According to a 2008 Institute of Public Accountants (OROC) self-assessment, Portuguese Audit Standards (PASs) are already in general compliance with the International Standards on Auditing (ISAs) promulgated by the International Auditing and Assurance Standards Board (IAASB), however, some revisions are necessary to fully comply with the corresponding international standards. As of 2008, all audits are conducted in accordance with the national auditing standards and guidelines developed by the OROC and in case of loopholes in the national auditing framework, IAASB pronouncements are to be followed, the self-assessment explains. In addition, the OROC believes that the approval of the European Union 8th Directive will bring PASs further in line with ISAs. With the enactment of Directive 2006/43/EC of the European Parliament and Council (effective May 2006), all statutory audits of annual and consolidated accounts must be carried out on the basis of ISAs as adopted by the European Commission. EU member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

General Overview

According to the description of the legal and regulatory framework provided in the 2005 Institute of Public Accountants (OROC) self-assessment, all listed companies, private companies with certain size criteria, governmental and not-for-profit entities are subject to statutory audits in accordance with the Portuguese Auditing Standards (PASs) issued by the OROC. Governed by the Decree-Law No. 486 of 1999, listed companies are regulated by the Securities Exchange Commission (CMVM) which is the central regulatory and supervisory institution for the securities market. The self-assessment explains that the CMVM controls the accounting and disclosure requirements and also collects and examines the independent auditors' opinions for listed entities. In addition, the CMVM performs quality reviews of auditors once every two years for listed companies and once every five years for other auditors by a random selection process. The CMVM cooperates with the Accounting Standards Board (CNC) and the OROC in the accounting and auditing standard setting process.

With regard to banks, financial and non-fincial institutions, the self-assessment explains that the Bank of Portugal (BdP) does not play a role in the issuance of auditing standards, although it does establish disclosure requirements for reporting institutions. Governed by the Decree-Law No. 289 of 2001, insurance companies are regulated by the Insurance Supervisory Authority of Portugal (ISP) that participates with the OROC in the development of auditing standards with regard to the insurance sector. All insurance companies are required to be audited by a statutory auditor, and the ISP is empowered to review the financial statements of all insurance companies, including listed entities.

According to a 2008 OROC self-assessment, PASs are already in general compliance with the International Standards on Auditing (ISAs) promulgated by the International Auditing and Assurance Standards Board (IAASB); however, some differences remain. The self-assessment explains that, in the absence of PASs and other guidelines, the IAASB pronouncements are to be followed. Also, the OROC believes that the approval of the European Union 8th Directive will bring PASs further in line with ISAs. With the enactment of Directive 2006/43/EC of the European Parliament and Council (effective May 2006), all statutory audits of annual and consolidated accounts must be carried out on the basis of ISAs as adopted by the European Commission (EC). EU member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010.

The OROC regulates the statutory audit profession in Portugal. The OROC primarily performs two functions: (1) statutory audits and audit related services and (2) consultancy and teaching. Empowered by the Decree-Law No. 487 of 1999 the OROC is legally mandated to develop and set the auditing standards in Portugal and the 2005 OROC self-assessment explains that the OROC's focus has been on producing standards not covered by the ISAs and on translating the existing ISAs. The OROC also develops the Portuguese Code of Ethics which was issued in December 2001. As clarified in the 2008 self-assessment, "the IFAC Code of Ethics was considered and incorporated to some extent in our own Code of ethics" (p. 50). At the time of the self-assessment, the OROC had a project on "limited revision" of the national code of ethics so as to incorporate the IFAC Code effective June 2006. The OROC is listed as a member on the IFAC website.

The Principles

ISA 200 Objective and General Principles Governing an Audit of Financial Statements (effective 2006)

II

According to the 2008 OROC self-assessment, auditors in Portugal follow national auditing standards and guidelines which are similar to ISAs issued by the IAASB. However, there is insufficient information regarding Portugal’s compliance with the corresponding ISA.

ISA 210 Terms of Audit Engagements (effective 2006)

II

See ISA 200.

ISA 220R Quality Control for Audits of Historical Financial Information (effective 2005)

II

See ISA 200.

ISA 230R Documentation (effective 2006)

II

See ISA 200.

ISA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of Financial Statements (effective 2004)

II

See ISA 200.

ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements (effective 2004)

II

See ISA 200.

ISA 260 Communications of Audit Matters With Those Charged With Governance (effective 2004)

II

See ISA 200.

ISA 300 Planning an Audit of Financial Statements (effective 2004)

II

See ISA 200.

ISA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (effective 2004)

II

See ISA 200.

ISA 320 Audit Materiality (effective 2004)

II

See ISA 200.

ISA 330 The Auditor’s Procedures in Response to Assessed Risks (effective 2006)

II

See ISA 200.

ISA 402 Audit Considerations Relating to Entities Using Service Organizations (effective 2004)

II

See ISA 200.

ISA 500 Audit Evidence (effective 2004)

II

See ISA 200.

ISA 501 Audit Evidence - Additional Considerations for Specific Items (effective 2004)

II

See ISA 200.

ISA 505 External Confirmations (effective 2004)

II

See ISA 200.

ISA 510 Initial Engagements — Opening Balances (effective 2004)

II

See ISA 200.

ISA 520 Analytical Procedures (effective 2004)

II

See ISA 200.

ISA 530 Audit Sampling and Other Selective Testing Procedures (effective 2004)

II

See ISA 200.

ISA 540 Audit of Accounting Estimates (effective 2004)

II

See ISA 200.

ISA 545 Auditing Fair Value Measurements and Disclosures (effective 2004)

II

See ISA 200.

ISA 550 Related Parties (effective 2004)

II

See ISA 200.

ISA 560 Subsequent Events (effective 2006)

II

See ISA 200.

ISA 570 Going Concern (effective 2004)

II

See ISA 200.

ISA 580 Management Representations (effective 2004)

II

See ISA 200.

ISA 600 Using the Work of Another Auditor (effective)

II

See ISA 200.

ISA 610 Considering the Work of Internal Auditing (effective 2004)

II

See ISA 200.

ISA 620 Using the Work of an Expert (effective 2005)

II

See ISA 200.

ISA 700 The Auditor’s Report on Financial Statements (effective 2006)

II

See ISA 200.

ISA 701 Modifications to the Independent Auditor's Report (effective 2006)

II

See ISA 200.

ISA 710 Comparatives (effective 2004)

II

See ISA 200.

ISA 720 Other Information in Documents Containing Audited Financial Statements (effective 2004)

II

See ISA 200.

ISA 800 The Auditor’s Report on Special Purpose Audit Engagements (effective 2006)

II

See ISA 200.