Public Company Accounting Oversight Board - PCAOB · PCAOB Release No. 104-2016-127 Inspection of Ernst & Young Auditores Independentes S.S. June 16, 2016 Page 2 PROFILE OF THE FIRM1

1666 K Street, N.W.Washington, DC 20006

Telephone: (202) 207-9100Facsimile: (202) 862-8433

www.pcaobus.org

Report on

2015 Inspection of Ernst & YoungAuditores Independentes S.S.

(Headquartered in Sao Paulo, Federative Republic of Brazil)

Issued by the

Public Company Accounting Oversight Board

June 16, 2016

PCAOB RELEASE NO. 104-2016-127

THIS IS A PUBLIC VERSION OF A PCAOB INSPECTION REPORT

PORTIONS OF THE COMPLETE REPORT ARE OMITTEDFROM THIS DOCUMENT IN ORDER TO COMPLY WITH

SECTIONS 104(g)(2) AND 105(b)(5)(A)OF THE SARBANES-OXLEY ACT OF 2002

PCAOB Release No. 104-2016-127

2015 INSPECTION OF ERNST & YOUNGAUDITORES INDEPENDENTES S.S.

Preface

In 2015, the Public Company Accounting Oversight Board ("PCAOB" or "theBoard") conducted an inspection of the registered public accounting firm Ernst & YoungAuditores Independentes S.S. ("the Firm") pursuant to the Sarbanes-Oxley Act of 2002("the Act").

Inspections are designed and performed to provide a basis for assessing thedegree of compliance by a firm with applicable requirements related to issuer auditwork. For a description of the procedures the Board's inspectors may perform to fulfillthis responsibility, see Part I.C of this report (which also contains additional informationconcerning PCAOB inspections generally). The inspection included reviews of portionsof two issuer audits performed by the Firm and the Firm's audit work on one other issueraudit engagement in which it played a role but was not the principal auditor. Thesereviews were intended to identify whether deficiencies existed in the reviewed auditwork, and whether such deficiencies indicated defects or potential defects in the Firm'ssystem of quality control over audit work. In addition, the inspection included a review ofpolicies and procedures related to certain quality control processes of the Firm thatcould be expected to affect audit quality.

The Board is issuing this report in accordance with the requirements of the Act.The Board is releasing to the public Part I of the report and portions of Part IV of thereport. Part IV of the report consists of the Firm's comments, if any, on a draft of thereport. If the nonpublic portions of the report discuss criticisms of or potential defects inthe firm's system of quality control, those discussions also could eventually be madepublic, but only to the extent the firm fails to address the criticisms to the Board'ssatisfaction within 12 months of the issuance of the report. Appendix A presents the textof the paragraphs of the auditing standards that are referenced in Part I.A. in relation tothe description of auditing deficiencies there.

PCAOB Release No. 104-2016-127Inspection of Ernst & Young

Auditores Independentes S.S.June 16, 2016

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PROFILE OF THE FIRM1

Offices 14 (Belo Horizonte, Blumenau,Brasilia, Campinas, Curitiba,Fortaleza, Goiania, Porto Alegre,Recife, Rio de Janeiro(2), Salvador,Sao Paulo(2), Federative Republicof Brazil)

Ownership structure Professional company

Partners / professional staff2 91 / 1,012

Issuer audit clients 4

Other issuer audits in which the Firmplays a role3

79

1 The information presented here is as understood by the inspection team,generally as of the outset of the inspection, based on the Firm's self-reporting and theinspection team's review of certain information. Additional information, includingadditional detail on audit reports issued by the Firm, is available in the Firm's filings withthe Board, available at http://pcaobus.org/Registration/rasr/Pages/RASR_Search.aspx.

2 The number of partners and professional staff is provided here as anindication of the size of the Firm, and does not necessarily represent the number of theFirm's professionals who participate in audits of issuers.

3 The number of other issuer audits encompasses audit work performed bythe Firm in engagements for which the Firm was not the principal auditor, includingaudits, if any, in which the Firm plays a substantial role as defined in PCAOB Rule1001(p)(ii).



