Audit Quality: A Globally Sustainable Approach - EY
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Audit Quality: A Globally Sustainable Approach
Contents
EY structure and governance 03
Foreword
Mark A. Weinberger 04
Felice Persico 05
Viewpoint
David Thorburn 06
Introduction
Driving a culture of audit quality 07
Tone at the top 08
World view 16
10
Strengthen people capabilities
By strengthening the capabilities of all our people, we are able to better equip them with the tools to
provide high-quality audits, and by showing how much we value them, we are in a better position to attract
high-quality new recruits.
18
Simplification
The simplification of our Global Audit Methodology tools, processes and enablers is an ongoing process
that is continually updated and refined so that all our audits worldwide benefit from consistency of approach,
while also being tailored to individual requirements.
22
Audit technology and digital
Our enhanced global audit platform, encompassing EY Canvas, EY Helix and EY Atlas, provides our auditors with
a suite of technology tools to aid them in their work, which increasingly adopts an analytics-driven approach.
28
Accountability, enablement and quality support
The system of reviews and rewards we have established encourages our auditors to take personal and professional
pride in producing their best work, which we support and monitor so that all our audits are of high quality.
02 Audit Quality: A Globally Sustainable Approach
Americas EMEIA Asia-Pacific Japan
10
Regions
31 11
Countries Regions
98 5
Countries Regions
22 1
Countries Region
1
Country
EY structure and governance
EY is a global leader in assurance, tax, client service by member firms worldwide. The streamlined structure allows EY
transaction and advisory services. The member firms’ obligations and member firms to further enhance their
Worldwide, around 250,000 people responsibilities are governed by the provision of consistent, exceptional client
in member firms in more than 150 regulations of EYG and various service worldwide, with the Executive
countries share a commitment to building other agreements. coordinating a global approach to strategy,
a better working world, united by shared quality, risk management, business
values and an unwavering commitment to The Global Governance Council is the planning and priorities. It allows for
quality, integrity and objectivity. In today’s main oversight body of EYG. It comprises greater stakeholder focus in the 27
global market, EY’s integrated approach is one or more representatives from each Regions, permitting member firms to build
particularly important in the provision of Region, other member firm partners as stronger relationships with clients and
high-quality, multinational audits. representatives and up to six independent others in each country and be more
non-executives. responsive to local needs.
EY refers to the global organization, and
may refer to one or more of the member The Executive layer of EY’s operating The Global Vice Chair, Professional Practice
firms of Ernst & Young Global Limited model includes the Global Executive works directly with the Area Professional
(EYG), each of which is a separate legal (GE), its committees and teams. The Practice Directors (PPDs) to establish
entity. EYG, a UK company limited by GE combines leadership from our four global audit quality control policies and
guarantee, is the central entity of EY. Areas — the Americas, EMEIA (Europe, the procedures. Area PPDs are overseen by the
It does not provide services to clients. Middle East, India and Africa), Asia-Pacific Global PPD and the Area Assurance Leader,
and Japan — and four service lines — while the Global Vice Chair, Professional
EYG coordinates the member firms and Advisory, Assurance, Tax and Transaction Practice is overseen by the Global Vice
promotes cooperation among them. Its Advisory Services (TAS). This creates Chair, Assurance. This helps provide
objectives include promoting the an accountability matrix, strengthening greater confidence as to the objectivity of
provision of exceptional, high-quality global while empowering local. audit quality and consultation processes.
Audit Quality: A Globally Sustainable Approach
03
Foreword
Building a better
working world
with Sustainable
Audit Quality
Mark A. Weinberger
Global Chairman and CEO, EY
H
igh-quality audits create trust and confidence in the capital
markets and facilitate economic growth. Providing high-
quality audits helps us at EY to fulfill our purpose of Building
a better working world.
The Sustainable Audit Quality (SAQ) program, our commitment
to conducting globally consistent, high-quality audits sustained
over time, is making a difference. It ensures that we have the right
tone from the top and clear accountability across EY. Through the
six components of SAQ, we have introduced common technology,
methodologies and approaches to training and evaluating our people.
Since we introduced SAQ, there is greater consistency in our audit
execution, and our internal and external inspection results are
improving. While we are proud of the progress that has been made,
we will always have more to do to improve our work.
At EY, we want to be known for audits that consistently exceed
regulatory benchmarks. By doing so, we provide greater transparency
to investors and the markets. We also embrace innovation to evolve the
audit and offer more insights to audit committees and company boards.
Audit Quality: A Globally Sustainable Approach demonstrates our
commitment to this cause. I hope you enjoy reading about the
improvements we have made and our plans for the years ahead.
“We want to be
known for audits
that consistently
exceed regulatory
benchmarks.”
