BANQUE CENTRALE DU CONGO

LE GOUVERNEUR

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INSTRUCTION N° 19 RELATIVE A L'EXERCICE DES FONCTIONS DE COMMISSAIRE AUX COMPTES DES LES ETABLISSEMENTS DE CREDIT ET DES INSTITUTIONS DE MICROFINANCE

(Modification n° 1)

The Central Bank of Congo,

Having regard to the Uniform Act relating to commercial company law and economic interest groups in its articles 710 to 722;

Having regard to Law No. 18/027 of December 13, 2018, on the organization and functioning of the Central Bank, especially its articles 10 and 11;

Having regard to Law No. 003/2002 of February 2, 2002, on the activity and control of Credit Institutions, especially its articles 49 to 55;

Having regard to Law No. 002/2002 of February 2, 2002, laying down provisions applicable to Savings and Credit Cooperatives, especially its articles 76 and 77;

Having regard to Law No. 11/020 of September 15, 2011, setting rules relating to the microfinance activity in the Democratic Republic of Congo, especially its articles 31 and 32;

Having regard to Law No. 15/002 of February 12, 2015, on the creation and organization of the National Order of Chartered Accountants;

Enacts the following provisions:

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CHAPTER I: OBJECT AND SCOPE

Article 1:

This Instruction aims to set specific rules relating to the exercise of statutory auditor functions in Credit Institutions and Microfinance Institutions.

Article 2:

This Instruction applies to Credit Institutions and Microfinance Institutions, referred to as "subject institutions."

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# CHAPTER II: DEFINITIONS

## Article 3

For the purposes of this Instruction, the following terms are understood as:

- **Audit of financial statements**: examination carried out by an independent professional consisting of verifying the financial statements or other financial information of a given entity, with a view to expressing a reasoned opinion intended to inform stakeholders on the regularity, fairness, and true and fair view that these financial statements or information give on the operations of the past fiscal year as well as on the financial situation and results of the entity at the end of the fiscal year.

When conducting an audit of financial statements, the general objectives of the statutory auditor are to:

- obtain reasonable assurance that the financial statements taken as a whole do not contain material misstatements, whether due to fraud or error, thereby allowing the auditor to formulate an opinion expressing whether the financial statements are prepared, in all material respects, in accordance with an applicable accounting framework, and;
- produce a report on the financial statements and carry out the communications required by the International Standards on Auditing, abbreviated as ISA, based on the conclusions of his work.

- **Certification work**: process of activities by which statutory auditors certify that the annual accounts of an entity are regular, fair, and give a true and fair view of the results of the operations of the past accounting year as well as of the financial situation, results, and equity of the company at the end of the fiscal year. Regularity refers to the conformity of the accounts with the valuation and presentation rules, while the fairness of the financial statements refers to loyalty and good faith in the preparation of the accounts;

- **General Meeting**: supreme body composed of capital contributors, natural or legal persons, namely shareholders, partners, or members, which approves the annual accounts of the institution;

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• Supervisory body: body responsible, on behalf of the shareholders, for defining the strategic direction of the institution and the effective monitoring of the management of activities. It is constituted as a board of directors;

Audit Committee: Governance committee, emanating from the supervisory body, created to assist it in the exercise of its monitoring missions, notably the evaluation of the quality of the internal control system and the steering of internal audit;

• Executive body: the set of structures that contribute to the day-to-day management of a subject institution and ensure the effective application of the strategic direction of the activity defined by the supervisory body. It corresponds to the General Management, the Management Committee, or the Direction Committee. It includes the General Director and the Deputy General Director(s);

• Anomaly: difference between the amount, classification, presentation, or information provided concerning an element of the financial statements and the amount, classification, presentation, or information provided that is required for that same element to be in conformity with the applicable accounting framework. Anomalies may result from errors or stem from fraud. In the case where the statutory auditor expresses an opinion that the financial statements are fairly presented in all material respects or give a true and fair view, anomalies also include adjustments of amounts, classifications, presentation, or information provided which, in the judgment of the statutory auditor, are necessary for said statements to be considered fair in all material respects, or to give a true and fair view.

• Material anomaly: inaccurate, poorly presented, insufficient, or omitted accounting or financial information, due to error or fraud, of such importance that, alone or combined with others, it could influence the judgment of the user of this accounting and financial information;

• Fraud: any intentional act committed by one or more members of management, by one or more persons constituting corporate governance, by one or more employees or third parties to the entity, involving deceitful maneuvers with the aim of obtaining an undue or illegal advantage;

• Financial statements: the structured presentation of historical financial information, including the notes relating thereto, the purpose of which is to communicate the economic resources or obligations of an entity at a given moment, or their variations over a period of time, in accordance with the accounting framework in force or required by the Regulatory and Supervisory Authority. The notes relating thereto generally include a summary of principal accounting methods and other explanatory information. The term "financial statements" generally refers to a complete set as defined by the provisions of the applicable accounting framework, but may also mean only one of the components of the financial statements.

