Policies

Licensing of Auditors Policies

1.0 Introduction

The Financial Reporting Council (FRC) is responsible for broad oversight of the process for setting accounting, auditing standards and codes and for oversight of corporate governance standards and codes. The FRC is also responsible for monitoring and developing the quality and integrity of financial reporting and disclosure of public interest entities (PIEs), of corporate governance and of the quality and independence of audit in Mauritius.

The FRC was established to strengthen the credibility and quality of financial reporting and audit in Mauritius.

Under the Financial Reporting Act 2004 (the Act), especially Sections 4 and 5 and 33 to 43, the FRC has the responsibility ‘to promote the highest standards among licensed auditors’ and ‘to improve the quality of accountancy and audit services’.

To fulfil these objectives, the FRC is required by statute to ‘license auditors and to establish and maintain a Register of Licensed Auditors’ and a process to ‘Approve of Audit Firm Names’. Therefore all registered professional accountants with a practising certificate from the Mauritius Institute of Professional Accountants who wish to offer audit services for a fee must register and obtain a licence from the FRC. Further all auditors who wish to offer audit services for a fee in a firm name shall register that firm name with the FRC.

All Public Interest Entities (PIEs) must be audited by a qualified auditor, who may be a licensed auditor.

2.0 The Objective of Auditor Registration and Licensing

To establish and maintain high standards in the practice of audit in Mauritius.

Therefore the audit registration and licensing functions of the FRC are

to license auditors;
to establish and maintain a Register of Licensed Auditors; and
to establish a process to approve audit firm names.

3.0 The Application of this Policy

According to the Act, all those who wish to offer audit services for a fee, or any other remuneration or reimbursement, shall be licensed auditors and consequently are required to apply for a licence. In addition all those who wish to offer audit services for a fee, or any other remuneration or reimbursement in the name of a firm shall apply to the FRC for approval of the firm name. Auditors currently providing audit services for a fee will apply for a licence under the Act under transition regulations (see Section F).

It will not be contemplated that another individual that is not a licensed auditor be a ‘de facto’ auditor (‘shadow auditor’).

4.0 Auditors NOT under this Policy

The Act and FRC regulations do not apply to all those who wish to offer audit services. Those auditors offering audit services on a pro-bono basis are not obliged to apply to the FRC to be a licensed auditor. However those who have not been granted a licence to audit under Section 33 of the Act may not call themselves a ‘licensed auditor’. Also, if they are offering audit services on a pro-bono basis as a firm, they are not obliged to apply for approval of the firm name.

Also this Act does not apply to internal auditors or to public sector auditors employed under the Director of Auditor when auditing public sector entities.

5.0 Date of Application

The auditor registration and licensing provisions apply to all new applications lodged on or after July 2006. Also, all audit practitioners seeking an audit licence from the FRC and who wish to practice under a firm name will also need to apply for approval of the firm name. Such approval must be given prior to the commencement of offering the audit services.

All auditors currently offering audit services for a fee in Mauritius, whether in the name of a firm or not, will apply the transition provisions in Section F.

6.0 Overview

This policy statement sets out the FRC approach to:

A. The registration and licensing of an individual as an auditor and the conditions and regulations the FRC will impose in the registration and licensing process.

B. The approval process of an audit firm name, where licensed auditors wish to offer audit services for a fee under a firm name.

C. The lodgment of annual statements and other required information, notifications and fees by licensed auditors.

D. Contraventions of the Act and regulations by licensed auditors and by audit firms and

E. How the FRC will put in place general systems and procedures for the auditor registration and licensing process, the process for approval of firm names, and how it will use its powers to promote the highest standards among licensed auditors and to improve the quality of audit services.

F. Transition provisions for auditors and firms currently undertaking audits to the new provisions under the Act and under the FRC regulations.

As the environment in audit changes, both in Mauritius and internationally, the FRC may review and amend the requirements of this policy. The FRC may also review and amend these requirements to ensure consistency with international best practice .

