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    Country by Country Financial Reporting and Auditing Framework

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    Ecuador - Crowe Horwath Ecuador (prepared December 2014)

     

    Preparation of and Filing of Statutory Financial Statements

     

    Corporations and Limited Liability Partnerships (LLPs) are required to prepare annual financial statements and file these with the Superintendence of Companies.

     

    The companies are required to file their financial statements with the Superintendence of Companies within 4 months after the balance sheet date.

     

    All corporations and LLPs are required to prepare full financial statements comprising a balance sheet, an income statement and explanatory notes to the financial statements. Additionally they are also required to prepare and file a management report. Certain small companies/LLPs have an option to file abbreviated financial statements with the Superintendence of Companies. Abbreviated financial statements provide for some reduced disclosure, e.g. a condensed balance sheet and less notes disclosures.

     

    Financial Reporting Framework

     

    Listed companies in Ecuador are required to prepare their group financial statements in accordance with International Financial Reporting Standards (IFRS). 

     

    The IFRS financial statements are the starting point for determining the taxable income of an entity for corporation and LLPs, but they need to prepare a reconciliation with the tax law.

     

    Audit Requirements for Corporations and LLPs Registered in Ecuador

     

    In general, all corporations and LLPs with asset from US$ 1 million and ahead must have an audit on their statutory financial statements.

     

    In addition to the audit of separate statutory financial statements, the parent companies and their group financial statements are also subject to an audit.

     

    Audit Exemption

     

    Subject to the above, corporations/LLPs with less than US$ 1 million of assets, may not need an audit of their annual accounts - unless the company participates in the security market.

     

    Audit Appointment, Rotation and Joint Audits

     

    Auditors are elected by the shareholders and appointed by management or - if present - the supervisory board of an entity for only one year.  Ecuador does not have any rules relating to mandatory rotation of audit firms but there are guidelines within the ethical standards regarding partner rotation. When the company participates in the security market, there is a mandatory audit firm rotation each three years.

     

    Auditing Standards

     

    All audits firms in Ecuador are required to carry out their audits and express an opinion on the (group) financial statements in accordance with the international auditing standards - ISA promulgated by the IAASB subject to some minor additional requirements relevant within Ecuador.

     

    Ethical Framework

     

    All audits firms in Ecuador are bound by the Code of Ethics promulgated by the IFAC (IESBA).

     

     

    Audit Regulation

     

    Crowe Horwath Ecuador, as a member firm, is subject to the following external and internal monitoring processes with regard to their audit practice.

     

    External Monitoring

     

    Those audit firms carrying out statutory audits of public interest entities are subject to regular inspections performed by the Superintendence of Companies - Security Market Board, who is the competent authority for the organisation and performance of inspections that are carried out occasionally. These inspections particularly focus on audit quality matters that are unique to public listed entities.

     

    Internal Monitoring

     

    The Ecuadorian firm has established an annual firm-wide monitoring process known as internal inspections. The internal inspections are led by the Quality Assurance Partner within the firm. The internal inspections are conducted following procedures defined by its internal manual. The results of the annual internal inspections are used to develop and further enhance the quality of the audit processes.

     


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