Mexico

While the General Law for Commercial Enterprises of 1934 provides broad rules on the form of financial information to be provided to shareholders, other entities are legally authorized to determine specific rules and standards.

Financial sector regulators—the National Banking and Securities Commission (CNBV) and the National Insurance and Surety Commission (CNSF)—are empowered to set sector-specific accounting rules for the companies they regulate. Listed companies are required to use IFRS. Financial institutions and insurance companies apply Mexican Financial Reporting Standards (MFRS) set by the Mexican Board for Research and Development of Financial Reporting Standards (CINIF) (described below) in addition to specific requirements issued by the CNBV and the CNSF—the insurance regulator.

Article 5 of the Mexican Constitution grants legal authority to the local professional accountancy organizations and their federal umbrella, the Instituto Mexicano de Contadores Públicos (IMCP), to set applicable accounting standards.

The IMCP has delegated its accounting standard-setting process to the Mexican Board for Research and Development of Financial Reporting Standards (CINIF). The CINIF was established on August 21, 2001, as an independent, nonprofit entity to develop and issue Mexican financial and accounting standards consistent with international standards. Since 2004, the CINIF has issued Mexican Financial Reporting Standards (MFRS) that are converged with IFRS. To date, practically all rules established in MFRS converge with IFRS; however, CINIF continuously reviews the existing differences to confirm whether they should remain or be eliminated based on some circumstances (e.g., inflation, cryptocurrencies). In addition, in response to global regulatory framework trends, in 2022, the CINIF created its first Technical Committee on Sustainability Reporting.

In accordance with the current Mexican tax law, a statutory audit is mandatory for listed companies and companies that exceed certain thresholds in terms of revenue. The audit must be prepared by an independent public accountant registered with the tax authorities.

Article 5 of the Mexican Constitution grants legal authority to the IMCP to also issue auditing standards that its members must apply in all audits they conduct. ISAs have been adopted without modification by the IMCP's Committee on Standards of Auditing and Assurance, effective since January 2012, for all mandatory audits. The financial sector regulators are empowered to set sector-specific audit rules for the companies they regulate. Both the CNBV and CNSF accept the auditing standards issued by the IMCP such that all audits of listed companies, financial institutions, and insurance companies—effectively the public interest entities (PIEs) in Mexico—are conducted in accordance with ISA. Only IMCP-certified public accountants designated as CPA (Contador Publico Certificado—CPC) can perform audits of PIEs.

The main requirement to practice accountancy in Mexico is a bachelor's degree in accounting from a higher education institution. Several universities require students to undertake a final exam when they finish their formal education program. An independent evaluation body manages the exam (CENEVAL), and the exam's content is aligned with the 2019 International Education Standards (IES). The MoE licenses professional accountants to practice public accountancy, and universities set the curriculum for accounting degrees.

Individual professionals may voluntarily join a state-level accountancy organization, which is authorized to issue regulations in accordance with the Mexican Constitution. Several professional accountancy organizations exist in Mexico with voluntary membership; however, apart from the Instituto Mexicano de Contadores Públicos (IMCP), it is unclear whether they have established membership requirements and regulate their members.

The Instituto Mexicano de Contadores Públicos (IMCP) is a federation composed of 60 state-level accountancy organizations that bring together professional accountants from around the country. The MoE license is the only requirement for applying for IMCP membership. The IMCP, alongside its state professional organizations, carries out the following regulatory activities for its members: (i) setting applicable auditing standards; (ii) establishing ethical standards; (iii) setting and enforcing continuing professional development CPD requirements; (iv) implementing an investigation and discipline system; and (v) establishing and operating a quality assurance QA review system.

The IMCP introduced the certified public accountant (CPA; Contador Publico Certificado—CPC) qualification, which the IMCP states is in line with the 2019 IES requirements. The CPC qualification is mandatory for auditors of companies registered with the National Banking and Securities Commission (CNBV) and the National Insurance and Surety Commission (CNSF), effectively the principal public interest entities in Mexico.

In addition, auditors providing services to the CNBV and the CNSF are subject to their ethical guidelines specifying independence requirements and to additional investigation and discipline procedures. The CNBV and CNSF have legal powers to dismiss or impose administrative sanctions on auditors of entities under their respective supervision for violation of applicable accounting, auditing, and reporting rules and standards.