Therefore, this paper has five sections:

Section A discusses the approach to registration and licensing of an individual as an auditor for those public accountants (professional accountants in practice, holding a practising certificate delivered by the MIPA) offering audit services for a fee, or other remuneration or reimbursement.

Section B discusses the approach to the approval of a firm name for those auditors seeking to offer audit services for a fee or other remuneration or reimbursement under a firm name.

Section C sets out our approach to the lodgment of annual statements and notifications by licensed auditors and audit firms.

Section D discusses the FRC approach to contraventions of the Act or the regulations promulgated under the Act and the sanctions for such contraventions.

Section E sets out the transition provisions for those offering audit services in Mauritius to enable the migration from current practices to the practices required under the Act and by FRC regulations.

Section A – Individual registration to be licensed auditor

Every person who wishes to offer audit services for a fee or other remuneration or reimbursement under the Act or other regulator in Mauritius must hold a license issued by the FRC.

Every person who wishes to obtain a license to offer audit services for a fee or other remuneration or reimbursement, shall make a written application to the FRC and lodge with the FRC such information, documents and fees as prescribed in the rules and in the style prescribed. All applicants are obliged to inform the FRC of any element that would make the person ineligible for registration. Documents lodged shall be correct and complete prior to their consideration by the FRC.

All applicants shall be aware of any provisions in the rules requiring they demonstrate qualifications and experience relevant to audit.

Eligibility Criteria

Applicants for a license must meet all the eligibility criteria set out in the Act and in the rules promulgated by the FRC. These include requirements that each applicant:

holds a practising certificate issued by the Mauritius Institute of Professional accountants (MIPA);
is a ‘fit and proper’ person; and
meets such requirements as may be specified in the rules of the FRC.

The first two criteria will be assessed by the MIPA in the assessment of individuals for a practicing certificate. Continuity of both holding of the practising certificate and of being a ‘fit and proper person’ is required for continuing validity of the audit licence.

To meet the third requirement mentioned above, the FRC will specify requirements that it may implement itself or that it may delegate. These criteria will be focused on the need for auditors to assure the FRC that they are currently competent to undertake the audit engagements they accept and that any audit engagement will be undertaken consistent with the IFAC requirements regarding independence. If this function is delegated, then the FRC will seek assurances from the delegated authority that it has in place rigorous assessments of audit competence and independence.

All applicants are obliged to inform the FRC of any element or event that would make the person ineligible for registration and the issuance of a licence as an auditor.

FRC Specific Requirements to be a Licensed Auditor

A. Audit Quality and Competence

Consideration of audit competence will ensure audit quality and may require:

the applicant to demonstrate and assure he has sufficient audit education, knowledge and experience to apply, as a minimum, all applicable standards, laws and regulations in undertaking an audit. This will include knowledge of applicable Mauritian laws and regulations, IFRS and ISAs;

the applicant is aware of and will apply, as a minimum, all IFAC ethical, independence and educational standards, especially any that are issued specifically relating to audit, audit activities and auditor competence;

the applicant attesting to the FRC and / or any delegated authority that he will not undertake any audit for which he is not competent.

B. Recent Practical Experience

Further, applicants may be required to have gained a minimum forty-eight weeks of relevant practical experience in auditing, including 24 weeks post-qualification audit work experience and 24 weeks’ practical experience in statutory audits according to Mauritian laws and regulations, before being licensed as an auditor under the Act. This experience shall be gained under the guidance of a licensed auditor and will be sufficient to demonstrate the individual has the necessary capabilities and competence to undertake audit engagements. This experience shall have been gained within three years of application to be a Licensed Auditor.

C. Continuity of Competence

Applicants to be a licensed auditor will assure the FRC and any delegated authority that after being recognised as a licensed auditor, he will assure the FRC or such delegated authority that he will undertake continuing professional development and will ensure continuing competence in audit.

