Notice No. 04/2013 of 22 March on External Audit

BANCO NACIONAL DE ANGOLA
Office of the Governor

NOTICE NO. 04/2013
of 22 March

SUBJECT: EXTERNAL AUDIT

Considering the importance of external audit for strengthening confidence in the accounting and prudential information emanating from financial institutions;

Considering the legal requirements for the exercise of external audit activity in the Republic of Angola established in Law No. 3/01 of 23 March, Article 84 of Law No. 13/05 of 30 September, and Presidential Decree No. 232/10 of 11 October;

Given the need to regulate the provision of external audit services and the certification of accounts of financial institutions supervised by the Banco Nacional de Angola;

Under the terms of the provisions contained in the Law of the Banco Nacional de Angola and the Law of Financial Institutions;

I DETERMINE:

Article 1.
(Scope)

1. The provisions of this Notice apply to financial institutions authorized by the Banco Nacional de Angola, under the terms and conditions provided in the Law of Financial Institutions, hereinafter abbreviated as institutions.

2. Also covered by the provisions of this Notice are management companies of shareholdings subject to the supervision of the Banco Nacional de Angola, as provided in the Law of Financial Institutions.

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Article 2.
(Object)

This Notice aims to regulate external audit activity in financial institutions authorized by the Banco Nacional de Angola.

Article 3.
(Definitions)

Without prejudice to the definitions established in the Law of Financial Institutions, for the purposes of this Notice, the following are understood:

1. "External Audit": the audit of accounts and related services, in accordance with Angolan legislation, namely the Law on the Exercise of Accounting and Audit and Presidential Decree No. 232/10 of 11 October, and subsidiarily, with internationally accepted standards, namely the International Standards on Auditing - ISA, provided they do not contradict Angolan legislation;

2. "External Auditor": a natural or legal person established in Angola, qualified to exercise the activity of external audit;

3. "Parent Company": a legal person that exercises a relationship of control over another legal person, designated as a subsidiary, when one of the following situations occurs:
   a) financial institutions authorized by the Banco Nacional de Angola; b) management companies of shareholdings subject to the supervision of the Banco Nacional de Angola under the terms set forth in the Law of Financial Institutions.

4. "Management Body": a person or group of persons, elected by partners or shareholders, tasked with representing the company, deliberating on all matters, and performing all acts to achieve its corporate purpose. This includes, notably, the managers of limited liability companies and the members of the board of directors provided for in the Commercial Companies Law;

5. "Opinions": the opinions issued by the external auditor on accounts or matters of an accounting or prudential nature.

6. "Related Natural Person": the spouse and descendants and ascendants of the first and second degrees, and;

7. "Relationship of Control or Group": "relationship of control" as defined in the Law of Financial Institutions.

Article 4.
(Duties of the Management Body)

It is the responsibility of the management body:

a) to hire the external auditor, taking into account that the terms of the contract must provide for the expiration of the contract if the Banco Nacional de Angola considers that the external auditor does not meet the requirements of integrity, independence, experience, and availability of human and material resources provided in this Notice; the hiring of the external auditor responsible for the audit of the accounts of a financial year must occur by 30 June of the same year;

b) to submit to the Banco Nacional de Angola, Prudential Supervision Department of Financial Institutions:
i. within five working days, counted from the date of hiring, contract renewal, or change of representative, the name, address of the external auditor, their representative, and their respective registration number as a certified accountant;
ii. within five working days, counted from the date of hiring, a declaration signed by all members of the management body, regarding compliance with the provisions of this Notice, notably Articles 6 to 9, and;
iii. annually, within five working days, counted from the issuance of the opinion provided for in paragraph a) of number 1 of Article 10 of this Notice, a declaration signed by all members of the management body, regarding compliance with the provisions of this Notice, notably Articles 6 to 9.

c) designate one of its members to respond, before the Banco Nacional de Angola, for the monitoring of the external auditor's activity, and;

d) provide the external auditor with all data, information, and logistical conditions necessary for the exercise of their activity.

Article 5.
(External Auditor)

1. The external auditor must possess:
   a) specific knowledge of matters related to financial activity, notably the accounting plan and prudential standards issued by the Banco Nacional de Angola; b) relevant experience in conducting external audits, preferably in the financial sector; c) personal and professional integrity, and; d) sufficient human, material, and financial resources to exercise their function.

