Colombia: Could A Firm Of Accountants Acting As Statutory Auditors Of A Client, At The Same Time, Provide Services To Comply The Transfer Pricing (TP) Formal Duties?

The Technical Counsel of Public Accountants (CTCP by its initials in Spanish) in its capacity to solve queries in the development of the application of the normative accounting frameworks and to serve as an advisory body of the State (Ministry of Finance and Public Credit and Ministry of Commerce, Industry and Tourism) resolved in the past days the concern raised above.

In this regard, the CTCP considers that despite the firm of accountants / statutory auditors could issue TP reports since these reports do not necessarily have to be carried out by a public accountant (as it is not an opinion of a public professional accountant nor an audit report) and additionally, the TP reports submitted to the Tax Administration should not be signed or ruled by auditor, the situation may imply inability and threats in which the firm of accountants / statutory auditors may be involved.

The CTCP determined that the firm of accountants / statutory auditors could be disqualified because it has obvious common interests and, in addition, because the circumstances arise that diminish their independence and objectivity in the development of their economic analyses (section 50 of Law 43 of 1990), analyses that are finally documented in the TP reports.

Furthermore, given that the results of the TP reports: (i) may produce potential effects in the determination of the income tax that is signed by the statutory auditors; (ii) are prepared based on the financial and accounting data subscribed or audited by the firm of accountants / statutory auditors; and (iii) must be provided to the Tax Administration on the dates determined by it, despite the statutory auditor does not have to sign it for submission; the CTCP determined that the foregoing could generate threats of self-review or self-interest and in addition of independence as provided in the Code of Ethics for professional accountants (Annex 5 of Decree 2420 of 2015).

Therefore, because these threats have no way in which they can be reduced to an acceptable level by the application of safeguards, the firm of accountants / statutory auditors must not provide TP services to the clients of which it is auditor. In conclusion, the companies that have contracted statutory auditor services and at the same time TP services, are assuming an important risk before the Tax Administration in future fiscal inspection processes. On the other hand, the firm of accountants / statutory auditors are disqualified in Colombia according to the criterion of the CTCP in case of providing the two services at the same time.

Our recommendation is that in case that companies had agreed TP services with firm of accountants / statutory auditors, these must be reviewed and re-evaluated as they can have incidences for you as taxpayers in Colombia and the position of the CTCP should be share with the Corporation hurriedly.

We are at your disposal if you require our support in TP issues, it is our interest to provide our services in favor of the Company, which will allow you to value our personalized service and efficiency in timely responses to your inquiries, thanks to the work of the world's largest law firm (our team creates agile solutions tailored to local, regional and global needs in 174 locations and more than 78 countries).

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