• Chartered Accountant: natural person of Congolese nationality and, if applicable, foreign nationality, practicing independently and registered on the roll of the National Order of Chartered Accountants;

Chartered Accountants Firm: legal person of Congolese law practicing independently and registered on the roll of the National Order of Chartered Accountants;

• Statutory Auditor (SA): Chartered Accountant or Chartered Accountants Firm exercising a regulated profession and whose mission is to control the fairness and regularity of the annual accounts established by an entity through a financial audit;

• Audit engagement letter: that containing clauses whose conditions for implementation agreed between management and the statutory auditor. These conditions are notably the use by management of an acceptable accounting framework for the preparation of financial statements and the agreement of the latter, if applicable, of the persons constituting corporate governance to carry out said audit. The statutory auditor accepts to pursue an audit mission only if these preliminary conditions are met and there is a mutual understanding between him and the management of the Credit Institution and, if applicable, the persons constituting corporate governance.

• IFRS Standards: International Financial Reporting Standards published by the IASB;

• ISA Standards: International Standards on Auditing;

• ONEC: National Order of Chartered Accountants in the Democratic Republic of Congo.

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# BANQUE CENTRALE DU CONGO

## CHAPTER III: PROCESS OF APPOINTMENT OF THE STATUTORY AUDITOR

### Article 4:

Statutory auditors, principal and alternate, are appointed by the General Meeting of shareholders, partners, or members, on the proposal of the supervisory body of the subject institution.

For subject institutions not having a supervisory body, the statutory auditor is appointed by the General Meeting of shareholders, partners, or members alone.

### Article 5:

Subject institutions are required to designate a legal person or two natural persons, as statutory auditors, chosen from those listed on the list of statutory auditors approved by the Central Bank of Congo.

Subject institutions having the legal form of a public limited company are required to have two principal statutory auditors and two alternate statutory auditors.

Principal statutory auditors and alternate statutory auditors must not have any interest or subordination links between them.

### Article 6:

The supervisory body, through its audit committee, relies on the criteria below for the appreciation of the files for the appointment or renewal of the mandate of statutory auditors:

- independence;
- professionalism;
- the terms of the draft contract to be concluded with the subject institution;
- the proposal of fees.

### Article 7:

Subject institutions that, under their specific regulation, are required to publish financial statements meeting IFRS standards must ensure to conclude a mandate with a statutory auditor possessing the appropriate expertise allowing him to rigorously carry out the revision of accounting operations, in accordance with the financial information standards applicable to the financial sector, in compliance with professional standards relating to statutory auditors.

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Article 8:

The duration of the mandate of statutory auditors is three fiscal years, renewable once.

Except in the case of resignation, the mandate of a statutory auditor may not be terminated except by order or authorization of the Central Bank of Congo for reasons of incompetence or immorality.

In the latter case, the audit committee is consulted prior to any possible dismissal of the statutory auditors.

Article 9:

Before the expiration of the mandate of a statutory auditor and his appointment or renewal, the subject institution informs the Central Bank of Congo/Direction in charge of the Supervision of Financial Intermediaries, at least six (6) months in advance, of the decision it intends to take regarding the signing of a new mandate.

In this case, the subject institution must transmit, without delay, to the Central Bank of Congo a copy of the notarized minutes of the Ordinary General Meeting.

Within a period of thirty (30) working days, the Central Bank of Congo informs the subject institution of its lack of opposition, or otherwise of its request to call upon another statutory auditor, given the requirements provided for, for the approval of statutory auditors, in this Instruction.

CHAPTER IV: MISSION OF THE STATUTORY AUDITOR

Article 10:

The main mission of the statutory auditor of a subject institution consists of carrying out the certification of the publishable financial statements, in conformity with the specific accounting framework for subject institutions, international auditing standards or, if applicable, international financial reporting standards in force.

Article 11:

The statutory auditor must certify the regularity and fairness of the financial statements by attesting that the end-of-fiscal-year accounts give a true and fair view of the operations carried out during the fiscal year, of the financial situation and of the assets, liabilities, and off-balance sheet commitments of the subject institution.