D. Referees

To support the application and demonstrate the necessary capabilities, the applicant shall provide the names of two referees who are familiar with the applicant’s work in audit and who are themselves licensed auditors.

Audit Independence

A licensed auditor shall carry out his functions in full independence, consistent with IFAC requirements, and shall not –

(a) act in any manner contrary to the Code of Professional Conduct and Ethics; or
(b) engage in any activity which is likely to impair his independence as an auditor.

Conflict of interest

Notwithstanding that licensed auditors must adhere to the principle of auditor independence, where an auditor considers that he may have a conflict of interest in relation to an entity for which he has been engaged as an auditor, he shall disclose to the entity the nature of the conflict of interest in order for the entity to determine the extent of the conflict and to decide whether to continue retaining the services of the auditor.

Outcomes of Applications

When the FRC receives an application whether it be an initial, transition or renewal application to be a licensed auditor, the applicant agrees to abide by the outcome of the application procedure.

When the FRC issues a license to an applicant authorizing him to offer services as an auditor, the FRC shall enter the name of the licensed auditor in the Register of Licensed Auditors, which will be open for public scrutiny.

Refusal to license auditors

Where the Council refuses to issue a licence to an applicant under section 33 or 35, it shall, by notice in writing, inform the applicant of its refusal as soon as practicable. The FRC will give reasons for the refusal of a licence.

After refusal of a licence, the applicant will have 30 days in which he may withdraw the application.

Duration and Renewal of a Licence

Each license issued to a licensed and registered auditor will be valid for one year. The licence will be subject to annual renewal by written application in the form and manner the FRC will prescribe. The renewal application is to be made to the FRC not later than three months before the expiry of the licence.

If an application to renew a licence is refused, the applicant has 30 days in which to withdraw the application.

Continuity of Audit License and Registration Provisions for Licensed Auditors

A licensed auditor’s continuation of the license and registration may be subject to any further conditions the FRC may impose and will be subject to the continued meeting of the MIPA requirements for the holding of a practising certificate, being a fit an proper person and meeting such other requirements as laid down by the FRC or any delegated authority.

In addition, the FRC will impose conditions on all auditors at the time of application and at renewal of a licence by reference to international best practices.

Renewal requirements and requirements for continuity of the validity of the licence will include that the auditor:

document, complete and be able to demonstrate a specified level of continuing professional development (CPD) in audit;

demonstrate and assure the maintenance of an adequate level of professional indemnity insurance;

ensure competence for the audit engagements the auditor will accept and perform;

document, maintain, follow and demonstrate quality assurance procedures as required by IFAC requirements and the Standards on Auditing issued by the FRC; and

document, maintain, follow and demonstrate procedures dealing with client complaints.

These conditions must continue to be met throughout the licence period for the continued validity of the auditor’s licence.

Renewal of Audit Licence

As noted above, the licence will be subject to annual renewal by written application in the form and manner the FRC will prescribe. The renewal application is to be made to the FRC not later than three months before the expiry of the licence.

Where the Council is satisfied that the applicant continues to meet the requirements for the issue of a licence, the Council shall renew the licence.

An applicaton for renewal of a licence will include the requirement to:

attest that the applicant holds a current practising certificate issued by MIPA;

attest that the applicant is still a ‘fit and proper person’ as defined by the MIPA requirements for a practising certificate;

attest that the applicant holds and will continue to hold for the duration of the audit licence adequate professional indemnity insurance; and

demonstrate the applicant’s continuing competence in auditing practice through the provision of evidence of completion of continuing professional development relevant and related to the practice of audit.

All renewing applicants are obliged to inform the FRC of any element or event that would make the person ineligible for re-registration.

Where the Council has not dealt with an application for the renewal of a licence before the expiry of the licence, the licence shall continue to be in force until the application for renewal is dealt with and any renewal in such case shall be taken to have commenced from the day when the licence would have expired but for the renewal.

