Published legislation and draft legislation - Mexico

External audit independence

National Banking, Securities, Insurance & Sureties Commission and the Retirement Savings System

The new provisions published in June by the National Banking, Securities, Insurance & Sureties Commission and the Retirement Savings System bring Mexican regulations up to date in improving the transparency and reliability of financial information about financial groups' parent companies, by improving the external audit services hired by these companies.

Independent audits

The provisions consist of four main sections and 43 articles, which set out the requirements that companies and independent external auditing firms must meet when providing audit services of the individual and consolidated financial statements of financial groups; the standards that apply to external audit projects, and the contents of the report that these firms submit.

Specifically, the provisions highlight the role of the parent companies' boards of directors in approving the substitution, when this occurs, of the external auditing company or auditor, and the fees receivable for the internal audit itself.

The role of the audit committee

The audit committee also has an important role, which includes the following functions:

  • Validating before their appointment that the auditing firm and the external auditor meet the legally mandated personal, professional and impartiality requirements
  • Obtaining from the auditing firm its statement of compliance with the quality control standard corresponding to the financial period audited, as submitted to the professional trade body
  • Issuing an opinion on whether the proposed resources for conducting the external audit program are reasonable and commensurate with the scope of the audit, the nature and complexity of the transactions, as well as the structure of the financial group
  • Reviewing the terms of the audit brief, before the service provision agreement with the audit firm is signed

The committee should also monitor the external audit's activities, and among other matters:

  • Help to ensure that the internal audit area facilitates the external auditors' task
  • Encourage the creation of policies in the parent company and its subsidiaries such that they have the appropriate staff who can prepare, review and authorize the documents being submitted to the external audit
  • Supervise the roll out of such corrective measures as may be necessary in response to the external auditor's findings and recommendations

Finally, the provisions state that this committee will be responsible for a regular assessment of the external audit company's work and, at the end of their task, for assessing the auditors' opinion; the committee will be authorized to request such documents as it wishes to demonstrate the company's compliance with the obligations and requirements in the regulation, as well as those in the formal service provision agreement.