The statutory auditor prepares a detailed report in which are recorded notably:

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• his assessment of the organization and governance of the institution and the quality of its identification, measurement, monitoring, control, and risk reduction devices;
• his assessment of the adequacy and efficiency of the internal control and compliance system of the subject institution, given the characteristics of the institution, the nature of the activities carried out, and the risks incurred;
• his assessment of the anti-money laundering and counter-financing of terrorism and proliferation device as well as on IT security;
• his opinion on the mastery of risks inherent to outsourced essential services, in accordance with the provisions of the Central Bank of Congo relating to risk management;
• his observations on any anomalies found during his investigations in the various verified areas, notably those concerning:
  • internal control, compliance, and risk management systems and devices,
  • compliance with prudential management standards, particularly those relating to solvency, liquidity, concentration, as well as the classification and provisioning of loans,
  • compliance with accounting and prudential principles;
• his reservations and/or his refusal of certification.

Article 12:

The engagement letter of the statutory auditor must include notably:

• the verification and certification diligences to be carried out regarding the financial statements, internal control, and risks;
• the responsibilities of the statutory auditor;
• the responsibilities of the executive body;
• the indication of the applicable accounting framework for the preparation of financial statements;
• the indication of the form and content envisaged of all reports to be issued by the auditor;
• the specification of the form of the report established by the statutory auditor and the expected information elements;
• the format of the attestation regarding the conformity of the accounting framework applied by the subject institution with that in force in the Democratic Republic of Congo;
• the extent and depth of controls to be carried out, notably the sampling of commitments to be examined;

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• the format of the issuance of the opinion on the fairness and regularity of the accounts.

Article 13:

The statutory auditor assesses, within the framework of his mission, the quality of the internal control device implemented by the subject institution, notably:

(i) the device put in place to:

• prevent and master all significant risks, among others, fraud and other operational risks;

• ensure compliance with the regulation applicable to financial operations, in particular the law relating to the fight against money laundering and the financing of terrorism;

(ii) the effectiveness of the security device of the accounting information system, notably the reliability of the recording of operations and the audit trail, as well as the quality of accounting procedures and their control.

Article 14:

The statutory auditor must ensure that the subject institution presents a situation conforming to the requirements of the Central Bank of Congo relating to prudential management standards, regarding notably:

• prudential own funds;

• solvency;

• risk division;

• exchange positions;

• liquidity and transformation;

• limitation of participations;

• limitation of operations with related parties.

The statutory auditor must also ensure that the practices of the subject institution in terms of classification and provisioning of loans are in conformity with the relevant prescriptions of the Central Bank of Congo.

The statutory auditor must further ensure the effective implementation of a business continuity plan.

Article 15:

The Central Bank of Congo may request the statutory auditor of a subject institution, at the expense of the latter, to carry out any additional diligence it deems necessary to assess the financial situation of said institution.

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CHAPTER V: GOVERNANCE OF RELATIONS WITH THE STATUTORY AUDITOR

Article 16:

When the mandate of statutory auditor of a subject institution is exercised by a legal person, the signature certifying the annual accounts can only be affixed by an associate, natural person, approved, in a personal capacity, as a statutory auditor by the Central Bank of Congo and therefore listed on the relevant list in accordance with Instruction No. 18 relating to approvals and prior authorizations.

This associate engages the responsibility of the statutory auditor.

Article 17:

To ensure the quality of the review carried out by the statutory auditor according to the size and risk profile of the subject institution, the supervisory body, supported by the audit committee, must:

• be informed of the objectives and work plan of the statutory auditor;
• supervise and facilitate the execution of his diligences;
• evaluate the findings noted in the report of the statutory auditor who is its recipient;
• adopt the necessary and appropriate corrective measures;
• carry out annually or every two (2) years, a documented evaluation of the quality of the services provided by the statutory auditors;
• evaluate the reasonableness of his fees.

CHAPTER VI: INCOMPATIBILITIES

Article 18:

The statutory auditor, natural person, including his employer if applicable, and the statutory auditor, legal person, including the associates and the members of the mission team, are subject to the incompatibilities provided for by the legal provisions relating to the exercise of the Chartered Accountant profession.

Article 19:

When the statutory auditor, natural person, including his employer, and the statutory auditor, legal person, including the associates and the members of the mission team, are clients in any capacity whatsoever of the subject institution they are charged with controlling, all operations of the latter with said statutory auditors, subsequent to the date of signature of the mandate, must:

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• be limited to deposits only;
• be carried out under usual market conditions;
• no longer concern new credits, nor renewal of facilities;
• be subject to the approval of the supervisory body on the advice of the audit committee.

Article 20: Statutory auditors or associates of a legal person who have exercised the function of statutory auditor in a subject institution cannot be invested with any function with said institution before a period of three (3) years after the end of their mandate.

Article 21: Statutory auditors cannot exercise, within the subject institutions for which they have been appointed, any mission other than that relating to the certification of accounts. It is notably prohibited to carry out, directly or indirectly by a related person, any consulting activity, remunerated or not, not strictly fitting within the framework of the exercise of his mandate and in compliance with the rules applicable to his profession.

Article 22: The statutory auditors of subject institutions cannot find themselves in a situation of conflict of interest with the Central Bank of Congo.