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Lead partners on issuer audit work4 43

Other names used in audit reports Ernst & Young Terco AuditoresIndependentes S.S.5

4 The number of lead partners on issuer audit work represents the totalnumber of Firm personnel who had primary responsibility for an issuer audit (as definedin AS No. 10, Supervision of the Audit Engagement) or for the Firm's role in an issueraudit during the twelve-month period preceding the outset of the inspection.

5 The Firm filed a special report on PCAOB Form 3 describing a change inits legal name from Ernst & Young Terco Auditores Independentes S.S. to Ernst &Young Auditores Independentes S.S., effective November 4, 2013.



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PART I

INSPECTION PROCEDURES AND CERTAIN OBSERVATIONS

Members of the Board's staff ("the inspection team") conducted primaryprocedures for the inspection from May 4, 2015 to May 15, 2015.6

A. Review of Audit Engagements

The inspection procedures included reviews of portions of two issuer auditsperformed by the Firm and the Firm's audit work on one other issuer audit engagementin which it played a role but was not the principal auditor. The inspection team identifiedmatters that it considered to be deficiencies in the performance of the work it reviewed.

The descriptions of the deficiencies in Part I.A of this report include, at the end ofthe description of each deficiency, references to specific paragraphs of the auditingstandards that relate to those deficiencies. The text of those paragraphs is set forth inAppendix A to this report. The references in this sub-Part include only standards thatprimarily relate to the deficiencies; they do not present a comprehensive list of everyauditing standard that applies to the deficiencies. Further, certain broadly applicableaspects of the auditing standards that may be relevant to a deficiency, such asprovisions requiring due professional care, including the exercise of professionalskepticism; the accumulation of sufficient appropriate audit evidence; and theperformance of procedures that address risks, are not included in any references to theauditing standards in this sub-Part, unless the lack of compliance with these standardsis the primary reason for the deficiency. These broadly applicable provisions aredescribed in Part I.B of this report.

Certain deficiencies identified were of such significance that it appeared to theinspection team that the Firm, at the time it issued its audit report, had not obtainedsufficient appropriate audit evidence to support its opinion that the financial statements

6 For this purpose, "primary procedures" include field work, other review ofaudit work papers, and the evaluation of the Firm's quality control policies andprocedures through review of documentation and interviews of Firm personnel. Primaryprocedures do not include (1) inspection planning, which is performed prior to primaryprocedures, and (2) inspection follow-up procedures, wrap-up, analysis of results, andthe preparation of the inspection report, which extend beyond the primary procedures.



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were presented fairly, in all material respects, in accordance with the applicablefinancial reporting framework and/or its opinion about whether the issuer hadmaintained, in all material respects, effective internal control over financial reporting("ICFR"). In other words, in these audits, the auditor issued an opinion without satisfyingits fundamental obligation to obtain reasonable assurance about whether the financialstatements were free of material misstatement and/or the issuer maintained effectiveICFR.

The fact that one or more deficiencies in an audit reach this level of significancedoes not necessarily indicate that the financial statements are materially misstated orthat there are undisclosed material weaknesses in ICFR. It is often not possible for theinspection team, based only on the information available from the auditor, to reach aconclusion on those points.

Whether or not associated with a disclosed financial reporting misstatement, anauditor's failure to obtain the reasonable assurance that the auditor is required to obtainis a serious matter. It is a failure to accomplish the essential purpose of the audit and itmeans that, based on the audit work performed, the audit opinion should not have beenissued.7

The audit deficiencies that reached this level of significance are described below.

7 Inclusion in an inspection report does not mean that the deficiencyremained unaddressed after the inspection team brought it to the Firm's attention.Depending upon the circumstances, compliance with PCAOB standards may requirethe Firm to perform additional audit procedures, or to inform a client of the need forchanges to its financial statements or reporting on internal control, or to take steps toprevent reliance on its previously expressed audit opinions. The Board expects thatfirms will comply with these standards, and an inspection may include a review of theadequacy of a firm's compliance with these requirements, either with respect topreviously identified deficiencies or deficiencies identified during that inspection. Failureby a firm to take appropriate actions, or a firm's misrepresentations in responding to aninspection report, about whether it has taken such actions, could be a basis for Boarddisciplinary sanctions.