2. For the purposes of verifying the experience and integrity of the external auditor, institutions must collect information on work previously performed by them, their reputation in the financial sector, and the absence of criminal incidents.

3. The external auditor of banking financial institutions, in accordance with the Law of Financial Institutions, must be a legal person authorized to exercise the activity in Angola.

4. The external auditor of non-banking financial institutions, in accordance with the Law of Financial Institutions, may be a natural or legal person.

5. The external auditor of the companies referred to in number 2 of Article 3 of this Notice must be a legal person if these companies have subsidiaries with the nature of banking financial institutions.

Article 6.
(Independence of the External Auditor)

1. In the exercise of their activity, the external auditor must act with independence, in the sense of being capable of making objective and impartial judgments on all matters related to their function, considering:
   a) ethical rules and international practices of external audit; b) legislation on external audit, instituted by the Banco Nacional de Angola and the order of their professional class, and; c) the adequate formalization of their policy of action demonstrating respect for the principles enunciated in this Notice.

2. The independence of the external auditor is manifested, notably:
   a) in the prohibition of providing services not related to external audit, in accordance with Article 7 of this Notice; b) in the rules of relationship, in accordance with Article 8 of this Notice, and; c) in the absence of financial interests, in accordance with Article 9 of this Notice.

3. Non-compliance with the requirements of independence determines that audit services are null, for the purposes of provisions emanating from the Banco Nacional de Angola.

Article 7.
(Inhibition of Service Provision by the External Auditor)

1. The external auditor cannot provide, or have provided in the last twelve months, services not strictly related to their function and that imply loss of independence, in the audited institution or in an entity that is in a relationship of control or group with it, notably:
   a) advice on strategy and organizational restructuring; b) accounting or tax advice, including tax planning; c) valuation of assets and liabilities; d) carrying out financial operations; e) actuarial advice; f) remodeling, including design and implementation, of internal control and risk management systems; g) legal advice; h) hiring, evaluation, and operational management of human resources, and; i) subcontracting of key functions of the internal audit, compliance, and risk management internal control system.

2. For the purposes of the preceding number, audited institutions must consider:
   a) related natural persons with the external auditor or with their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions, and; b) legal persons that are in a relationship of control or group with them.

Article 8.
(Relationship with the External Auditor)

1. Institutions are not permitted to:
   a) retain the same external auditor for a period longer than defined in the Law of Financial Institutions, only allowing their re-hiring after an equal period has elapsed following replacement; b) elect the external auditor, as well as their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the external audit team with management functions, to positions in their corporate bodies; c) hire the external auditor, as well as their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions, for positions that allow influence on the decisions of the administration of the audited institution, including, notably, those responsible for accounting and risk management, compliance, and internal audit functions, and; d) hire services, notably those provided for in Article 7 of this Notice, from the external auditor, as well as their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions.

2. The following are covered by the provisions of number 1 of this article:
   a) related natural persons with the external auditor or with their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions, and; b) legal persons that are in a relationship of control or group with them.

3. The following are covered by paragraphs b), c), and d) of number 1 of this article: persons, natural or legal, who have exercised or have exercised external audit functions in the last twelve months, counted from the date of issuance of the last opinion, in the audited institution or in entities that are in a relationship of control or group with it.

4. Institutions must verify the absence, in the audit team, of persons who have exercised, in the last twelve months, functions in their corporate bodies.

Article 9.
(Financial Interests)

1. The external auditor cannot possess direct or indirect financial interests in the audited institution, including, notably:
   a) active operations of liability or with guarantee of the external auditor; b) provision of guarantees in favor of the external auditor; c) qualified shareholding participation of the external auditor, or; d) payment of fees and reimbursement of expenses to the external auditor representing equal to or greater than 25% (twenty-five percent) of the total billing of the external auditor.

2. For the purposes of number 1 of this article, indirect financial interests of the external auditor are considered to relate to:
   a) companies that are in a relationship of control with the audited institution; b) their partners or shareholders, technical managers, directors, managers, supervisors, or any other members with management functions in the team involved in the audit work; c) related natural persons with the external auditor or with their partners or shareholders, technical managers, directors, managers, supervisors, or any other member of the audit team with management functions, and; d) legal persons that are in a relationship of control or group with them.

