Ecuador

The financial reporting framework in Ecuador is established under Commercial Code Law No. 28 of 1960, as amended, and the Companies Law No. 312 of 1999, as amended. These laws establish the legal framework for accounting and auditing in the jurisdiction and require all companies to maintain accounting records.

The Companies Law delegates the responsibility for setting accounting and auditing standards to the Superintendence of Companies, Securities, and Insurance (SCVS). Standards issued by the SCVS are to be applied by all companies except banks and financial institutions. Under Resolution No. 8 of 2008, amended by the SCVS-INC-DNCDN-2019-0009, the SCVS has adopted IFRS and IFRS for SMEs by reference and without modification for listed companies and other companies under its supervision. Companies under SCVS oversight may use IFRS for SMEs if they meet the following conditions: (i) total annual sales revenue less than USD 5,000,000; (ii) total assets less than USD 4,000,000; and (iii) total number of employees less than 200. In addition, in 2017, the SCVS adopted IFRS for insurance companies according to Resolution No. 6 of 2016. Banks and financial institutions are regulated by the Superintendence of Banks (SB) and are required to prepare their financial statements in accordance with the accounting norms issued by the SB, with IFRS used as a supplement.

In regards to audit requirements, Resolution No. 011 of 2016 states that companies under the supervision of the SCVS with assets above USD 500,000 and companies regulated by the SB are required to prepare annual audited financial statements. The SCVS and SB require auditors providing audit services to all regulated companies to apply ISA by reference and without modification.

In Ecuador, the profession is regulated at the state level by the Accountants Law of 1966 and by the financial sector regulators—Superintendence of Companies, Securities, and Insurance and the Superintendence of Banks—for auditors of regulated companies in accordance with the Companies Law No. 312 of 1999, as amended, and the Monetary and Financial Code. The Accountants Law sets initial professional development (IPD) requirements for professional accountants and defines two segments of the profession: accountants (including auditors) and accounting technicians. Both are entitled to perform bookkeeping and other related services, but only an accountant can perform audits of financial statements.

In accordance with the Accountants Law, universities and the Ministry of Education have a role in establishing IPD requirements for professional accountants. Accountants are required to acquire a university degree in accounting, while accounting technicians are only required to obtain a secondary education degree. No law or regulation defines continuing professional development requirements or requires that individuals pass a qualification exam before practicing. Amendments to the Accountants Law in 2008 led to significant changes in the profession, including the removal of: (i) a national registry of professional accountants; (ii) mandatory membership requirements with the Federación Nacional de Contadores del Ecuador; (iii) a national investigative and disciplinary (I&D) system for professional accountants; and (iv) sanctions such as the loss of professional designations or exclusion from the profession.

However, the financial sector regulators are empowered by their legislation to: (i) maintain a registry of auditors and audit firms authorized to audit companies under their control; (ii) set accounting and auditing standards for regulated companies; (iii) establish IPD requirements; (iv) set ethical requirements; (v) develop an I&D system; and (vi) require audit firms to establish quality control mechanisms. Audit reviews are only carried out when a suspicion or risk is identified.

All other accountancy professionals may voluntarily join a professional accountancy organization (PAO) and be self-regulated through the membership requirements of the PAO, such as professional and ethical standards, and investigative and disciplinary mechanisms.

There is no independent audit oversight authority in Ecuador. Only auditors that provide services to the financial sector are subject to the regulation of the Superintendence of Companies, Securities and Insurance and the Superintendence of Banks, in accordance with the Companies Law No. 312 of 1999, as amended, and the Monetary and Financial Code. The financial sector regulators are empowered to: (i) maintain a registry of auditors and audit firms authorized to audit companies under their control; (ii) set accounting and auditing standards for regulated companies; (iii) establish IPD requirements; (iv) set ethical requirements; (v) develop an investigative and disciplinary system; and (vi) require audit firms to establish quality control mechanisms. Audit reviews are only carried out when a suspicion or risk is identified.

The Colegio de Contadores Públicos de Pichincha y del Ecuador (CCPPE)

The CCPPE, established by Ministerial Decree No.1638 of 1943, is a voluntary professional accountancy organization representing accountants and accounting technicians, with responsibilities such as: (i) establishing membership requirements; (ii) issuing professional and ethical standards for its members; (iii) investigating and disciplining its members; (iv) providing training programs; and (v) representing and promoting the accounting profession.

The CCPPE is an Associate member of IFAC, a member of the Inter-American Accounting Association and the Integration Committee Europe—Latin America, and a member of the Group of Latin-American Accounting Standard Setters.

The Federación Nacional de Contadores del Ecuador (FNCE)

The FNCE, established in 1945, is a voluntary professional accountancy organization representing accountants and accounting technicians. It undertakes activities related to promoting the accounting profession, providing training activities, and establishing ethical requirements and investigating and disciplining its members.

The FNCE is a member of the Inter-American Accounting Association.

In Ecuador, the financial sector regulators—Superintendence of Companies, Securities and Insurance (SCVS) and the Superintendence of Banks (SB)—are empowered to regulate auditors and audit firms providing services to regulated companies. This includes the establishment of a quality assurance (QA) review system, in accordance with the Companies Law No. 312 of 1999, as amended, and the Monetary and Financial Code. The SCVS carries out reviews when a suspicion or risk is identified. The Colegio de Contadores Públicos de Pichincha y del Ecuador reports that the SCVS’s Intervention and Control Unit’s QA processes are not fully aligned with SMO 1 best practices.

While the SB is also empowered to establish QA reviews, it is unclear whether the regulator has established a QA system and, if it has, whether the procedures align with SMO 1 best practices.