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Issuer A

(1) the failure, in an audit of ICFR, to perform sufficient procedures totest the design and operating effectiveness of controls over the valuationof goodwill (AS No. 5, paragraphs 39, 42 and 44);

(2) the failure to perform sufficient procedures to test the valuation ofgoodwill (AS No. 13, paragraph 5; AU 328, paragraphs .26 and .28);

(3) the failure, in an audit of ICFR, to perform sufficient procedures totest the design and operating effectiveness of controls over thepresentation and disclosure of revenue (AS No. 5, paragraph 39);

(4) the failure to perform sufficient procedures to test the presentationand disclosure of revenue (AS No. 13, paragraphs 8 and 36); and

(5) the failure to perform sufficient procedures to test the existence oftrade accounts receivable, including the failure to perform sufficientprocedures to extend the audit conclusion from the interim date for itssubstantive procedures to year end (AS No. 13, paragraph 45; AU 330,paragraph .33).

Issuer B

the failure to perform sufficient procedures to test the occurrence andallocation of revenue (AS No. 15, paragraphs 4 and 10 ).

B. Auditing Standards

Each deficiency described above could relate to several applicable provisions ofthe standards that govern the conduct of audit work. The paragraphs of the standardsthat are cited for each deficiency are those that most directly relate to the deficiency.The deficiencies also relate, however, to other paragraphs of those standards and toother auditing standards, including those concerning due professional care, responsesto risk assessments, and audit evidence.

Many audit deficiencies involve a lack of due professional care. AU 230, DueProfessional Care in the Performance of Work, paragraphs .02, .05, and .06, requires



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the independent auditor to plan and perform his or her work with due professional careand sets forth aspects of that requirement. AU 230, paragraphs .07 through .09, and ASNo. 13, The Auditor's Responses to the Risks of Material Misstatement, paragraph 7,specify that due professional care requires the exercise of professional skepticism.These standards state that professional skepticism is an attitude that includes aquestioning mind and a critical assessment of the appropriateness and sufficiency ofaudit evidence.

AS No. 13, paragraphs 3, 5, and 8, requires the auditor to design and implementaudit responses that address the risks of material misstatement, and AS No. 15, AuditEvidence, paragraph 4, requires the auditor to plan and perform audit procedures toobtain sufficient appropriate audit evidence to provide a reasonable basis for the auditopinion. Sufficiency is the measure of the quantity of audit evidence, and the quantityneeded is affected by the risk of material misstatement (in the audit of financialstatements) or the risk associated with the control (in the audit of ICFR) and the qualityof the audit evidence obtained. The appropriateness of evidence is measured by itsquality; to be appropriate, evidence must be both relevant and reliable in providingsupport for the related conclusions.

The paragraphs of the standards that are described immediately above are notcited in Part I.A, unless those paragraphs are the most directly related to the relevantdeficiency.

B.1. List of Specific Auditing Standards Referenced in Part I.A.

The table below lists the specific auditing standards that are referenced in PartI.A of this report, cross-referenced to the issuer audits for which each standard is cited.

PCAOB Auditing Standards Issuers

AS No. 5, An Audit of Internal Control OverFinancial Reporting That is Integrated with AnAudit of Financial Statements

A

AS No. 13, The Auditor's Responses to the Risksof Material Misstatement

A

AS No. 15, Audit Evidence B



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PCAOB Auditing Standards Issuers

AU 328, Auditing Fair Value Measurements andDisclosures

A

AU 330, The Confirmation Process A

C. Information Concerning PCAOB Inspections that is Generally Applicable toTriennially Inspected Firms

A Board inspection includes a review of certain portions of selected audit workperformed by the inspected firm and a review of certain aspects of the firm's qualitycontrol system. The inspections are designed to identify deficiencies in audit work anddefects or potential defects in the firm's system of quality control related to the firm'saudit work. The focus on deficiencies, defects, and potential defects necessarily carriesthrough to reports on inspections and, accordingly, Board inspection reports are notintended to serve as balanced report cards or overall rating tools. Further, the inclusionin an inspection report of certain deficiencies, defects, and potential defects should notbe construed as an indication that the Board has made any determination about otheraspects of the inspected firm's systems, policies, procedures, practices, or conduct notincluded within the report.

