Through circular N°004-2011/CB/C of January 04, 2011, the Commission Bancaire specifically set out the conditions under which statutory auditors must perform their duties in WAMU credit institutions. The purpose of the circular was to:
- set the conditions for the appointment and term of office of the Statutory Auditors;
- set the terms and procedures for approval and withdrawal by the Commission Bancaire of the appointment of statutory auditors;
- specify the functions and activities that are incompatible with the practice of statutory auditing;
- specify the due diligence required of the statutory auditors and the specific provisions relating to the certification of year-end documents and specific reports;
- provide a framework for relations between statutory auditors and the Commission Bancaire.
Following the entry into force of BCEAO's new prudential framework and the revised PCB, the WAMU Banking Commission has published Circular N°002-2018/CB/C on the conditions for carrying out statutory audits of WAMU credit institutions and financial companies.
Compared with the 2011 circular, this new circular introduces significant changes to the practice of statutory auditors in banks, notably in terms of limiting their terms of office and introducing new obligations for statutory auditors.
Below are the main changes brought about by the new circular:
1. Limitation of auditing mandates
Article 51 of the framework law on WAMU banking regulations sets the term of office of the statutory auditors at three years, renewable, with the exception of the first term when the Bank was set up, which is set at two years.
This provision is confirmed by article 6 of circular N°002-2018. The novelty introduced by the circular in its article 7, is the limitation of the mandates of the statutory auditors which is a maximum of:
- Six years (including renewals) for a sole practitioner;
- Nine years (including renewals) for a chartered accountancy firm, provided that the signatory partner changes at the time of the last mandate.
The outgoing auditor may not be reappointed to the same bank until a three-year waiting period has elapsed.
Furthermore, in order to avoid impacting current statutory auditors' mandates, the circular includes a transitional provision which makes statutory auditors' appointments approved by the Commission Bancaire prior to the circular's entry into force valid until their term.
But what about the application of the term limit to statutory auditors appointed before the circular came into force? Will previous mandates be taken into account in the calculation? In other words, if a statutory auditor has already served two three-year terms before the circular comes into force, will he be eligible for reappointment at the end of his third current term?
These questions have not been clearly and precisely addressed in Circular N°002-2018. In our opinion, the Banking Commission should take a clear position on this matter.
2. Confirmation and reinforcement of missions incompatible with the role of statutory auditor
In addition to the general incompatibilities set out in Articles 697 et seq. of the revised Uniform Act on Commercial Companies and Economic Interest Groups, Article 8 of Circular N°002-2018 reaffirms the specific incompatibilities initially set out in the 2011 Circular, in particular:
- the function of provisional administrator of the establishment concerned ;
- the activities of business introducer, intermediary by commission, brokerage or otherwise;
- advisory, assistance and auditing services provided to the reporting entity, where these are not related to the statutory auditor's mission or to a request from the monetary and/or supervisory authorities;
- a stake in the company's capital.
These incompatibilities apply both to public accounting firms and to individuals representing public accounting firms.
3. New obligations for statutory auditors
Circular N°002-2018, also imposes new obligations on statutory auditors:
In terms of communication :
- Each year, statutory auditors are required to send the Commission Bancaire, through the intermediary of reporting institutions, a copy of their engagement letter specifying the scope of the work to be carried out and the human resources they plan to mobilize for this purpose, together with the time budget and its breakdown by participant.
- When, in the course of their work, the statutory auditors discover facts that are criminal or liable to compromise the continued operation of a reporting institution, they must immediately inform the Commission Bancaire in writing, with a copy to the institution, without being held liable for such revelation.
In terms of deliverables :
In addition to the opinion report on the annual financial statements, the report on the assessment of the fifty greatest risks and the report on the assessment of internal control initially provided for in the 2011 circular, statutory auditors are now required to deliver the following deliverables:
- A specific report on compliance with prudential regulations;
- A signed attestation stating that, based on their conclusions, there is no reason to believe that the final report on the annual financial statements will contain a qualified opinion. This attestation is drawn up on the basis of the report made available to the Board of Directors and communicated to the Banking Commission;
- A limited review report on the individual financial statements at the end of the first half;
- A limited review report on the first-half consolidated financial statements, where applicable.
