Accounting, in the category of accountant, except as provided in article 6; VI - having at least half of the partners registered as technical managers with this Commission; VII - maintaining a professional office legally licensed, in the name of the society, with facilities compatible with the exercise of the independent audit activity, under conditions that guarantee the custody, security, and confidentiality of documents and information resulting from this activity, as well as absolute privacy in dealings with its clients; VIII - appearing in the articles of association, a clause assigning to one of the partners the function of responsible party, before the Securities and Exchange Commission, for providing clarifications related to the compliance with this Instruction.

Art. 6. The period of exercise of the activity of auditing financial statements, counted from the date of registration with the Regional Council of Accounting and provided for in items II of article 4 and V of article 5, may be reduced to up to 3 (three) years, at the discretion of the Securities and Exchange Commission - CVM, if the interested party proves one of the following conditions:
I - the successful completion of a master's course specific to accounting organized in accordance with the relevant legislation of the Federal Council of Education; II - having exercised abroad, for the period necessary to complete the minimum period of 5 (five) years, the activity of auditing financial statements, in accordance with the legislation regulating the exercise of the profession in the country where this activity was exercised; III - having exercised, prior to registration with the Regional Council of Accounting, in the forms provided for in items III and IV of article 14 of this Instruction, for the period necessary to complete a minimum period of 5 (five) years, the activity of auditing financial statements, with proof of having been attending the Faculty of Accounting Sciences during that period.

Sole paragraph. The period provided for in the caput of this article may be reduced to up to 1 (one) year, when the audit activity was exercised in a country member of the Southern Common Market - MERCOSUL, however, the provisions of item II of this article shall apply.

PROCEDURES AND NECESSARY DOCUMENTS

Art. 7. The application for registration as an independent auditor shall be subject to examination by the Securities and Exchange Commission - CVM, which may require the completion of the initially presented documents, their update at any time, as well as the presentation of other documents deemed necessary for the examination of the process.

§1. The deadline for granting registration is 30 (thirty) days from the date of receipt of the application at the Securities and Exchange Commission - CVM, duly accompanied and documented.

§2. After the expiration of the period provided for in the preceding paragraph, without any manifestation from the Securities and Exchange Commission - CVM, the application shall be automatically approved, and the interested party may request the issuance of the respective Declaratory Act.

§3. The 30 (thirty) day period referred to in § 1 shall be suspended only once if the Securities and Exchange Commission - CVM requests additional information or document necessary for the examination of the registration application, or conditions it to modifications in the relevant documentation.

§4. A period of no more than 60 (sixty) days, counted from the receipt by the applicant of the respective correspondence, shall be granted to comply with any requirements, under penalty of the application being denied.

§5. The Securities and Exchange Commission - CVM is assured, for final manifestation, a period corresponding to 5 (five) business days, if the remainder of the period provided for in § 1 is less than this.

Art. 8. If the application is granted, the Securities and Exchange Commission - CVM shall issue the competent Declaratory Act, which shall be published in the "Official Gazette" of the Union.

Art. 9. If the application is denied, the Securities and Exchange Commission shall notify the interested party by correspondence, with clarification of the reasons that led to the denial.

Art. 10. From the denying decision, a voluntary appeal may be filed with the Collegiate Body of the Securities and Exchange Commission - CVM, in accordance with the norms in force.

Art. 11. The application for registration of Independent Auditor - Natural Person shall be accompanied by the following documents:
I - request (Annex I);
II - copy of the accountant's identity card, in the category of accountant, or equivalent certificate, issued by the Regional Council of Accounting; III - registration information (Annex II); IV - copy of the License for Location and Operation, or equivalent competent document, issued by the Municipal Prefecture of the applicant's domicile, which proves the legalization of each office, in his own name; V - proof of the exercise of the audit activity; VI - legal declaration (Annex III).

Art. 12. The application for registration of Independent Auditor - Legal Entity shall be accompanied by the following documents:
I - request (Annex IV);
II - transcript or certificate of the instrument of articles of association, or equivalent constitutive act, and subsequent amendments, with proof of enrollment and filing in the Civil Registry of Legal Entities, and enrollment in the Regional Council of Accounting; III - list of addresses of the headquarters and offices, if applicable; IV - list of affiliated or associated entities that operate or provide services within the securities market, indicating their respective areas of activity; V - copy of the License for Location and Operation or equivalent competent document, issued by the Prefecture, of the headquarters and offices, if applicable, which proves their legalization; VI - number of registration in the General Register of Taxpayers of the Ministry of Finance, of the headquarters and offices, if applicable; VII - copy of the License issued by the Regional Council of Accounting, of the headquarters and offices, if applicable; VIII - copy of the accountant's identity card, in the category of accountant, or equivalent certificate issued by the Regional Council of Accounting, of the partners and technical managers; IX - registration information of partners and technical managers (Annex II); X - proof of the exercise of the audit activity of the technical managers; XI - legal declaration (Annex V).