C.1. Reviews of Audit Work

Inspections include reviews of portions of selected audits of financial statementsand, where applicable, audits of ICFR and the firm's audit work on other issuer auditengagements in which it played a role but was not the principal auditor. For theseaudits, the inspection team selects certain portions of the audits for inspection, and itreviews the engagement team's work papers and interviews engagement personnelregarding those portions. If the inspection team identifies a potential issue that it isunable to resolve through discussion with the firm and any review of additional workpapers or other documentation, the inspection team ordinarily provides the firm with awritten comment form on the matter and the firm is allowed the opportunity to provide awritten response to the comment form. If the response does not resolve the inspectionteam's concerns, the matter is considered a deficiency and is evaluated for inclusion inthe inspection report.



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The inspection team selects the audits, and the specific portions of those audits,that it will review, and the inspected firm is not allowed an opportunity to limit orinfluence the selections. Audit deficiencies that the inspection team may identify includea firm's failure to identify, or to address appropriately, financial statementmisstatements, including failures to comply with disclosure requirements,8 as well as afirm's failure to perform, or to perform sufficiently, certain necessary audit procedures.An inspection may not involve the review of all of the firm's audit work, nor is it designedto identify every deficiency in the reviewed audits. Accordingly, a Board inspectionreport should not be understood to provide any assurance that a firm's audit work, or therelevant issuers' financial statements or reporting on ICFR, are free of any deficienciesnot specifically described in an inspection report.

In some cases, the conclusion that a firm did not perform a procedure may bebased on the absence of documentation and the absence of persuasive other evidence,even if the firm claimed to have performed the procedure. AS No. 3, AuditDocumentation, provides that, in various circumstances including PCAOB inspections, afirm that has not adequately documented that it performed a procedure, obtainedevidence, or reached an appropriate conclusion must demonstrate with persuasiveother evidence that it did so, and that oral assertions and explanations alone do notconstitute persuasive other evidence. In reaching its conclusions, an inspection teamconsiders whether audit documentation or any other evidence that a firm might provideto the inspection team supports the firm's contention that it performed a procedure,obtained evidence, or reached an appropriate conclusion. In the case of every mattercited in the public portion of a final inspection report, the inspection team has carefullyconsidered any contention by the firm that it did so but just did not document its work,and the inspection team has concluded that the available evidence does not support thecontention that the firm sufficiently performed the necessary work.

8 When it comes to the Board's attention that an issuer's financialstatements appear not to present fairly, in a material respect, the financial position,results of operations, or cash flows of the issuer in conformity with the applicablefinancial reporting framework, the Board's practice is to report that information to theSecurities and Exchange Commission ("SEC" or "the Commission"), which hasjurisdiction to determine proper accounting in issuers' financial statements. Anydescription in this report of financial statement misstatements or failures to comply withSEC disclosure requirements should not be understood as an indication that the SEChas considered or made any determination regarding these issues unless otherwiseexpressly stated.



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Identified deficiencies in the audit work that exceed a significance threshold(which is described in Part I.A of the inspection report) are summarized in the publicportion of the inspection report.9

The Board cautions against extrapolating from the results presented in the publicportion of a report to broader conclusions about the frequency of deficienciesthroughout the firm's practice. Individual audit engagements and areas of inspectionfocus are most often selected on a risk-weighted basis and not randomly. Areas offocus vary among selected audit engagements, but often involve audit work on the mostdifficult or inherently uncertain areas of financial statements. Thus, the audit work isgenerally selected for inspection based on factors that, in the inspection team's view,heighten the possibility that auditing deficiencies are present, rather than through aprocess intended to identify a representative sample.

C.2. Review of a Firm's Quality Control System

QC 20, System of Quality Control for a CPA Firm's Accounting and AuditingPractice, provides that an auditing firm has a responsibility to ensure that its personnelcomply with the applicable professional standards. This standard specifies that a firm'ssystem of quality control should encompass the following elements: (1) independence,integrity, and objectivity; (2) personnel management; (3) acceptance and continuance ofissuer audit engagements; (4) engagement performance; and (5) monitoring.

