Brazilian experience on adoption and implementation of ISAs: strategy and implementation model;

1. International Audit and Assurance Standards (ISA) Adoption and Implementation Challenges and Tools for the Region

3. Brazilian experience on adoption and implementation of ISAs: • strategy and implementation model; • timeline for effective implementation; and • particularly challenging areas.

4. In 2007 the Federal Accounting Council CFC setup the Convergence Management Committee in Brazil formed by: Federal Accounting Council (CFC); Brazilian Institute of Independent Auditors (Ibracon); Securities and Exchange Commission (CVM); and Central Bank of Brazil (Bacen). Strategy and implementation model

5. Responsibilities of the Committee: Identify and monitor the actions to be carried out to make it viable the convergence of local auditing standards to the international audit and assurance standards issued by the International Federation of Accountants (IFAC); Complete the convergence work by 2010; Lay down guidelines through its own regulations and always according to its purposes (ultimately the convergence was in substance an endorsement process, where the CFC issued local standards equivalent to the international ones). Strategy and implementation model

6. Timeline for effective implementation

7. Timeline for effective implementation - SMEs • A special transition rule was adopted for audits of certain(*) SMEs, which in effect waived the compulsory adoption of the standards equivalent to the Clarity Project in two years. (*) Since the small and medium enterprises do not have their debt or equity instruments traded on the stock market, that they are not financial institutions, as defined by Bacen, which are not subject to regulation, or registration process with the CVM or the Superintendence of Private Insurance (SUSEP).

8. NBC TA 570 – Going Concern (ISA 570) NBC TA 540 – Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures (ISA 540) NBC TA 600 – Audits of Group Financial Statements (ISA 600) NBC TA 706 - Emphasis of Matter Paragraphs and Other Matter(s) Paragraphs in the Independent Auditor’s Report (ISA 706) NBC TA 710 – Comparative Information – Corresponding Figures and Comparative Financial Statements (ISA 710) Particularly challenging areas [1/3]

9. Ibracon´stechnical orientations Individual statutory FSs under BR GAAP only and Consolidated FSs under IFRS/BR GAAP could be presented side-by-side (on the same set of FSs), as they have same equity and net income and individual and consolidated FSs under BR GAAP had been presented side-by-side since 1976. Auditors should issue dual opinion (2 opinions separately on the same report); Presentation of VAT statement is required under BR GAAP (for certain entities), but is supplementary info under IFRS. Auditors should always address VAT statement as “other matters”; Particularly challenging areas [2/3]

10. Ibracon´stechnical orientations Adoption of corresponding approach in 2010, while comparative approach was adopted until 2009 under prior BR GAAS. Auditors should include “other matters” paragraph addressing division of responsibility under prior GAAS on the corresponding figures when applicable; and Certain financial institutions had an option, given by Bacen, not to present comparative figures upon first time adoption of IFRS. Auditors should treat such cases under ISA 800. Particularly challenging areas [3/3]