3. The incompatibilities mentioned in paragraphs a) and b) of number 1 of this article, existing on the date of hiring, must be regularized within a maximum period of three months counted from this date.

Article 10.
(Opinions Issued by the External Auditor)

1. The external auditor of the institution must prepare the following opinions:
   a) on the annual accounts, including their adequacy to accounting standards issued by the Banco Nacional de Angola; b) those provided for in specific regulations issued by the Banco Nacional de Angola, covering matters of an accounting or prudential nature, and; c) others requested by the Banco Nacional de Angola on specific matters within the scope of supervisory functions.

2. Without prejudice to the provisions of the preceding number, the external auditor of institutions with a total asset, determined in the last financial year, greater than four hundred billion Kwanzas must, additionally, prepare an opinion on the accounts as of 30 June, which respects the same requirements as the report provided for in paragraph a) of number 1 of this article.

3. The external auditor of the parent company, considering the consolidation scopes for accounting and prudential purposes provided for in Notices No. 14/07 of 12 September and No. 03/2013 of 22 March, respectively, is responsible for the opinions provided for in numbers 1 and 2 of this article on a consolidated basis.

4. The opinions mentioned in numbers 1 to 3 of this article must contain the explicit identification of the certified accountant responsible for the audit.

5. The opinions of the auditors referred to in paragraph a) of number 1 and in number 2 of this article, on an individual and consolidated basis, must specify the respective total of the balance sheet and net equity of the institution, including the net result referred to the date of the accounts, and must be submitted to the Banco Nacional de Angola on the date they are made available to shareholders.

6. The opinions mentioned in paragraph c) of number 1 of this article may be prepared by the external auditor of the institution or by others, possessing the same qualification, appointed and acting in the name of the Banco Nacional de Angola. The audited institution will bear the cost of the audit if it results from:
   a) indications of fraud or serious liquidity or solvency problems; b) restructuring processes, capital reinforcement, and others with economic interest for the institution.

Article 11.
(Duty of Diligence of the External Auditor)

The external auditor must communicate, in writing, to the Banco Nacional de Angola, as soon as they come to their knowledge:

a) facts of which they have knowledge that evidence the existence of:
i. non-compliance with legal and regulatory standards, which may affect the achievement of the corporate purpose or the economic-financial situation of the audited institution;
ii. frauds of any value committed by the administration of the institution;
iii. relevant frauds committed by employees of the institution or by third parties, but with influence on the institution, and;
iv. errors that result in material misstatements in the financial statements of the institution;
b) situations that they have detected indicating serious liquidity or solvency problems in the institution.

Article 12.
(Replacement of the External Auditor)

1. The Banco Nacional de Angola may determine that an institution replace the external auditor when:
   a) it considers that the auditor does not possess integrity, availability, and sufficient levels of knowledge and experience to exercise the function in the financial sector; b) there is no independence of the auditor with respect to the institution, considering, notably, the provisions of Articles 6 to 9 of this Notice, and; c) the opinions provided for in paragraphs a) and b) of number 1 of Article 10 of this Notice are not prepared.

2. The hiring of the external auditor, referred to in paragraph a) of Article 4 of this Notice, is considered fully in force if the Banco Nacional de Angola does not object within a period of 30 days, counted from the date of receipt of the respective communication, provided for in sub-paragraph i) of paragraph b) of Article 4 of this Notice, or, in the case of having requested complementary information, within a period of 30 days after the receipt of this.

Article 13.
(Sanctions)

Violation of the mandatory provisions of this Notice constitutes an offense, punishable by fine in accordance with the Law of Financial Institutions.

Article 14.
(Regulation)

The Banco Nacional de Angola may establish additional requirements or issue technical instructions for the implementation of the provisions of this Notice.

Article 15.
(Revocation)

All legislation that contradicts the provisions of this Notice is revoked, notably Notice No. 03/06 of 10 March, on external audit.

Article 16.
(Doubts and Omissions)

Doubts and omissions that arise in the interpretation and application of this Notice are resolved by the Prudential Supervision Department of Financial Institutions of the Banco Nacional de Angola.

Article 17.
(Entry into Force)

This Notice enters into force on the date of its publication.

PUBLISH

Luanda, 22 March 2013.

THE GOVERNOR
JOSÉ DE LIMA MASSANO