The inspection team's assessment of a firm's quality control system is derivedboth from the results of its procedures specifically focused on the firm's quality controlpolicies and procedures, and also from inferences that can be drawn from deficienciesin the performance of individual audit engagements. Audit deficiencies, whether aloneor when aggregated, may indicate areas where a firm's system has failed to providereasonable assurance of quality in the performance of audit work. Even deficiencies thatdo not result in an insufficiently supported audit opinion or a failure to obtain sufficient

9 The discussion in this report of any deficiency observed in a particularaudit engagement reflects information reported to the Board by the inspection team anddoes not reflect any determination by the Board as to whether the Firm has engaged inany conduct for which it could be sanctioned through the Board's disciplinary process. Inaddition, any references in this report to violations or potential violations of law, rules, orprofessional standards are not a result of an adversarial adjudicative process and donot constitute conclusive findings for purposes of imposing legal liability.



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appropriate audit evidence to fulfill the objectives of its role in an audit may indicate adefect or potential defect in a firm's quality control system.10 If identified deficiencies,when accumulated and evaluated, indicate defects or potential defects in the firm'ssystem of quality control, the nonpublic portion of this report would include a discussionof those issues. When evaluating whether identified deficiencies in individual auditengagements indicate a defect or potential defect in a firm's system of quality control,the inspection team considers the nature, significance, and frequency of deficiencies;11

related firm methodology, guidance, and practices; and possible root causes.

Inspections also include a review of certain of the firm's practices, policies, andprocesses related to audit quality, which constitute a part of the firm's quality controlsystem. This review addresses practices, policies, and procedures concerning auditperformance and the following eight functional areas (1) tone at the top; (2) practices forpartner evaluation, compensation, admission, assignment of responsibilities, anddisciplinary actions; (3) independence implications of non-audit services; businessventures, alliances, and arrangements; personal financial interests; and commissionsand contingent fees; (4) practices for client acceptance and retention; (5) practices forconsultations on accounting, auditing, and SEC matters; (6) the Firm's internalinspection program; (7) practices for establishment and communication of audit policies,procedures, and methodologies, including training; and (8) the supervision by the Firm'saudit engagement teams of the work performed by foreign affiliates.

END OF PART I

10 Not every audit deficiency suggests a defect or potential defect in a firm'squality control system, and this report may not discuss every audit deficiency theinspection team identified.

11 An evaluation of the frequency of a type of deficiency may includeconsideration of how often the inspection team reviewed audit work that presented theopportunity for similar deficiencies to occur. In some cases, even a type of deficiencythat is observed infrequently in a particular inspection may, because of somecombination of its nature, its significance, and the frequency with which it has beenobserved in previous inspections of the firm, be cause for concern about a qualitycontrol defect or potential defect.



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PARTS II AND III OF THIS REPORT ARE NONPUBLICAND ARE OMITTED FROM THIS PUBLIC DOCUMENT



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PART IV

RESPONSE OF THE FIRM TO DRAFT INSPECTION REPORT

Pursuant to section 104(f) of the Act, 15 U.S.C. § 7214(f), and PCAOB Rule4007(a), the Firm provided a written response to a draft of this report. Pursuant tosection 104(f) of the Act and PCAOB Rule 4007(b), the Firm's response, minus anyportion granted confidential treatment, is attached hereto and made part of this finalinspection report.12

12 The Board does not make public any of a firm's comments that address anonpublic portion of the report unless a firm specifically requests otherwise. In somecases, the result may be that none of a firm's response is made publicly available. Inaddition, pursuant to section 104(f) of the Act, 15 U.S.C. § 7214(f), and PCAOB Rule4007(b), if a firm requests, and the Board grants, confidential treatment for any of thefirm's comments on a draft report, the Board does not include those comments in thefinal report at all. The Board routinely grants confidential treatment, if requested, for anyportion of a firm's response that addresses any point in the draft that the Board omitsfrom, or any inaccurate statement in the draft that the Board corrects in, the final report.



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APPENDIX A

AUDITING STANDARDS REFERENCED IN PART I

This appendix provides the text of the auditing standard paragraphs that arereferenced in Part I.A of this report. Footnotes that are included in this appendix, andany other Notes, are from the original auditing standards that are referenced. While thisappendix contains the specific portions of the relevant standards cited with respect tothe deficiencies in Part I.A of this report, other portions of the standards (including thosedescribed in Part I.B of this report) may provide additional context, descriptions, relatedrequirements, or explanations; the complete standards are available on the PCAOB'swebsite at http://pcaobus.org/STANDARDS/Pages/default.aspx.

