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2. PwC Transparency and disclosure 3rd Meeting of the Latin America Corporate Governance Roundtable Mexico City - April 10, 2002 Ana María Elorrieta © 2001 PricewaterhouseCoopers. PricewaterhouseCoopers refers to the individual member firms of the world-wide PricewaterhouseCoopers organisation. All rights reserved.

3. PricewaterhouseCoopers What do markets, investors and stakeholders want? Comparable andprepared under common financial comprehensivereporting principles, full disclosure fairrepresents economic reality, balance discussion of risks consideredresults from good governance reliableaudit to high standard Access to high quality information that is:

4. PwC Financial reporting

5. PricewaterhouseCoopers Financial Reporting - Why IAS? The only international framework New Board structure in place Due process Interpretations Translations, practice aids Principles not rules

6. PricewaterhouseCoopers Financial Reporting - Why IAS? Comparability Common recognition and measurement principles Full disclosure “Financial statements should not be described as complying with IAS unless they comply with all the requirements of each applicable standard” Fair presentation “transactions accounted for in accordance with their substance and economic reality and not merely their legal form”

7. PricewaterhouseCoopers IAS in some Latin American countries Argentina Rules similar to IAS approved by the professional body, applicable as from July 1, 2002 Certain minor differences will remain. Brazil Regulators and professional bodies support harmonisation through local rules There is a project at the Congress to create the Brazilian Accounting Commission New accounting standards in accordance with IASs.

8. PricewaterhouseCoopers Colombia Government required by law (2000) to promote harmonisation Feasibility study conducted by university Chile Regulators and professional body support gradual harmonisation IAS concepts apply in the absence of local rules New standards are generally IAS compliant

9. PricewaterhouseCoopers Ecuador IAS’s are translated and adopted as local GAAP Time lag due to translation and approval by regulator Paraguay IASs have been adopted by the Professional Council

10. PricewaterhouseCoopers Peru IAS have been adopted as the Peruvian GAAP by the Government professional body. The IAS’s need to be approved by CNC IAS 1 to 38 and SIC 1 to 16 have been approved for 2001 Financials. SIC 17 and IAS 40 are mandatory as from 2002. IAS 32 (revised in 1998), 39 and 41 are mandatory from 2003 Uruguay The IAS’s approved by a technical commission are mandatory. Some IASs and IAS interpretations are still not mandatory

11. PricewaterhouseCoopers Panamá and Costa Rica have officially adopted IAS in 2001. However the adoption is still partial in certain industries. El Salvador has scheduled full adoption in 2004 Guatemala in 2002. Nicaragua and Honduras has postponed full adoption to 2003/4.

12. PwC Corporate governance

13. PwC Auditing

14. PwC Auditor Independence

15. PricewaterhouseCoopers oMost inherent value of the auditing profession oAppearance Vs. essenceIndependence

16. PricewaterhouseCoopers qThreats to independence qSafeguards qCircumstances and relationships that may create threats to independence and the safeguards that may be appropriate to eliminate and reduce, including financial interests, relationships with clients, provisions of non-audit services to audit clients. Conceptual approach adopted by IFAC Code of Ethics

17. PricewaterhouseCoopers Apparent benefit Independence of auditors Disadvantages Reduction in quality due to lack of cumulative client knowledge, reduction of investments in audit training and industry specialization Increase audit costs without a corresponding increase in benefits In South America: Brazil, Bolivia, Ecuador and Paraguay Rotation of audit firm

18. PricewaterhouseCoopers Scope of services - Framework proposed oServices that directly supports high quality audit: audit services, tax services, risk management and control services. oOther services based on study of threats and safeguards.

19. PricewaterhouseCoopersSafeguards 3Client acceptance procedures 3Independence policies 3Rotation of audit partner 3Concurring partner review 3Consultations 3Segregation of personnel involved in audit and non-audit services 3Internal disciplinary an review processes

20. PwC Standards on Auditing

21. PricewaterhouseCoopers Audit and assurance rFinancial statements audited in accordance with internationally- recognised framework. rAudit quality enhanced by deeper knowledge of the business.

22. PricewaterhouseCoopers International Standards on Auditing rChange the name to International Auditing and Assurance Standards Board (IAASB) rIncrease the Board size to 18 r5 members from FoF, 10 from Member Bodies and 3 public members rMeetings to be held in public rIncrease staff resources

23. PricewaterhouseCoopers ISAs in Latin American countries Argentina: in the agenda for 2002, including independence rules. Difference in auditor’s report Brazil:no significant differences but Brazilian standards are too generic in some areas and could result in differences in application. Independence rules in the accounting body’s agenda for 2002. Ecuador, Peru and Uruguay: already adopted for audits of financial statements

24. PwC Conclusions

25. PricewaterhouseCoopers Conclusion In terms of financial reporting rImprove quality of reporting standards, adopting International Accounting Standards Corporate Governance rGood corporate governance to support quality information

26. PricewaterhouseCoopers Conclusion In terms of auditing rCommon goal: audit quality rIndependence is a state of mind: adopt a principle approach, the Independence Standard in the IFAC Code of Ethics rRaise local auditing standards to International Standards on Auditing rIndependent oversight rDiscourage rotation of audit firm

27. PwC Thank you!

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