Lastly, professional accountants who intend to carry out audits for tax purposes need to register with the Federal General Administration of Tax Audit, a division of Mexico's Internal Revenue Department. Any practitioner affiliated with a state professional accountancy organization is eligible for inclusion in the list of qualified auditors maintained by the tax authorities. The Internal Revenue Department has the power to impose civil and criminal penalties on auditors who certify misleading or inaccurate numbers about a client's taxable profits. In addition, if a tax authority is dissatisfied with the performance of any auditors, their names may be sanctioned, suspended, or struck from the list.

There is no independent audit oversight in Mexico. Auditors providing services to companies are regulated by the National Banking and Securities Commission (CNBV) and the National Insurance and Surety Commission (CNSF) (effectively public interest entities in Mexico). The CNBV and CNSF have legal powers to dismiss or impose administrative sanctions on auditors of entities under their respective supervision for violation of applicable accounting, auditing, and reporting rules and standards. The CNBV and CNSF may impose the following disciplinary penalties against errant auditors: monetary penalties, admonishment, reprimand, or dismissal. In fraud cases, the regulators can initiate judicial proceedings for criminal actions.

In order to conduct audits for these entities, individuals must be certified as a Contador Publico Certificado–CPC by the Instituto Mexicano de Contadores Públicos (IMCP)—a federal umbrella organization for professional accountancy associations in Mexico. As certified members of IMCP, individuals are subject to the IMCP's regulations in accordance with the Mexican Constitution, which are further described in the Regulation section.

The Instituto Mexicano de Contadores Públicos (IMCP)

The IMCP is an umbrella federation composed of 60 professional associations that bring together professional accountants from around the country. Membership in the IMCP is voluntary and consists of certified and non-certified members. Certified members have earned the IMCP's certification of Contador Publico Certificado–CPC. Only IMCP-CPCs can perform audits of public interest entities registered with the National Banking and Securities Commission and the National Insurance and Surety Commission.

The IMCP, along with its state professional organizations, carries out the following regulatory activities for its members: (i) setting auditing standards; (ii) establishing ethical standards; (iii) setting and enforcing continuing professional development (CPD) requirements; (iv) implementing an investigation and discipline system; and (v) establishing and operating a quality assurance (QA) review system.

In addition to being an IFAC member, the IMCP is a member of the Inter-American Association of Accountants.

Other PAOs

Recently other institutions have been created because of a split from the IMCP; however, there is limited information about the associations' activities and members.

There is no legal foundation for establishing and implementing quality assurance (QA) reviews for all audits of financial statements. However, the Securities Market Law and the National Banking and Securities Commission (CNBV) Official Circular for Issuers recognizes that entities must ensure that their independent auditors comply with quality control requirements. As of 2022, no specific rules or procedures have been issued by the CNBV regarding a QA system; however, it may perform quality inspections for auditors on a case-by-case basis.

In 2012, the Instituto Mexicano de Contadores Públicos (IMCP) issued a Standard of Quality Control that fully converged with ISQC 1 and introduced a mandatory QA system (known as NRCC) for its members that the institute reports it is in line with the SMO 1 requirements. In August 2021, the IMCP officially announced the mandatory adoption of ISQM1 and ISQM 2 to become effective on December 15, 2022. In addition, the IMCP is reviewing and amending its NRCC considering the ISQM standards.

Only the IMCP's members that receive the institute's certification of Certified Public Accountant (CPA; Contador Publico Certificado–CPC) and member firms can perform audits of listed companies, financial institutions, and insurance companies registered with the CNBV and the National Insurance and Surety Commission—effectively the principal public interest entities in Mexico. In accordance with the current Mexican tax law, a statutory audit is mandatory for listed companies and companies that exceed certain thresholds in terms of revenue.

Current Status: Partially Adopted

Article 5 of the Mexican Constitution regulates entry requirements for all professional fields. The main requirement to practice accountancy in Mexico is a bachelor's degree in accounting from a higher education institution. Several universities require students to undertake a final exam when they finish their formal education program. An independent evaluation body manages the exam (CENEVAL), and the exam's content is aligned with the 2019 International Education Standards (IES). The MoE licenses professional accountants to practice public accountancy and universities set the curriculum for accounting degrees.