Art. 13. The application for registration in the category of Independent Auditor - Natural Person, of a professional registered with this Commission, who has ceased to be part of the technical staff of Independent Auditor - Legal Entity registered with the Securities and Exchange Commission, shall be accompanied by the following documents:
I - request (Annex I);
II - proof of having detached from Independent Auditor - Legal Entity; III - copy of the License for Location and Operation or equivalent competent document, issued by the Municipal Prefecture, which proves that the office is legalized in his own name; IV - registration information (Annex II); and V - legal declaration (Annex III).

Art. 14. The exercise of the audit activity, as required in articles 4, 5, and 6, may be proven through the presentation of the following documents:
I - excerpts of audit reports, issued and signed by the interested party, which have been published in specialized newspapers and magazines, one excerpt being sufficient for each year; II - copies of long-form audit reports, issued and signed by the interested party, duly authenticated and accompanied by authorization from the audited entity, for the specific purpose of presentation to the Securities and Exchange Commission - CVM, one report being sufficient for each year; III - copy of the individual employee registration or declaration of the audit society, and copy of the work booklet, proving that the same was part of the technical staff of an audit society registered with the Securities and Exchange Commission - CVM; IV - declaration from a public entity, government agency, mixed-economy society, or reputable private company, of medium or large size, in which he held a position or function of auditor, proving experience in auditing financial statements work.

§1. The proof of compliance with the provisions of this article may be by partial periods, consecutive or not, provided that the sum of the period of exercise of activity is not less than 5 (five) years, except as provided in article 6 of this Instruction.

§2. In the cases provided for in items III and IV of this article, the interested party must prove the exercise, for a minimum period of 2 (two) years, in a position of direction, management, or supervision in the area of auditing financial statements.

CASES OF REFUSAL, SUSPENSION, AND AUTOMATIC CANCELLATION

Art. 15. The registration of independent auditor with the Securities and Exchange Commission - CVM shall be refused if the conditions established in articles 4, 5, 6, 11, 12, 13, and 14 of this Instruction are not satisfied, as applicable.

Art. 16. Registration shall not be permitted, in the category of Independent Auditor - Natural Person, of an accountant who is a partner, director, or technical manager or who has an employment relationship with Independent Auditor - Legal Entity.

Art. 17. The Independent Auditor - Natural Person, the technical manager of the Independent Auditor - Legal Entity, and Independent Auditor - Legal Entity, may have their registration with the Securities and Exchange Commission cancelled or provisionally suspended, until the update of the documents and information required by this Instruction, when applicable, independent of the realization of an administrative inquiry and without prejudice to other legal sanctions applicable, in the cases where:
I - the falsity of the documents or declarations presented to obtain registration with the CVM is proven; II - any of the conditions necessary for its granting are subsequently breached, or the interested party incurs in a situation provided for as impeding its obtaining; III - they have suffered a penalty of suspension or exclusion applied by the profession's regulatory body, in accordance with communication from the Regional Council of Accounting to which they are subject; IV - they are declared insolvent by judicial sentence, or finally convicted, in a criminal process of an infamating nature, or for a crime or misdemeanor of economic content, suffer a penalty impeding access to public office, or loss of civil capacity judged by sentence.

Sole paragraph. The Securities and Exchange Commission - CVM shall previously communicate to the independent auditor the decision to suspend or cancel his registration, in accordance with this article, granting him a period of 10 (ten) business days, counted from the date of receipt of the communication, to present his reasons for defense or regularize his registration, and, furthermore, in the cases provided for in items I and II above, an appeal with suspensive effect may be filed with the Collegiate Body of this Commission.

Art. 18. The application for registration as Independent Auditor - Natural Person and Independent Auditor - Legal Entity may be refused when the application includes the name of an accountant who, in accordance with articles 17 and 33 of this Instruction, has had his registration cancelled or suspended by the Securities and Exchange Commission - CVM.

