Section 3: Terms of engagement

The professional practice standard relating to the diligence of the statutory auditor concerning the management report, the other documents on the financial situation and the accounts and the information relating to the corporate governance report sent to the members of the body called upon to approve the accounts, approved by the Minister of Justice, is shown below:

NEP-9510. Statutory auditor's due diligence relating to the management report, other documents on the financial situation and accounts and information relating to the corporate governance report sent to the members of the body called upon to approve the accounts

Introduction

01. Articles L. 823-10, L. 225-235, L. 22-10-71 ou L. 226-10-1, L. 22-10-78 et L. 441-14 of the French Commercial Code require the statutory auditor to carry out specific verifications relating to the management report, the other documents on the financial situation and the accounts and the information in the corporate governance report sent to the members of the body called upon to approve the accounts.

02. The purpose of this standard is to define the due diligence relating to:

-management report and other documents on the financial situation and the accounts;

-information falling within the scope of the corporate governance report, the conclusions of which are formulated in the report on the accounts.

03. It also defines the impact of any inaccuracies and irregularities identified and the form and content of the section of the report on the accounts relating to such due diligence.

Diligences relating to the management report and other documents on the financial situation and the accounts sent to the members of the body called upon to approve the accounts

04. In all entities, the statutory auditors shall carry out their work on the management report and the other documents on the financial situation and the accounts sent to the members of the body called upon to approve the accounts or made available to them.

These documents may be:

-provided for by the legal and regulatory texts applicable to the entity;

-provided for by the entity's articles of association;

-or drawn up on the entity's own initiative and communicated to the statutory auditor before the date on which his report on the accounts is drawn up.

Requirements relating to information on the financial position and accounts

05. Information on the financial situation and the accounts is that which is extracted from the accounts or which can be reconciled with the data used to draw up these accounts. It may consist of figures or comments and details relating to these accounts.

06. Pursuant to articles R. 823-7 and D. 823-7-1 of the French Commercial Code and in order to:

state its observations on the fairness and consistency with the financial statements of the information on the financial position and the financial statements;

-certify, in companies, the fairness of the information on payment periods referred to in Article D. 441-6 of the Commercial Code and its consistency with the annual financial statements, and to present his observations, where appropriate;

the statutory auditor:

verifies that this information reflects the situation of the entity and the relative importance of the events recorded in the financial statements as he knows them following the work carried out during his assignment. Where appropriate, it assesses the potential impact on the fairness of the information of any reservations, refusals or impossibility to certify that it intends to express in the report on the accounts.

-verifies that each significant item of information is consistent with the accounts from which it has been derived or with the data used to prepare those accounts.

Diligences relating to other information

07. Other information is that which is not extracted from the accounts or which cannot be reconciled with the data used to prepare those accounts.

08. The statutory auditor shall read the other information in order to identify any information that appears to him to be manifestly inconsistent. He is not required to verify this other information.

When carrying out this reading, the statutory auditor exercises his critical mind by relying on his knowledge of the entity, its environment and the elements collected during the audit and on the conclusions reached by the controls he has carried out.

09. In addition, when the entity is subject to the provisions of Article L. 225-102-1 of the French Commercial Code, which requires non-financial information, in particular social and environmental information, in order to attest to the existence of the declaration provided for by this article, it verifies, pursuant to Article L. 823-10 paragraph 4 of the Commercial Code, the presence:

-of the non-financial performance statement in the management report, or,

-of the consolidated non-financial performance statement within the information relating to the group given in the management report.

Other procedures

10. The statutory auditor shall verify that the management report and the other documents on the financial position and the accounts include all the information required by the legal and regulatory texts and, where applicable, by the articles of association.

Diligences relating to information in the corporate governance report

11. The statutory auditor's due diligence covers the information covered by the corporate governance report provided for in articles L. 225-37 or L. 225-68 of the French Commercial Code applicable to sociétés anonymes, sociétés en commandite par actions and sociétés européennes. This information is:

-presented in the corporate governance report attached to the management report;

-or provided within a specific section of the management report, in public limited companies with a board of directors that have made this choice.

Diligences relating to remuneration, benefits and commitments of any kind

12. In the companies referred to in paragraph 11, whose shares are admitted to trading on a regulated market, information relating to remuneration and benefits of any kind paid or granted to corporate officers, as well as commitments made in their favour, is required by Article L. 22-10-9 of the French Commercial Code. In order to certify, pursuant to articles L. 22-10-71 or L. 22-10-78 and L. 823-10 paragraph 2 of the French Commercial Code, of the existence, accuracy and fair presentation of this information, the statutory auditor verifies the presence of the required information and that it:

-consistent with the financial statements or with the data used to prepare these financial statements;

-consistent with the information gathered by the company from the companies it controls, where remuneration, benefits or commitments are paid or granted by these companies;

-consistent with the knowledge it has acquired of the company as a result of the work carried out during its engagement.

13. In companies whose shares are admitted to trading on a regulated market, it shall also verify that the information required by Article L. 22-10-8 or Article L. 22-10-26 ou L. 22-10-76 of the French Commercial Code, concerning the draft resolution on the remuneration policy for corporate officers have been provided.