AS No. 5, An Audit of Internal Control Over Financial Reporting That Is Integratedwith An Audit of Financial StatementsUSING A TOP-DOWNAPPROACHSelecting Controls to TestAS No. 5.39 The auditor should test those controls that are

important to the auditor's conclusion about whether thecompany's controls sufficiently address the assessed risk ofmisstatement to each relevant assertion.

Issuer A

TESTING CONTROLSTesting DesignEffectivenessAS No. 5.42 The auditor should test the design effectiveness of

controls by determining whether the company's controls, ifthey are operated as prescribed by persons possessing thenecessary authority and competence to perform the controleffectively, satisfy the company's control objectives and caneffectively prevent or detect errors or fraud that could result inmaterial misstatements in the financial statements.

Note: A smaller, less complex company might achieveits control objectives in a different manner from alarger, more complex organization. For example, asmaller, less complex company might have feweremployees in the accounting function, limitingopportunities to segregate duties and leading thecompany to implement alternative controls to achieveits control objectives. In such circumstances, theauditor should evaluate whether those alternativecontrols are effective.

Issuer A



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Testing OperatingEffectivenessAS No. 5.44 The auditor should test the operating effectiveness

of a control by determining whether the control is operatingas designed and whether the person performing the controlpossesses the necessary authority and competence toperform the control effectively.

Note: In some situations, particularly in smallercompanies, a company might use a third party toprovide assistance with certain financial reportingfunctions. When assessing the competence ofpersonnel responsible for a company's financialreporting and associated controls, the auditor maytake into account the combined competence ofcompany personnel and other parties that assist withfunctions related to financial reporting.

Issuer A

AS No. 13, The Auditor's Responses to the Risks of Material MisstatementOverall ResponsesAS No. 13.5 The auditor should design and implement overall

responses to address the assessed risks of materialmisstatement as follows:

a. Making appropriate assignments of significantengagement responsibilities. The knowledge, skill,and ability of engagement team members withsignificant engagement responsibilities should becommensurate with the assessed risks of materialmisstatement.1/

b. Providing the extent of supervision that isappropriate for the circumstances, including, inparticular, the assessed risks of materialmisstatement. (See paragraphs 5—6 of AuditingStandard No. 10, Supervision of the AuditEngagement.)

c. Incorporating elements of unpredictability in theselection of audit procedures to be performed. Aspart of the auditor's response to the assessed risksof material misstatement, including the assessedrisks of material misstatement due to fraud ("fraudrisks"), the auditor should incorporate an element ofunpredictability in the selection of auditingprocedures to be performed from year to year.Examples of ways to incorporate an element ofunpredictability include:

(1) Performing audit procedures related toaccounts, disclosures, and assertions that

Issuer A



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AS No. 13, The Auditor's Responses to the Risks of Material Misstatement

would not otherwise be tested based ontheir amount or the auditor's assessment ofrisk;

(2) Varying the timing of the audit procedures;

(3) Selecting items for testing that have loweramounts or are otherwise outside customaryselection parameters;

(4) Performing audit procedures on anunannounced basis; and

(5) In multi-location audits, varying the locationor the nature, timing, and extent of auditprocedures at related locations or businessunits from year to year.2/

d. Evaluating the company's selection and applicationof significant accounting principles. The auditorshould evaluate whether the company's selectionand application of significant accounting principles,particularly those related to subjectivemeasurements and complex transactions,3/ areindicative of bias that could lead to materialmisstatement of the financial statements.

Footnotes to AS No. 13.5

1/ See also paragraph .06 of AU sec. 230, Due Professional Care in the Performance of Work.

2/ For integrated audits, paragraphs 61 and B13 of Auditing Standard No. 5, An Audit of InternalControl Over Financial Reporting That Is Integrated with An Audit of Financial Statements, establishrequirements for introducing unpredictability in testing of controls from year to year and in multi-location audits.

3/ Paragraphs 12–13 of Auditing Standard No. 12 discuss the auditor's responsibilities regardingobtaining an understanding of the company's selection and application of accounting principles. See alsoparagraphs .66.–67A of AU sec. 316, Consideration of Fraud in a Financial Statement Audit, and paragraphs.04 and .06 of AU sec. 411, The Meaning of Present Fairly in Conformity With Generally Accepted AccountingPrinciples.