Individuals who then voluntarily join one of Mexico's state-level professional organizations might be subject to its continuing professional development (CPD) requirements. Apart from the Instituto Mexicano de Contadores Públicos (IMCP), which is an IFAC member, it is unclear whether these organizations have established such requirements.

The MoE license is the only requirement for applying for the Instituto Mexicano de Contadores Públicos (IMCP) membership. The IMCP requires its members to fulfill continuing professional development (CPD) requirements. The IMCP has set CPD requirements for its members at 65 CPD credits per year for CPAs, and 45 CPD credits for non-CPAs. In addition, the IMCP has implemented its own Certified Public Accountant (CPA; Contador Publico Certificado–CPC) certification as a prerequisite to audit public interest entities, as required by the National Banking and Securities Commission and the National Insurance and Surety Commission. The IMCP states that the certification aligns with the 2019 IES requirements.

The IMCP has also collaborated with the National Association of Colleges and Schools of Accounting and Management (ANFECA), representing more than 400 higher education institutions in Mexico, to urge for the adoption the IES requirements.

Current Status: Partially Adopted

Article 5 of the Mexican Constitution grants legal authority to the IMCP to issue auditing standards that its members must apply in all audits they conduct. ISAs have been adopted without modification by the IMCP's Committee on Standards of Auditing and Assurance, effective since January 2012, for all mandatory audits. When the IAASB issues new and revised ISA, the standards are reviewed, translated, and published by the IMCP, mandating the same effective adoption dates as the IAASB. As of the date of the assessment, the 2020 ISA are being applied.

In addition, financial sector regulators—the National Banking and Securities Commission, and the National Insurance and Surety Commission—are empowered to set sector-specific audit rules for the companies they regulate. Both the CNBV and CNSF accept the auditing standards issued by the IMCP such that all audits of listed companies, financial institutions, and insurance companies—effectively the public interest entities (PIEs) in Mexico—are conducted in accordance with ISA. In addition, the Mexican Internal Revenue Department also accepts the auditing standards issued by the IMCP.

Current Status: Adopted

Professional accountants in Mexico are eligible to practice with a university degree in accounting and a license from the Ministry of Education (MoE). They are not subject to any ethical requirements by the MoE. Individual professionals may voluntarily join a state professional accountancy organization (PAO), and become subject to their regulation, including ethical requirements.

The Instituto Mexicano de Contadores Públicos (IMCP) is a federation composed of 60 PAOs and is the only IFAC member organization in the jurisdiction. It requires its members to follow its Code of Ethics. According to the IMCP, its Code aligns with all the requirements of the 2018 International Code of Ethics for Professional Accountants issued by the IESBA.

In addition, members of IMCP who perform audits of companies regulated by the National Banking and Securities Commission and the National Insurance and Surety Commission are subject to their ethical guidelines which specifies independence requirements. These are primarily aligned with the specific requirements for PIE audits per the International Code of Ethics.

Several other professional accountancy organizations exist in Mexico with voluntary membership; however, apart from IMCP, it is unclear whether they have established ethical requirements for their members.

Current Status: Partially Adopted

The General Law of Governmental Accounting 2008 created the National Council of Accounting Harmonization (CONAC) as the accounting standard-setter for the public sector. Mexico has adopted national standards with reference to IPSAS as the federal public sector accounting standards (IFAC/CIPFA International Public Sector Financial Accountability Index 2020). The national standards are on a partial accrual basis.

State-owned enterprises are required to apply the Governmental Accounting Standards on an accrual basis in the preparation of their financial statements. In addition, since 2014, the CONAC has authorized that Mexican Financial Reporting Standards and IPSAS may be used as supplementary standards for certain entities.

Current Status: Partially Adopted

Professional accountants in Mexico are eligible to practice with a university degree in accounting and a license from the Ministry of Education (MoE) and are not legally subject to a formal professional investigative and disciplinary (I&D) system. Individual professionals may voluntarily join a state-level accountancy organization and become subject to their regulation which may include I&D procedures.

The Instituto Mexicano de Contadores Públicos (IMCP) is a federation composed of 60 PAOs and is the only IFAC member organization in the jurisdiction. Chapter VII of the IMCP's by-laws sets the I&D procedures for its members. The IMCP and the local professional accountancy organizations under its umbrella operate that system through a National Honor Board and the 60 local Honor Committees.