Diligences relating to information on items likely to have an impact in the event of a takeover bid or public exchange offer

14. In companies whose securities are admitted to trading on a regulated market, in order to formulate, pursuant to Articles L. 22-10-71 or L. 22-10-78 of the Commercial Code, its observations on the information referred to in Article L. 22-10-11 of the French Commercial Code relating to items that the company has considered likely to have an impact in the event of a public takeover bid or public exchange offer, the statutory auditor:

-checks the conformity of this information with the documents and information from which it is derived and which have been communicated to it;

-requests a statement from management confirming that it has provided it with all the information it has identified.

Other due diligence

15. In order to certify the existence of the information required by articles L. 225-37-4 and L. 22-10-10 of the French Commercial Code, relating in particular to the operation of the entity's administrative and management bodies, the statutory auditor shall verify their presence within the corporate governance information.

16. The statutory auditor shall read the information, other than that required by Articles L. 22-10-9 and L. 22-10-11 of the French Commercial Code, in order to identify, where appropriate, those that appear to it to be manifestly inconsistent. It is not required to verify this information.

When carrying out this reading, the statutory auditor exercises his critical mind by relying on his knowledge of the entity, its environment and the elements collected during the audit and on the conclusions reached by the controls he has carried out.

Incidence of any inaccuracies and irregularities identified

17. If the statutory auditor identifies in the management report, in the other documents on the financial situation and the accounts or in the information covered by the corporate governance report, items which could constitute :

a) Misstatements, i.e. information that is not consistent with the financial statements or with the data used to prepare the financial statements, that is not consistent with the documents and information from which it has been extracted, that is not accurate or that is not fair ;

b) Irregularities resulting from the omission of information or documents required by laws and regulations or by the Articles of Association;

It discusses these matters with management and, if it considers it necessary, implements other procedures to conclude:

if there is indeed a misstatement or irregularity in the management report, the other documents on the financial position and the accounts or the information covered by the corporate governance report;

if there is a material misstatement in the accounts;

if it needs to update its knowledge of the entity and its environment.

18. If the statutory auditor concludes that there are inaccuracies or irregularities, he shall request the necessary changes from management.

<19. In the absence of a change by management, the statutory auditor determines whether these misstatements or irregularities are likely to influence the judgment of the users of the accounts about the entity or their decision-making and therefore to have an impact on his report on the accounts.

20. The statutory auditor shall inform the bodies referred to in Article L. 823-16 of the French Commercial Code of any uncorrected inaccuracies or irregularities and shall inform them of the impact they may have on its report on the accounts.

If no correction is made, the auditor draws any consequences from this in his report on the financial statements.

Format and content of the part of the report on the accounts relating to the audit of the management report, the other documents on the financial situation and the accounts and the information covered by the corporate governance report

21. In the report on the annual accounts, this part includes the following:

-an introduction by which the statutory auditor indicates that he has carried out the specific verifications provided for by the legal and regulatory texts;

-with regard to the information given in the management report and in the other documents on the financial situation and the annual accounts:

the conclusions expressed in the form of an observation, or absence of observation, on the fairness and consistency with the annual financial statements of the information given in the management report and in the other documents on the financial position and the annual financial statements addressed to the body called upon to rule on the financial statements;

where applicable, the certification of the fairness of the information relating to payment periods mentioned in the article D. 441-6 of the French Commercial Code and their consistency with the annual financial statements and the formulation, where appropriate, of its observations;

where appropriate, certification of the presence of the extra-financial performance declaration referred to in the article L. 225-102-1 of the French Commercial Code;

any irregularities resulting from the omission of information or documents required by law, regulations or the Company's bylaws;

any other inaccuracies that may have been identified.

As regards the information contained in the corporate governance report:

the existence of the information required by Articles L. 225-37-4 and L. 22-10-10 and, where applicable, by article L. 22-10-9 of the French Commercial Code;

where applicable, certification of the accuracy and fairness of the information relating to remuneration and benefits of any kind paid or granted to each corporate officer, provided pursuant to article L. 22-10-9 of the French Commercial Code;

where applicable, the conclusions expressed in the form of observations, or the absence of observations, on the compliance of the information provided for in Article L. 22-10-11 of the French Commercial Code, relating to items that the company considered likely to have an impact in the event of a public tender offer or public exchange offer, with the documents from which they are derived and which have been communicated to the statutory auditor;

any irregularities resulting from the omission of information or documents provided for by the laws and regulations or by the bylaws;

any other inaccuracies noted.

22. In the report on the consolidated financial statements, the section relating to the verification of the information relating to the Group given in the management report shall include the following:

-an introduction by which the statutory auditor indicates that it has carried out the specific verifications provided for by the legal and regulatory texts;

-conclusions, expressed in the form of observations, or the absence of observations, on the fairness and consistency with the consolidated financial statements of the information relating to the group given in the management report;

where applicable, certification of the presence of the consolidated statement of non-financial performance referred to in Article L. 225-102-1 of the French Commercial Code;

any irregularities resulting from the omission of information or documents required by laws and regulations or by the company's bylaws;

any other inaccuracies noted.