04 Audit Quality: A Globally Sustainable Approach
Our mission: to be
the highest-quality
audit organization
in the profession
Felice Persico
Global Vice Chair, Assurance, EY
A
lot has been accomplished since EY launched SAQ in 2015
as a strategic program focused on improving audit quality.
The changes introduced through SAQ have required
significant investment and created a positive change for
our people and the companies we audit.
Over this period, we have globally deployed EY Canvas, our online
audit platform; introduced the EY Canvas Client Portal; established
our Global Audit Quality Committee; developed a network of
seasoned professionals as our Quality Enablement Leaders
(QELs); implemented the Milestones project management
program; transformed our root-cause analysis program; and
launched a number of other global initiatives.
SAQ demonstrates our commitment to keeping audit quality as
our primary focus. It is the single most important factor in our
decision-making, and the key measure on which our professional
reputation stands.
SAQ is making an impact, and we are already seeing improvements in
our audit quality results. Our mission is to be the highest-quality audit
organization in the profession. We are proud of the progress that has
been made and know that our efforts are ongoing.
This publication details the approach we have taken on each of the six
components of the SAQ agenda: tone at the top, strengthen people
“SAQ is the single capabilities, audit technology and digital, enablement and quality
support, simplification, and accountability. It shows the extent of
most important the culture change program on which we have embarked.
factor in our All our people are having to learn new ways of working. They are
embracing innovation and harnessing the power of new technologies
decision-making, such as data analytics, robotic process automation (RPA),
blockchain, artificial intelligence and machine learning.
and the key We cannot stand still. As this publication demonstrates, continuous
measure on which improvement is fundamental to the way we operate and quality is
key to our culture.
our professional
reputation stands.”
Audit Quality: A Globally Sustainable Approach
05
Viewpoint
Serving the public interest
David Thorburn
on behalf of the EY Independent Non-Executives
A
t its heart, auditing exists challenge management and make sure that audit failings or if problems arise in a
to serve the public interest. this well-intentioned initiative stands up to particular location, we will dig deeper.
The expectations of all our scrutiny. We are pleased to say that there Where there are failings, we will seek
stakeholders, as to the quality is clear evidence of a strong tone from the assurances on the root-cause analysis,
of our work and the consistency of our top, good commitment at all levels and remedial action taking place, and learnings
execution, have never been higher. So, in substantial resources being devoted to being transferred across the global network.
our role as Independent Non-Executives the initiative.
(INEs), we want to be certain that quality We meet regularly with leadership and
is EY’s first priority. We also welcome the global approach, which discuss these key topics, which include
allows the use of standardized processes, the progress against the IFIAR goals. The
Since June 2016, I have been an INE on language, systems and internal reporting. INEs’ priority in the coming year will be
the Global Governance Council (GGC), Therefore, continuing to strengthen to monitor the execution of SAQ and the
EY’s main oversight body. There are up to consistency of execution across the network organization’s progress with audit quality
six individuals who are INEs. Sir Richard is critical to achieve its objectives. results across its international network.
Lambert stood down in April 2017, due to
expiring terms, and I have taken over his role Audit quality, of course, is not just a priority We have been pleased to see EY’s
as chair of the Public Interest Committee for EY. There is pressure on this issue commitment to SAQ as a foundational
(PIC), which is a subcommittee of the from a variety of important stakeholders, element of its culture and its push to
GGC. I also chair the UK member firm’s including investors, politicians, the public develop a market-leading global digital audit.
INE Oversight Committee, which focuses and the media. It is the primary focus of This is vital for EY’s long-term success and
on the implementation of the FRC’s Audit attention in the regulatory environment, its ability to meet the expectations of the
Firm Governance Code. with bodies such as the International Forum public, politicians and regulators in relation
of Independent Audit Regulators (IFIAR) to audit quality.
The PIC is primarily concerned with setting challenging targets for improved
overseeing audit quality in the global inspection results. David Thorburn is a member of the EY GGC
organization. Of course, serving the public and chairs its Public Interest Committee
interest extends beyond audit quality — It is pleasing that EY’s internal targets on and the UK member firm’s INE Oversight
incorporating ethics and whistleblowing, audit quality go beyond the goals set by Committee. He is also an External Member
for example — but quality is first among IFIAR and other regulators. Organizations on the Bank of England’s Prudential
equals. EY’s SAQ program is its vehicle for such as EY should have their own risk Regulation Committee, and was previously
confirming that there is a globally consistent appetite, their own quality standards, the Chief Executive of Clydesdale Bank
approach to delivering high-quality audits and should draw the line where they and Yorkshire Bank.
and it is the principal focus of the PIC. think appropriate.
