Subsection 2: Certification of accounts

The professional practice standard relating to the audit of accounts carried out by several statutory auditors, approved by the Minister of Justice, is shown below:

. NEP-200. Principles applicable to the audit of accounts carried out within the framework of the certification of accounts

Introduction

01. In accordance with article L. 823-9, premier alinéa, du code de commerce, "les commissaires aux comptes certifiés, en justifiant de leurs appréciations, que les comptes annuels sont réguliers et sincères et donnent une image fidèle du résultat des opérations de l'exercice écoulé ainsi que de la situation financière et du patrimoine de la personne ou de l'entité à la fin de cet exercice". In addition, in accordance with the second paragraph of Article L. 823-9 of the same code, "when a person or entity prepares consolidated financial statements, the statutory auditors shall certify, giving reasons for their assessments, that the consolidated financial statements are true and fair and give a true and fair view of the assets and liabilities, financial position and profit or loss of the group formed by the persons and entities included in the consolidation". In order to meet these legal obligations, the statutory auditor formulates an opinion on the annual financial statements and, where applicable, an opinion on the consolidated financial statements, after carrying out an audit of the financial statements.

02. In accordance with article L. 823-10-1 du code de commerce, sans préjudice des obligations d'information résultant des rapports à émettre par le commissaire aux comptes et des autres dispositions qui définissent les diligences qui lui incombont, visées par ledit article, l'audit des comptes mis en œuvre au titre de la mission de certification des comptes ne consiste pas à garantir la viabilité ou la qualité de la gestion de la personne ou entité contrôlée.

. 03. The purpose of this standard is to define the principles applicable to the audit of accounts performed by the statutory auditor with a view to certifying the accounts.

Definition

04. Material misstatement: inaccurate, inadequate or omitted accounting or financial information, due to error or fraud, of such significance that, alone or in combination with other information, it may influence the judgement of a user of accounting or financial information.

Respect for texts and critical thinking

05. The statutory auditor complies with the provisions of the profession's code of ethics. The statutory auditor carries out the audit of the accounts in accordance with the legal texts and professional practice standards relating to this assignment.

06. Throughout the audit, the statutory auditor exercises a critical mind and takes into account the fact that certain situations may lead to material misstatements in the accounts.

In this respect, the statutory auditor is required to have a good understanding of the financial position and the results of the audit. In this respect, the statutory auditor critically assesses the validity of the information gathered in the course of his work, and remains alert to information that contradicts or calls into question the reliability of the information obtained.

07. In addition, throughout the course of their work, statutory auditors exercise professional judgement, in particular in deciding on the nature, timing and extent of audit procedures to be performed and in reaching conclusions based on the evidence gathered.

Nature of assurance

08. The formulation by the statutory auditor of his opinion on the accounts requires him to obtain assurance that the accounts, taken as a whole, are free from material misstatement.

This high level of assurance, although not absolute due to the limitations of the audit, is conventionally referred to as "reasonable assurance".

09. The limitations of the audit result in particular from the use of sampling techniques, the inherent limitations of internal control, and the fact that most of the information gathered during the audit leads more to presumptions than to certainties.

Audit risk and audit scope Audit risk and scope

. 10. The risk that the auditor expresses a different opinion from the one it would have expressed if it had identified all material misstatements in the accounts is called "audit risk".

Audit risk has two components: the risk of material misstatement of the accounts and the risk of non-detection of these misstatements by the statutory auditor.

11. The risk of material misstatement of the accounts is specific to the entity; it exists independently of the audit of the accounts. It is subdivided into inherent risk and control risk. Inherent risk corresponds to the possibility that, regardless of the internal controls that may exist in the entity, a material misstatement may occur in the accounts.

Control risk corresponds to the risk that the entity's internal controls may not be effective. Control risk is the risk that a material misstatement will not be prevented or detected by the entity's internal control and therefore not corrected in a timely manner.

12. The risk of non-detection is specific to the audit assignment: it corresponds to the risk that the statutory auditor will not be able to detect a material misstatement.

. 13. The statutory auditor reduces the audit risk to a sufficiently low level to obtain the assurance required for the certification of the financial statements.

To this end, the statutory auditor assesses the audit risk in relation to the financial statements. To this end, the statutory auditor assesses the risk of material misstatement and designs audit procedures in response to this assessment, in accordance with the principles set out in the professional practice standards.

The more the statutory auditor assesses the risk of material misstatement, the more likely it is that the statutory auditor will be unable to express an opinion on the financial statements. The higher the auditor's assessment of the risk of material misstatement, the more additional audit procedures the auditor performs to reduce the risk of non-detection.