Art. 19. The Securities and Exchange Commission - CVM shall make known, in publication in the "Official Gazette" of the Union, the registration of independent auditor cancelled or provisionally suspended, and shall communicate, in cases of administrative inquiry, the occurrence to the pertinent Regional Council of Accounting.

Sole paragraph. In the case of cancellation, the documents and declarations presented to obtain and maintain the registration shall remain at the disposal of the interested party for a period of 60 (sixty) days, after which they may be destroyed.

PERIODIC INFORMATION

Art. 20. The independent auditors registered with the CVM shall annually submit, until the last business day of the month of April, the information required in Annex VI to this Instruction. (NR)*

Art. 21. Whenever there is an interruption in the provision of audit services, the fact shall be communicated by the audited entity to the Securities and Exchange Commission - CVM, within a period of 20 (twenty) days, with a justified exposition, in which the auditor's consent shall appear. If the auditor does not agree with the exposition, he shall forward to the Securities and Exchange Commission - CVM the reasons for his disagreement.

Art. 22. Without prejudice to the CVM's ability at any time to require the update of any documents and information, independent auditors shall, whenever there is a change, forward to the CVM, within a period of thirty days counted from the date of its occurrence, the following documents: (NR)* I - Registration information (Annex II); II - Transcript, certificate, or copy of the amendments to the articles of association, with proof of enrollment and filing in the Civil Registry of Legal Entities and in the Regional Council of Accounting; III - Copy of the accountant's identity card or equivalent certificate of the new partners or technical managers.

Art. 23. Independent auditors who do not keep their registration updated, nor present the clarifications and information required by this CVM, shall be subject to a daily coercive fine, observing the following values: (NR)* I - Fine of R$ 100.00 (one hundred reais) - for the non-presentation of the information and documents required in article 22 of this Instruction; II - Fine of R$ 200.00 (two hundred reais) - for the non-presentation of the information and documents required in article 20 of this Instruction.

EXERCISE OF THE AUDIT ACTIVITY IN THE SECURITIES MARKET - NORMS

Art. 24. The independent auditor, in the exercise of his activity within the securities market, must comply, by himself and by his legal representatives, and ensure compliance by his employees and agents, with the specific norms emanated from the Securities and Exchange Commission - CVM, in addition to the norms and procedures that regulate the professional activity of independent audit.

Art. 25. The Independent Auditor - Natural Person and the Independent Auditor - Legal Entity, all their partners and other members of the technical staff shall also observe, the norms emanated from the Federal Council of Accounting, insofar as they do not conflict with the acts of this Commission, with respect to conduct, the exercise of the activity, and the issuance of opinions and audit reports.

Art. 26. Audit opinions and documents intended to satisfy requirements of the Securities and Exchange Commission - CVM shall be issued and signed, with the indication of the unique professional category, and the registration number with the Regional Council of Accounting, when Natural Person, or with the indication of the professional category, the registration number with the Regional Council of Accounting of the technical manager, and the registration number of the society, when Legal Entity.

GROUNDS FOR DISQUALIFICATION (PROHIBITIONS)

Art. 27. An auditor who has infringed the independence norms, issued by the Federal Council of Accounting, in the period to which the audit refers, or during the execution of the service, with respect to the audited entity, its subsidiaries, holding companies, or members of the same group, may not perform independent audit.

Sole paragraph. The provisions of this article may be applied to all partners and members of the technical staff of Independent Auditor - Legal Entity when the infringement of the independence norms issued by the Federal Council of Accounting is established in their performance.

Art. 28. The independent auditor shall resign from the function in the occurrence of disqualification, under the conditions provided for in article 27.

DUTIES AND RESPONSIBILITIES OF INDEPENDENT AUDITORS

Art. 29. The duties of the independent auditor in the exercise of his activities within the securities market are:
I - to verify if the information and analyses presented in the management report are in consonance with the audited financial statements and to inform the Securities and Exchange Commission - CVM if they are not; II - to prepare a detailed report, to be addressed to the management of the audited entity, containing observations regarding the deficiencies or inefficacy of the internal controls and accounting procedures of the audited entity; III - to communicate to the Securities and Exchange Commission - CVM circumstances that may constitute acts practiced by the administrators in disagreement with the legal and regulatory provisions applicable to the activities of the audited entity and/or relating to its condition as an entity integrated into the securities market, acts that have, or may come to have, reflections on the audited financial statements and eventual impacts on the entity's operations; IV - to keep in good custody, for a period of 5 (five) years, all documentation, correspondence, working papers, reports, and opinions related to the exercise of his functions;