The IMCP has developed a comparison of the local professional accountancy organizations' I&D systems and processes against the requirements of SMO 6. Through this assessment, it has concluded that three areas of the SMO 6 requirements—having a separate disciplinary committee, linkage with the results of Quality Assurance reviews, and certain administrative processes (e.g., timeframe targets for disposal of all cases and tracking mechanisms to monitor progress in I&D cases)—have not been incorporated and require further harmonization.

In addition, members of IMCP who perform audits of companies regulated by the National Banking and Securities Commission (CNBV) and the National Insurance and Surety Commission (CNSF) are subject to additional investigation and discipline procedures. The CNBV and CNSF have legal powers to dismiss or impose administrative sanctions on auditors of entities under their respective supervision for violation of applicable accounting, auditing, and reporting rules and standards. The CNBV and CNSF may impose the following disciplinary penalties against errant auditors: monetary penalties, admonishment, reprimand, or dismissal. In fraud cases, the regulators can initiate judicial proceedings for criminal actions.

The Internal Revenue Department also can impose civil and criminal penalties on auditors who certify misleading or inaccurate numbers about a client's taxable profits. In addition, if a tax authority is dissatisfied with the performance of any auditors, their names may be sanctioned, suspended, or struck from the list.

Several other professional accountancy organizations exist in Mexico with voluntary membership; however, apart from IMCP, it is unclear whether they have established I&D systems for their members.

Current Status: Partially Adopted

While the General Law for Commercial Enterprises of 1934 provides broad rules on the form of the financial information to be provided to shareholders, other entities are legally authorized to determine specific rules and standards.

Financial sector regulators—the National Banking and Securities Commission (CNBV) and the National Insurance and Surety Commission (CNSF)—are empowered to set sector-specific accounting rules for the companies they regulate. Listed companies are required to use IFRS. Financial institutions and insurance companies apply Mexican Financial Reporting Standards (MFRS) set by the Mexican Board for Research and Development of Financial Reporting Standards (CINIF) (described below) in addition to specific requirements issued by the CNBV and the CNSF—the insurance regulator.

Article 5 of the Mexican Constitution grants legal authority to the local professional accountancy organizations and their federal umbrella, the Instituto Mexicano de Contadores Públicos (IMCP), to also set applicable accounting standards.

The IMCP has delegated its accounting standard-setting process to the Mexican Board for Research and Development of Financial Reporting Standards (CINIF). The CINIF was established on August 21, 2001, as an independent, nonprofit entity to develop and issue Mexican financial and accounting standards consistent with international standards. Since 2004, the CINIF has issued Mexican Financial Reporting Standards (MFRS) that are converged with IFRS. To date, practically all rules established in MFRS converge with IFRS; however, CINIF continuously reviews the existing differences to confirm whether they should remain or be eliminated based on some circumstances (e.g., inflation, cryptocurrencies).

CINIF has not adopted the IFRS for Small- and Medium-sized Enterprises (SMEs). As reported by the IFRS Foundation, CINIF has stated that it does not believe that different recognition and measurement criteria from full IFRS are appropriate for SMEs. CINIF has a project to create a Reduced Disclosure Regime for SMEs.

Current Status: Partially Adopted

Relevant Organizations

• Consejo Mexicano de Normas de Información Financiera (CINIF)
• Instituto Mexicano de Contadores Públicos (IMCP)
• National Association of Colleges and Schools of Accounting and Management (ANFECA)
• National Banking and Securities Commission (CNBV)
• National Council of Accounting Harmonization (CONAC)
• National Insurance and Surety Commission (CNSF)
• National Commission for the Pension System (CONSAR)

Relevant Legislation

• CNBV Official Circular for Issuers, 2003
• General Law of Governmental Accounting, 2008.
• Securities Act
• Mexican National Banking and Securities Act

Relevant Publications

• Deloitte, Taxation and Investment in Mexico, 2016.
• IMCP, SMO Action Plan, 2022.
• IFRS Foundation, IFRS Application Around the World—Jurisdictional Profile: Mexico, June 2016.
• World Bank, Report on the Observance of Standards and Codes: Accounting and Auditing—Mexico, March 2004.