Accounting regulation and enforcement mechanisms: the auditor's role in the portuguese listed groups

Abstract

The purpose of this article is to examine the extent to which the clauses for the exclusion of subsidiaries from consolidation are used, in order to assess the degree of compliance with accounting regulation and the effectiveness of the statutory auditor as an enforcement mechanism in case of observed non-compliance. The presentation of consolidated financial statements by Portuguese companies was not regulated in detail before the implementation of the EU's Seventh Directive and the general obligation to prepare consolidated accounts had not applied to Portuguese companies until 1991. Regulators have been responsible for the endorsement of accounting rules and managers are responsible for the information disclosed by Portuguese companies regarding the scope of group accounting. In practice, the scope of consolidation depends on the judgment of makers and managers of the parent company. Auditors may play a key role in the process of guaranteeing the correct application of prevailing standards and thus encompassing the enforcement of accounting regulations and contributing to the quality of disclosed information. Our sample includes the consolidated financial statements of all the Portuguese companies listed in the Lisbon Stock Exchange on December 31st for the year 1999, to which the Official Accounting Plan is applicable. Our conclusion is that diversity exists among accounting practices regarding the adopted group concept and the use of the clauses for excluding subsidiaries from consolidation. The role of the auditors as enforcement actors seems to be minor, as we did find few qualifications in their audit reports in the cases of observed non-compliance with the accounting regulation.<br>Em Portugal não existiu regulamentação sobre informação consolidada até 1991, quando foi publicado o Decreto-Lei nº 238/91, de 2 de Julho, que transpôs para o ordenamento jurídico-contábil português as normas de consolidação de contas estabelecidas na Sétima Diretiva Comunitária (83/349/CEE). Surgiu assim a obrigação geral de as empresas portuguesas sujeitas ao Plano Oficial de Contas (POC) elaborarem, divulgarem e publicarem contas consolidadas. As entidades com funções de regulamentação na área contábil têm sido responsáveis pelo processo de elaboração das normas, enquanto os membros dos órgãos de direção e gestão das empresas são responsáveis pela informação contábil consolidada dos grupos. Os Revisores Oficiais de Contas (ROCs) podem desempenhar um papel importante, assegurando a correta aplicação das normas contábeis e contribuindo assim para a melhoria da qualidade da informação publicada. O objectivo deste artigo é analisar o conceito de grupo e a extensão da aplicação das cláusulas de exclusão de filiais do perímetro de consolidação, com o objectivo de avaliar em que medida as empresas cumprem as normas contábeis, e avaliar o papel dos Revisores Oficiais de Contas como mecanismo de enforcement em caso de não cumprimento. Neste artigo analisam-se os relatórios e contas consolidados de todas as empresas-mãe com acções ad...

Perceptions regarding the implementation of International Financial Reporting Standards in Portugal and Brazil

“…Enforcement mechanisms are an essential element of the convergence process and individual countries' adoption of international accounting standards (Guerreiro, 2009;Silva et al, 2003). Previous research consistently establishes a relationship between the level of enforcement and how IFRS are implemented.…”

“…The OCC regularly checks accounting professionals' work, whereas the OROC performs quality checks on auditors (Isidro & Pais, 2017). In both countries, statutory auditors play an important supervisory role for accounting processes among entities subject to external auditing (Batista & Lopes, 2018;Guerreiro, 2009;Isidro & Pais, 2017;Silva et al, 2003).…”