HSBC Doing business in Mexico

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Audit and accountancy
Companies listed on the
Mexican Stock Exchange,
government-owned companies
and companies in the finance
sector regulated by The
National Banking and Securities
Commission (Comisión
Nacional Bancaria y de
Valores or CNBV), the National
Commission for the Protection
and Defence of Users of
Financial Services (CONDUSEF)
or the National Insurance and
Bonding Commission, such as
banks and brokerage firms, are
required to have independent
auditors perform annual audits
of their financial statements.
In addition, companies meeting
any of the following threshold
requirements must have
independent auditors conduct
annual audits and file a
tax report.
The following bases are
currently valid:
• Annual revenues of at least
Mex$34,803,950;
• Total assets of at least
Mex$69,607,920; or
• Three hundred employees
or more in each month of
the preceding year.
Annual audits are required
in the year after a company
reaches any of the above
conditions. Audited financial
statements are presented
at the annual shareholders’
meeting, to the tax authorities,
and if the company is publicly
held, to the CNBV. Audits of
financial statements prepared
under Mexican GAAP are
conducted under Mexican
Generally Accepted Auditing
Standards (GAAS). These
financial statements must also
be filed with the tax authorities
along with a tax compliance
report. These reports are filed
electronically with the tax
authorities via the internet.
When a company has lost
two-thirds of its capital stock,
a going-concern paragraph
must be attached to the report,
because it is considered a
technical bankruptcy. In a worstcase
scenario, the audit opinion
may be modified.
The CNBV and the National
Insurance and Bonding
Commission (CNSF) are
statutorily authorised to issue
accounting and reporting
standards for the companies
they regulate. Banking, stock
brokerage houses, investment
funds, financial leasing,
factoring and other financial
institutions are subject to
regulations issued by the
CNBV. Insurance and bonding
companies are subject to
regulations issued by the
CNSF. The primary differences
between the accounting
practices established by the
CNBV and the IMCP (Mexican
Institute of Public Accountants)
refer to the valuation of
repurchase transactions (repos)
and non-consolidation of
non-financial subsidiaries. The
accounting practices issued by
the CNSF differ from Mexican
GAAP primarily in the following
areas: partial recognition of
inflationary effects and deferred
taxes; certain capital reserves
shown as liabilities; the equity
method used for investments
instead of consolidation;
and the assumptions used
for determining employee
compensation at retirement.
Local GAAP
The financial statements must
be presented at the annual
shareholders’ meeting and
approved by the shareholders.
All companies under a S.A.
form of organisation must have
a statutory auditor (comisario)
appointed by the shareholders.
Because of the statutory
auditor’s functions and
responsibilities, he is usually
an independent public
accountant, and generally a
representative of the company’s
independent auditing firm. The
statutory auditor may not be
an employee or executive of
the company. Each year, the
statutory auditor issues a report
stating whether the financial
statements have been prepared
in accordance with Mexican
GAAP. The statutory auditor
also determines whether the
company’s board of directors
has informed the shareholders
of all significant matters.
Professional auditing standards
require that a public accountant
acting as a statutory auditor
rely on an annual examination
conducted in accordance
with generally accepted
auditing standards.
All Mexican corporations
must maintain detailed
accounting records in Spanish
using Mexican pesos and in
accordance with Mexican
GAAP. Mexican companies
must maintain the following:
• a general ledger;
• a general journal;
• an 'inventories and trial
balances' record;
• historical minutes of
board of directors’ and
shareholders’ meetings;
• a record of investments
in shares;
• a record of debts held in foreign
currency, credits and cash; and
• a record of registered shares.
The principal books and
records, together with all
supporting documentation,
must generally be maintained
at the official domicile of the
business and remain available
for 10 years.
The Mexican Corporations Act
and the Income Tax Law only
include general accounting
requirements and do not
specify the form or content
of the books and accounts
that a company must maintain.
Each company is required to
keep the records necessary
to support the amount of
gross income, deductions and
tax credits contained in the
taxpayer’s Mexican income
tax return on an accrual basis.
Management determines the
exact form of the records.