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Responses Involving theNature, Timing, and Extentof Audit Procedures

AS No. 13.8 The auditor should design and perform auditprocedures in a manner that addresses the assessed risks ofmaterial misstatement for each relevant assertion of eachsignificant account and disclosure.

Issuer A

Substantive ProceduresAS No. 13.36 The auditor should perform substantive procedures

for each relevant assertion of each significant account anddisclosure, regardless of the assessed level of control risk.

Issuer A

TIMING OF SUBSTANTIVEPROCEDURESAS No. 13.45 When substantive procedures are performed at an

interim date, the auditor should cover the remaining period byperforming substantive procedures, or substantiveprocedures combined with tests of controls, that provide areasonable basis for extending the audit conclusions from theinterim date to the period end. Such procedures shouldinclude (a) comparing relevant information about the accountbalance at the interim date with comparable information atthe end of the period to identify amounts that appear unusualand investigating such amounts and (b) performing auditprocedures to test the remaining period.

Issuer A

AS No. 15, Audit EvidenceSufficient AppropriateAudit EvidenceAS No. 15.4 The auditor must plan and perform audit

procedures to obtain sufficient appropriate audit evidenceto provide a reasonable basis for his or her opinion.

Issuer B

USING INFORMATIONPRODUCED BY THECOMPANY

AS No. 15.10 When using information produced by the companyas audit evidence, the auditor should evaluate whether theinformation is sufficient and appropriate for purposes of theaudit by performing procedures to:3/

Test the accuracy and completeness of theinformation, or test the controls over theaccuracy and completeness of that information;and

Issuer B



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Evaluate whether the information is sufficientlyprecise and detailed for purposes of the audit.

Footnote to AS No. 15.10

3/ When using the work of a specialist engaged or employed by management, see AU sec. 336,Using the Work of a Specialist. When using information produced by a service organization or a serviceauditor's report as audit evidence, see AU sec. 324, Service Organizations, and for integrated audits, seeAuditing Standard No. 5, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Auditof Financial Statements.

AU 328, Auditing Fair Value Measurements and DisclosuresTESTING THE ENTITY'SFAIR VALUEMEASUREMENTS ANDDISCLOSURES

Testing Management'sSignificant Assumptions,the Valuation Model, andthe Underlying DataAU 328.26 The auditor's understanding of the reliability of the

process used by management to determine fair value is animportant element in support of the resulting amounts andtherefore affects the nature, timing, and extent of auditprocedures. When testing the entity's fair valuemeasurements and disclosures, the auditor evaluateswhether:

a. Management's assumptions are reasonable andreflect, or are not inconsistent with, marketinformation (see paragraph .06).

b. The fair value measurement was determined usingan appropriate model, if applicable.

c. Management used relevant information that wasreasonably available at the time.

Issuer A

AU 328.28 Where applicable, the auditor should evaluatewhether the significant assumptions used by managementin measuring fair value, taken individually and as a whole,provide a reasonable basis for the fair valuemeasurements and disclosures in the entity's financialstatements.

Issuer A



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AU 330, The Confirmation ProcessRELATIONSHIP OFCONFIRMATIONPROCEDURES TO THEAUDITOR'S ASSESSMENTOF AUDIT RISKEvaluating the Results ofConfirmation ProceduresAU 330.33 After performing any alternative procedures, the

auditor should evaluate the combined evidence providedby the confirmations and the alternative procedures todetermine whether sufficient evidence has been obtainedabout all the applicable financial statement assertions. Inperforming that evaluation, the auditor should consider (a)the reliability of the confirmations and alternativeprocedures; (b) the nature of any exceptions, including theimplications, both quantitative and qualitative, of thoseexceptions; (c) the evidence provided by other procedures;and (d) whether additional evidence is needed. If thecombined evidence provided by the confirmations,alternative procedures, and other procedures is notsufficient, the auditor should request additionalconfirmations or extend other tests, such as tests of detailsor analytical procedures.

Issuer A

Documents

Public Company Accounting Oversight Board - PCAOB · PCAOB Release No. 104-2016-127 Inspection of Ernst & Young Auditores Independentes S.S. June 16, 2016 Page 2 PROFILE OF THE FIRM1