All renewals of licences will be viewed as an application for a licence and the applicants agree to abide by the determination of the licence procedure and licence renewal procedures.

Section B – Audit Practice by Licensed Auditors Under a Firm Name

Any Professional Accounting Practice or Firm (Audit Firm) which has a licensed auditor or licensed auditors who wish to offer audit services for a fee or other remuneration or reimbursement, each licensed auditor individually must apply for and hold an audit license as prescribed in Section A and individually abide by the obligations expressed therein.

Application for Approval of Name of Firm

Further each licensed auditor must not practice in the name of a firm unless such firm name is approved by the FRC prior to the commencement of offering audit services.

Any licensed auditor who wishes to practice in the name of a firm shall make a written application to the FRC and lodge with the FRC such information, documents and fees as prescribed in the regulations and in the style prescribed. Documents lodged shall be correct and complete prior to their consideration by the FRC.

Firms with more than one licensed auditor who wish to offer audit services under the name of a firm, may submit the application for approval of the name of the firm, at one time for the sake of convenience. Such application shall not be construed as an application for an audit license.

Name of Firm NOT to be Approved

The Council shall not approve the proposed name or any proposed change in the name of an audit firm where the proposed name or proposed change in the name –

(a) is the same as a firm name already approved by the Council;
(b) so closely resembles a firm name that it is likely to cause confusion;
(c) is, in the opinion of the Council, misleading, offensive or otherwise contrary to public interest; or
(d) is in breach of the Business Registration Act 2002

Firm Reporting Obligations – Partnership

Where a licensed auditor provides auditing services under a firm name and/or in partnership with other persons in a firm, the firm shall submit to the Council, at the end of each calendar year, a list of the names of the partners who are licensed auditors and those partners who are not licensed auditors. The Audit Firm shall also provide to the FRC such other documentation or information as it requires.

Where a licensed auditor or any other partner resigns or joins a firm, the firm shall forthwith and within one month, inform the Council in writing of that fact.

Section C – Lodgment of Statements and Notifications

Licensed Auditors

All applicants shall make a written application to the FRC and lodge with the FRC such information, documents and fees as prescribed in the regulations and in the style prescribed. Documents lodged shall be correct and complete prior to their consideration by the FRC.
All applicants are obliged to inform the FRC forthwith of any element or event that would make the person ineligible for registration under the Section 33 of the Act, or any breach of FRC regulations or those issued by a delegated authority.

Firm Notifications

Where a licensed auditor provides auditing services in partnership and/or with other persons in a firm, the firm shall submit to the Council, at the end of each calendar year, a list of the names of the partners who are licensed auditors and those partners who are not licensed auditors and such other information or documentation as the FRC may require.
Where a licensed auditor or any other partner resigns or joins a firm, the firm shall forthwith, or within one month, inform the Council in writing of that fact.

Change of Name or Details

Every licensed auditor and audit firm shall, where there is a change in his name or the name of the firm as the case may be, or in any of his or the Audit Firm’s particulars recorded in the Register of Licensed Auditors or lodged with the FRC, shall notify the Council of such change within 30 days of the change occurring, in such manner as the Council may require.

Material irregularity

Where, during the course of an audit of a public interest entity, a licensed auditor is satisfied, or has reason to believe, that a material irregularity has taken or is taking place, he shall, without delay, notify in writing, the officers and all the members of the Board of the public interest entity of the irregularity, by giving particulars of the irregularity; and

request every person referred to in the previous paragraph, either individually or collectively, to take such action, as he may deem necessary, and to acknowledge receipt in writing of the notice.

The licensed auditor shall, within 30 days of the issue of notice of a material irregularity, notify the FRC and the Mauritius Institute of Professional Accountants of the material irregularity, together with such other information as he deems fit, unless he is satisfied that the officers or the members of the Board of the public interest entity referred in subsection, have taken adequate steps to remedy the irregularity.

