Chapter I General Principles
These Regulations are adopted under Article 11, paragraph 2 of the Certified Public Accountant Act (the "CPA Act").
Unless otherwise required by another competent authority for a given accounting event, a certified public accountant (CPA) engaged to audit and attest financial statements shall do so in accordance with these Regulations. Matters not provided herein shall be subject to generally accepted auditing standards ("the Auditing Standards") issued by the Accounting Research and Development Foundation.
Where the relevant competent authority adopts special provisions for a special industry, the regulation of audit and attestation services for that industry shall be subject to those provisions.
For the purposes of these Regulations, the terms "parent" and "subsidiary" shall have the meanings determined in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
For the purposes of these Regulations, the term "major subsidiary" means any subsidiary with respect to which any of the following circumstances has applied to the financial statements for each of the most recent two fiscal years, or any subsidiary that the CPA deems to have a significant effect on the audited entity's financial statements:
1.Where that subsidiary serves as a source of 15 percent or more of the consolidated operating revenue of the audited entity.
2.Where that subsidiary serves as a source of 25 percent or more of the consolidated total purchase amount of the audited entity.
3.Where that subsidiary serves as a source of 25 percent or more of consolidated total output value of the audited entity.
4.Where the audited entity, if its stock is already listed on a stock exchange (hereinafter referred to as a "listed company") has original investments in that subsidiary in an accumulated amount of 40 percent or more of the paid-in capital of the audited entity and also NT$300 million or more, or, if a non-listed company, has original investments in that subsidiary in an accumulated amount of 40 percent or more of the paid-in capital of the audited entity and also NT$100 million or more. However, if the stock of a company has no par value or a par value other than NT$10, the aforesaid calculation of 40 percent of paid-in capital shall be replaced by 20 percent of the equity attributable to owners of the parent.
5.Where the audited entity, if a listed company, has loaned funds to and/or provided endorsements/guarantees in favor of that subsidiary in a total amount of 40 percent or more of the audited entity's equity attributable to owners of the parent and also NT$300 million or more, or, if a non-listed company, has loaned of funds to and/or provided endorsements/guarantees in favor of that subsidiary in a total amount of 40 percent or more of the audited entity's equity attributable to owners of the parent and also NT$100 million or more.
6.If the audited entity is a listed company, where the comprehensive income of that subsidiary alone accounts for 50 percent or more of the total amount of the comprehensive income on the consolidated financial statements and also NT$300 million or more, or if a non-listed company, where the comprehensive income of that subsidiary alone accounts for 50 percent or more of the total amount of the comprehensive income on the consolidated financial statements and also NT$100 million or more.
When an audited entity replaces its CPA, the former and successor CPA shall act in accordance with Article 43, paragraph 3 of the CPA Act and with Statement of Auditing Standards No. 17. If the successor CPA discovers any disagreement between the former CPA and the audited entity, the successor CPA shall record in detail in the working papers the reasons for asserting any opinion.
If any item in the financial statements of an audited entity for a given period requires adjustment as a result of a CPA audit or a determination by the competent authority for the given accounting event, and if no such adjustment has been made by the time the CPA performs an audit for the ensuing period, the CPA shall request the adjustment to be made or otherwise an explanation to be given in a financial statement footnote, except where the entity only needs to reclassify the item on the financial statements or provide a footnote that no adjustment to any book entry is necessary.
CPAs and those assistants who help CPAs carry out audit and attestation work (hereinafter collectively referred to as "auditors") shall expand their professional knowledge and practical experience and shall adhere to a code of professional ethics.
CPAs shall pursue continuing professional development and shall see to it that their assistants pursue continuing development.
The financial statements to be audited by a CPA engaged for that purpose shall have been prepared by the audited entity on the basis of its account books and other relevant documents. When auditing the financial statements, the CPA shall take materiality and audit risk into account in accordance with Statement of Auditing StandardsNos. 48, 51, and 52, and obtain sufficient appropriate evidence in accordance with Statement of Auditing Standards No. 53, as a basis for preparing an audit report.
When initially engaged to audit financial statements, a CPA shall, for its audits on opening balances, perform necessary audit procedures and issue an appropriate audit opinion in accordance with Statement of Auditing Standards No. 63.
A CPA conducting an audit of group financial statements shall comply with the requirements of Statement of Auditing Standards No. 54 when the CPA audits the component entities included in the financial statements, or if the CPA plans to use the audit work of other CPAs.
When using the report of an expert as audit evidence, a CPA shall do so in accordance with Statement of Auditing Standards No. 20 and carefully evaluate the reasonableness and appropriateness of the data, assumptions, and methods used in the expert's report and of the findings reached in the report.
When engaged to audit financial statements, a CPA shall observe the provisions of Statement of Auditing Standards No. 29 when evaluating the audited entity's compliance with laws and regulations.
A CPA shall plan audit implementation work in consideration of the characteristics of the relevant industry and in accordance with Statement of Auditing Standards Nos. 43, 48, and 49.
If the audited entity is a public company, the CPA shall assess whether the audited entity has effectively implemented the control activities under Articles 7 through 9 of the Regulations Governing Establishment of Internal Control Systems by Public Companies, and on that basis determine the nature, timing, and extent of the substantive procedures.
A CPA shall communicate with those charged with governance of an audited entity in accordance with Statement of Auditing Standards No. 62, and if there is an audit committee, must document in the working papers the time, committee member(s), content, and results with respect to the communication with the audit committee.
At the beginning of an audit, a CPA shall first make the following checks by selecting one month, or by taking sufficient data for that purpose:
1.Check vouchers against supporting source documents on an item-by-item basis.
2.Check vouchers against journal entries on an item-by-item basis.
3.Check vouchers against subsidiary ledger entries on an item-by-item basis.
4.Check journal entries against general ledger entries on an item-by-item basis.
5.Check the sum of account balances in each subsidiary ledger against the balance in the control account in the general ledger.
If an audited entity processes its accounting data electronically, the CPA may study and test the computerized accounting operations of the audited entity and, to the degree it deems fit, modify or adjust the audit procedures required by the subparagraphs of the preceding paragraph.
With respect to subsequent events occurring to an audited entity after the balance sheet date, a CPA shall, in accordance with Statement of Auditing Standards No. 55, ascertain whether events of material significance have been adjusted or a disclosed in the financial statements.