V - grant access to the Securities and Exchange Commission (CVM) for inspection to all documents that served as the basis for the issuance of the audit report;

VI - in the event of replacement by another auditor, ensuring confidentiality and obtaining the prior consent of the audited entity, allow the new contracted auditor access to the documents and information that served as the basis for the issuance of the last audit report;

VII - notify the Securities and Exchange Commission (CVM), within a maximum period of 10 (ten) days from the occurrence of the fact, cases in which the accounting statements or the audit report, published in newspapers where their publication is mandatory, are in disagreement with the audited accounting statements or with the originally issued report;

VIII - when issuing an adverse or qualified opinion, clearly indicate which specific accounts or subgroups of assets, liabilities, results, and equity are affected and by how much, as well as the effects on dividends and earnings/loss per share.

DUTIES AND RESPONSIBILITIES OF ADMINISTRATORS IN RELATIONSHIP WITH INDEPENDENT AUDITORS

Art. 30. The entity, when contracting independent audit services, must provide the auditor with all elements and conditions necessary for the perfect performance of its functions.

§1º The administrators must inform the independent auditor, in writing, without prejudice to its adequate disclosure in a note to the accounting statements, about the existence or non-existence of facts not contained in the accounting records that may be affecting, or may come to affect, the accounting statements.

§2º The responsibility of the administrators of the audited entities for the information contained in the accounting statements, or in the declarations provided, does not eliminate the responsibility of the independent auditor regarding its opinion, nor does it exempt it from adopting the audit procedures required under the circumstances.

§3º The administrators of the audited entities are also responsible for the eventual hiring of independent auditors who do not meet the independence conditions provided for in article 27.

§4º Without prejudice to the applicable legal sanctions, if the lack of independence condition of the auditor is established, the work performed will be considered void, and the entity will hire another independent auditor.

§5º The audited entity must provide the independent auditor with the management responsibility letter, in accordance with the standards issued by the Federal Council of Accounting.

ADMINISTRATIVE PENALTIES

Art. 31. The Independent Auditor - Individual, the Independent Auditor - Legal Entity, and their technical managers may be warned, fined, or have their registration with the Securities and Exchange Commission (CVM) suspended or cancelled, without prejudice to other applicable legal sanctions, when:

a) they act in disagreement with the legal and regulatory norms that govern the securities market;

b) they perform incompetent or fraudulent audits, falsify data or numbers, or withhold information that they are duty-bound to reveal;

c) they use, for their own benefit or that of third parties, information to which they had access as a result of the exercise of audit activity.

Art. 32. The non-compliance with the provisions contained in this Instruction subjects its infringers to the penalties provided for in article 11 of LAW NO. 6.385, of December 7, 1976, constituting a grave infraction for the purposes of § 3º of said article 11, the non-compliance with the provisions of articles 24, 25, 27, 29, items I to IV and VIII, 30, § 3º, and 31, letters "b" and "c", of this Instruction.

Art. 33. The non-compliance with articles 26, 29, items V to VII, and 30, §§ 1º and 5º, as well as the repeated non-compliance with the provisions of articles 20 and 21 of this Instruction, constitute objective nature infractions, in which the summary procedure of the administrative process may be adopted.

Sole Paragraph. The summary procedure will not be adopted in cases of specific or generic recidivism.

FINAL AND TRANSITORY PROVISIONS

Art. 34. To the Independent Auditor - Individual and the Independent Auditor - Legal Entity registered with the Securities and Exchange Commission (CVM), in accordance with CVM INSTRUCTION NO. 4, of October 24, 1978, the maintenance of their registration with this Commission is assured, independently of any formality.

§1º The periods of 18 (eighteen) months and 3 (three) months, counted from the date of publication of this Instruction, are assured to Independent Auditors - Legal Entities registered with this Commission, to adapt, respectively, to items VI and VIII of article 5º of this Instruction.

§2º The information referred to in items III, IV, and VI of article 20, relating to the exercise of 1993, may be presented until the end of July 1994.

Art. 35. This Instruction will enter into force on the date of its publication, with CVM Instruction No. 204, of December 7, 1993, being revoked.

Original signed by
THOMÁS TOSTA DE SÁ
President
(NR)*=New Wording (changes introduced by CVM Instruction No. 275, of March 1998) We emphasize that this text does not represent a formal consolidation of the normative in question, having a merely informative character.