Current Status: Partially Adopted

Universities and the Ministry of Education in Ecuador are responsible for establishing initial professional development requirements for professional accountants, outlined in the Accountants Law of 1966. A university accounting degree for accountants (including auditors) and a secondary education degree for accounting technicians are the only legal requirements to practice in Ecuador.

No law or regulation defines continuing professional development (CPD) requirements or requires individuals to pass a qualification exam before practicing.

Auditors providing services to the financial sector are further subject to the respective regulations of the Superintendence of Companies, Securities and Insurance (SCVS) and the Superintendence of Banks (SB), in accordance with the Companies Law No. 312 of 1999, as amended, and the Monetary and Financial Code. The SCVS and SB do require three to five years of practical experience; however, neither regulator requires the completion of a professional examination or CPD requirements.

Current Status: Partially Adopted

In accordance with the Companies Law No. 312 of 1999, the Superintendence of Companies, Securities, and Insurance (SCVS) is responsible for setting auditing standards for all companies, except for banks and financial institutions, which are established by the Superintendence of Banks (SB).

The SCVS and SB require auditors providing audit services to apply ISA by reference and without modification.

Current Status: Adopted

The financial sector regulators—Superintendence of Companies, Securities and Insurance and the Superintendence of Banks—have the authority to determine ethical requirements for auditors of entities under their supervision, in accordance with the Companies Law No. 312 of 1999, as amended, and the Monetary and Financial Code. The Colegio de Contadores Públicos de Pichincha y del Ecuador (CCPPE) reports that the financial sector regulators have not issued any specific regulations related to ethical requirements.

All other accountancy professionals may voluntarily join a professional accountancy organization (PAO) and be self-regulated through the membership requirements of the PAO, such as professional and ethical standards.

The Ministerial Decree No. 1638 of 1943 authorizes the Colegio de Contadores Públicos de Pichincha y del Ecuador (CCPPE) to set ethical requirements for its members. Accordingly, the CCPPE has adopted the 2018 International Code of Ethics issued by the IESBA.

The Federación Nacional de Contadores del Ecuador (FNCE)—another professional accountancy organization operating in the jurisdiction—also sets ethical requirements for its members. The FNCE has adopted a Code of Ethics for its members; however, the extent of alignment of the FNCE’s Code with the requirements of the IESBA Code is unclear.

Current Status: Partially Adopted

The Ministry of Economy and Finance (MoF) is the accounting standard-setter for the public sector in Ecuador. The MoF has adopted accrual-basis IPSAS through the Agreement No. 67 of 2016. The MoF established 2020 as the first year for the application of IPSAS.

Current Status: Partially Adopted

The financial sector regulators—Superintendence of Companies, Securities and Insurance and the Superintendence of Banks—have authority for enforcement related to auditors and audit firms providing services to certain regulated companies, in accordance with the Companies Law No. 312 of 1999, as amended, and the Monetary and Financial Code. The extent to which the SCVS and SB enforcement systems are in line with the best practices of SMO 6 is unclear.

All other accountancy professionals may voluntarily join a professional accountancy organization (PAO) and be self-regulated through the membership requirements of the PAO, such as investigative and disciplinary mechanisms.

The Ministerial Decree No.1638 of 1943 authorizes the Colegio de Contadores Públicos de Pichincha y del Ecuador (CCPPE) to establish an investigative and disciplinary (I&D) system for its members. The CCPPE conducted an assessment of its I&D system against SMO 6 requirements and identified main gaps pertaining to: (i) the composition of members of the I&D committee; (ii) the results of the proceedings are not made available to the public; and (iii) an inability to impose sanctions due to prohibitions imposed by the Ecuadorian Constitution, among others.

The Federación Nacional de Contadores del Ecuador—another professional accountancy organization operating in the jurisdiction—is also responsible for implementing an I&D system for members. However, it is unclear whether such a mechanism has been established or is operational.

As reported by the CCPPE, no organization in Ecuador may suspend a professional license; such cases are only addressed through the regular justice system via judicial opinion.

Current Status: Partially Adopted

The Companies Law No. 312 of 1999 authorizes the Superintendence of Companies, Securities, and Insurance (SCVS) to set accounting standards for all companies (including listed companies and insurance companies), except for banks and other financial institutions.

Under Resolution No. 8 of 2008, amended by the SCVS-INC-DNCDN-2019-0009, the SCVS has adopted IFRS and IFRS for SMEs by reference and without modification. Companies under SCVS oversight may use IFRS for SMEs if they meet the following conditions: (i) total annual sales revenue less than USD 5,000,000; (ii) total assets less than USD 4,000,000; and (iii) total number of employees less than 200.

Banks and other financial institutions are regulated by the SB and are required to prepare their financial statements in accordance with the accounting norms issued by the SB, with IFRS used as a supplement.

Current Status: Partially Adopted

Relevant Organizations

• Colegio de Contadores Públicos de Pichincha y del Ecuador (CCPPE)
• Federación Nacional de Contadores del Ecuador (FNCE)
• Superintendence of Companies, Securities and Insurance (SCVS)
• Superintendence of Banks (SB)

Relevant Legislation

• Accountants Law of 1966
• Commercial Code, Law No. 28 of 1960
• Companies Law, No. 312 of 1999

Relevant Publications

• CCPPE, SMO Action Plan, September 2022.
• Inter-American Development Bank, “Estado de adopción de NICSP en los países de Latinoamérica y el Caribe Resumen Ejecutivo,” August 2017.
• IFRS Foundation, “IFRS Application Around the World, Jurisdictional Profile: Ecuador,” June 2016.
• SMS, “Monto Mínimo para Auditar una Empresa en Ecuador,” April 2018.
• World Bank, Report on the Observance of Standards and Codes (ROSC),Accounting and Auditing: Ecuador, March 2004.