Article 23: In the case where the statutory auditor calls upon experts not part of his staff to carry out occasional work within the framework of his mission, he is required to ensure that these persons do not infringe the provisions relating to incompatibilities covered by legal and regulatory provisions.

CHAPTER VII: RIGHTS AND OBLIGATIONS OF STATUTORY AUDITORS

Article 24: Under penalty of being sanctioned by the Central Bank of Congo, subject institutions are required to respect the rights recognized to statutory auditors in accordance with the legal and regulatory provisions in this matter.

Article 25: The statutory auditor is required to bring to the knowledge of the supervisory body through the audit committee and the executive body of the subject institution, upon their discovery:

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• significant shortcomings noted in the internal control device;
• material anomalies detected in the accounting or in the financial statements, and;
• omissions of significant information for the proper assessment of the financial situation and results.

Article 26:

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The statutory auditor of a regulated entity is required to alert the Central Bank of the Congo directly and without delay, by all legal means, as soon as they observe in the course of their mission any fact:

• which, in the context of the annual accounts certification mission, would lead them to (i) issue a qualification in their report, when this qualification could not be resolved after discussion with the regulated entity, (ii) refuse to certify the accounts;
• likely to significantly and negatively influence the financial situation of the regulated entity, including regarding administrative and accounting organization, internal control, and risk management;
• likely to constitute a violation of laws and instructions that could seriously call into question the liability of the regulated entity or its management;
• likely to compromise the continuity of the regulated entity's operations.

When the statutory auditor exercises their duty to alert, they must immediately transmit to the Central Bank of the Congo all correspondence and other documents related to this procedure, with simultaneous notification to the deliberating and executive bodies.

The liability of the statutory auditor cannot be engaged when they exercise their duty to alert provided for in this Instruction in good faith.

Article 27:

The statutory auditor communicates directly to the Central Bank of the Congo any report, including the annual certification report, that they address to the deliberating and executive bodies of the regulated entity, bearing their signature and seal which guarantee the authentic and definitive nature of said report.

The report relating to the certification of the entity's annual accounts, dated and signed by the statutory auditor, must be sent by the latter to the Central Bank of the Congo fifteen days before the closing of the accounting year.

The model of the statutory auditor's report is presented according to the template in the annex.

Article 28:

The statutory auditor responds, without delay, to any summons from the Central Bank of the Congo to communicate any required information regarding the financial or prudential situation of the regulated entity for which they ensure the certification of accounts.

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CENTRAL BANK OF THE CONGO

The Central Bank of the Congo has a general right of access and verification to the files of the statutory auditor constituted during the certification of annual accounts.

Professional secrecy cannot be opposed to the Central Bank of the Congo in this regard.

Article 29:

If, during their mission, the statutory auditor of the regulated entity is subject to any disciplinary sanction, they must immediately inform the Central Bank of the Congo and the deliberating and executive bodies.

CHAPTER VIII: PROFESSIONAL SECRECY

Article 30:

Professional secrecy is not opposable to the statutory auditor in the exercise of their mission.

They have a permanent right of access to the regulated entity to carry out any verification and control they deem appropriate.

The regulated entity is required to make available to the statutory auditor all documents and information that the latter deems necessary for the performance of their mission.

CHAPTER IX: MISCELLANEOUS PROVISIONS

Article 31:

The regulated entity is required to transmit to the Central Bank of the Congo, upon request and within the deadlines set by it, an action plan approved by the deliberating body, detailing the measures taken and those envisaged to remedy the gaps, errors, and deficiencies identified by the statutory auditors.

Article 32:

The Central Bank of the Congo reserves the right to report to the Public Prosecutor:

• any person who, either in their own name or as a partner in a statutory audit firm, knowingly accepted, exercised, or retained functions as a statutory auditor for regulated entities, despite legal incompatibilities;

• any statutory auditor who, either in their own name or as a partner in a statutory audit firm, knowingly gave or confirmed false information regarding the situation of a regulated entity or who did not reveal criminal facts of which they were aware.

The Central Bank of the Congo reserves the right to publish any decision it has pronounced against a statutory auditor.

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CHAPTER X: FINAL PROVISIONS

Article 33:

Entities are required to respect the provisions of this Instruction.

Article 34:

In the event of non-compliance with legislative or regulatory provisions applicable to statutory auditors, or failure to meet professional obligations, the Central Bank of the Congo may impose the following sanctions:

• a warning;
• a censure;
• suspension of approval;
• withdrawal of approval. As necessary, it informs the National Order of Chartered Accountants.

Article 35:

This Instruction enters into force on the date of its signature.

Done in Kinshasa, on 14 MAY 2019

Déogratias MUTOMBO MWANA NYEMBO Governor

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