Section D – Contraventions and Sanctions under the Act

Contraventions
The following are contraventions under the Act and will result in sanctions being imposed.

Failure to obtain a license
Any person who offers audit services as described in the Act and who does not hold a license issued by the FRC is in contravention of the Act and upon conviction, is liable to a fine not exceeding 500,000 rupees and to imprisonment for a term not exceeding 2 years.

Failure to make required notifications
Without reasonable excuse, any person who fails to notify the FRC within 30 days, of a change in name of the firm or a change in any of the firm’ particulars or the individual licensed auditor’s particulars recorded in the Register of Licensed Auditors, shall commit an offence and shall on conviction, be liable to a fine not exceeding 100, 000 rupees.

Unauthorised audit practice

No licensed auditor shall –

(a) employ a person who has been suspended from practising as a licensed auditor or a public accountant to carry out work in connection with his audit practice, unless the Council has consented to such employment;

(b) practise under the name of a firm, unless prior notification has been made to the Council –

(i) in the case of a partnership, of the first names and initials of the partners of the firm;
(ii) where a letterhead is used, of a copy of the letterhead;
(iii) where the name of the firm is similar to, or includes the name of a regional or international network, or where the name of the firm mentions that it is part of a network in its letterhead or any other document, the nature of such association or relationship with the regional or international network; and

(c) sign any account, statement, report or other document which purports to represent work performed by the licensed auditor, unless he is satisfied and is prepared to take full responsibility for the work done.

Sanctions on licensed auditors

(1) The Council may either cancel or suspend a licence granted to an auditor under section 33 where the auditor –

(a) has obtained the licence by fraud or misrepresentation;
(b) no longer satisfies the requirements of section 33;
(c) has acted in breach of this Act or any rule made by the Council.

(2) Notwithstanding subsection (1), where a licensed auditor has committed a breach of this Act or any rule made by the Council, the Council may issue a warning to the licensed auditor.

The FRC will develop Memoranda of Understanding with the MIPA and separately with other regulators that shall consider the role of the MIPA and those regulators in sanctioning licensed auditors where a cancellation or suspension of a licence is not warranted.

Section E – Transition provisions

In the establishment of the FRC and its functions, those who undertake and are currently offering audit services for a fee or other remuneration or reimbursement in Mauritius, or have done so in the past three years, are expected to apply for a practising certificate with the MIPA and meet the MIPA qualifications to be a ‘fit and proper’ person.

They will then apply to the FRC and shall make a written application to the FRC and lodge with the FRC such information, documents and fees as prescribed in the regulations and in the style prescribed. All applicants are obliged to inform the FRC of any element that would make the person ineligible for registration.

Documents lodged shall be correct and complete prior to their consideration by the FRC.

Applicants under these transitional provisions may be required to provide information to the FRC, not normally required in the licensing process or in the renewal process. This information is to inform the FRC of the current practice of audit in Mauritius.

All applications, including applicants under these transition provisions, will include the requirement for an applicant to:

attest that the applicant holds and will continue to hold a current practising certificate issued by MIPA;

attest that the applicant is and will continue to be a ‘fit and proper person’ as defined by the MIPA requirements for a practising certificate;

attest that the applicant holds and will continue to hold for the duration of the audit licence adequate professional indemnity insurance; and

demonstrate the applicant’s continuing competence in auditing practice through the provision of evidence of completion of continuing professional development relevant and related to audit. This last provision will be applicable for renewals on or after 20 January 2007.

Within two years all applicants to be a licensed auditor, or licensed auditors seeking renewal of a licence, will be expected to comply with any specific requirements laid down by the FRC or its delegated authority.

7.0 Application of this Policy

This policy is approved by the FRC and is applicable on and from [XXX].

8.0 Withdrawal of an Application

Applications to be a licensed auditor or for the approval of a firm name will be accompanied by the appropriate fee. Withdrawal of an application will not result in a refund of fees at any stage.