SAQ is a tremendously important initiative The INEs will be examining EY’s
for EY and the INEs have a responsibility to performance closely. If there are recurrent
06 Audit Quality: A Globally Sustainable Approach
Driving a culture
of audit quality
Steve Konenkamp
EY Global Deputy Vice Chair, Assurance
I
n no other time in my 36-year career explained in more detail in the later chapters
have I seen EY as focused on providing of this publication:
high-quality audits. Our organization
has embraced the EY SAQ program Tone at the top: the internal and external
and is fulfilling our commitments to messages on quality that the EY leadership
the companies we audit, the investing team send, including from our audit partners.
community, regulators and society. This is the most important element of
continuously building our culture of
SAQ was launched in 2015 and is audit quality.
our globally consistent approach to
implementing a high level of audit quality. Strengthen people capabilities: specific
As outlined elsewhere in this document, a initiatives that support our auditors in
number of changes have been made and devoting time to performing quality work.
initiatives launched as part of SAQ. The This covers recruitment, retention, learning
launch of our suite of technology tools has and workload management. It also includes
been fully embraced by our audit teams consideration of the type of skills and
across the world and provides a platform capabilities we need now and into the future.
for significant change in the years ahead.
This leading-edge technology is allowing us Simplification: how we are simplifying and
to better execute and monitor our audits. standardizing our methodology, forms,
templates and checklists to improve the quality,
Our goal is to have a culture where quality consistency and efficiency of our audits.
is always the most important focus area for
our auditors. SAQ is the highest priority for Audit technology and digital: our
our Assurance service line — above any other investment to improve the audit process
program that we have launched — and it is through the use of the latest technology.
driving the ongoing focus on our culture and In addition to our online audit tools, this
how we better execute to deliver the highest involves evaluating emerging technologies
quality audits in the profession. such as drones, artificial intelligence,
robotic process automation and blockchain.
SAQ has been important in improving
our results in both internal and external Enablement and quality support: how we are
inspections. We are on course to do our part helping teams to manage their responsibility
in achieving the target set by IFIAR of a 25% to provide quality. This includes efforts to
reduction in “deficient audits” — audits with support them through coaching, root-cause
at least one significant inspection finding — analysis, the Milestones project management
by 2019. program, the network of Area and Regional
QELs and the Global Audit Quality Committee
Our long-term internal goal is for the (GAQC) and its Area equivalents.
percentage of audits globally that are
“Our goal is to have classified as less than satisfactory to be
in the single digits. We need to improve
Accountability: each of our partners
involved in executing audits is accountable
a culture where further the consistency of our execution
and continue to raise performance. As the
for the provision of high-quality work, and
our Assurance leadership is accountable
quality is always name SAQ suggests, long-term “sustainable”
improvement is our ambition.
as well. We have reviewed our reward and
recognition initiatives and enhanced our
the most important accountability framework.
We are making progress on each of the
focus area for six components of SAQ and overall it is Quality is and will continue to be our priority.
We will build on the progress made so far and
our auditors.”
driving enhancements to our culture. Each
component is briefly summarized here and report back in future issues of this publication.
Audit Quality: A Globally Sustainable Approach
07
Leadership
Tone at the top
We believe it is important to set the right
tone from the top by establishing and
established a global Culture and Behaviors
task force, to drive change management “We believe that
maintaining a culture that is underpinned
by high-quality, effective risk management
and instill expected behaviors. It is critical
that our stakeholders view EY as the by asking the
and continuous improvement. Such
a culture fosters an environment of
leading audit organization in terms of a
quality culture, and we are developing a
right questions,
confidence, trust and pride which, in
turn, enhances mutual accountability
number of initiatives to make this happen.
our auditors
and develops high-performing teams. The task force meets regularly and
includes representatives from Assurance
can serve the
This is the reason that “tone at the top”
is the first component of SAQ and why
leadership, talent, communications and
internal and external behavioral change
public interest.”
we place great emphasis on culture, professionals. It is currently developing
consultation and communications. a mentorship scheme, to be led by our
QELs, and a communications program
By “the top,” we do not just mean the building on our existing “What we do
Global Chairman and Chief Executive or matters” campaign.
the Global Vice Chair for Assurance. The
messages sent by almost 4,000 audit We believe that by asking the right
partners across the globe are equally questions, our auditors can serve the
essential to maintaining a culture that public interest, and thereby help build
is focused on quality. businesses, boost local economies and
support communities.
Cascading this tone from the top will
help our people understand that shared EY’s approach to business ethics and
values and commitment to quality are integrity is embedded in our culture
central to everything that we do at all of consultation and our internal
levels of the organization. communications. Senior management Our leaders say…
regularly reinforces the importance of
Using root-cause analysis, we have performing quality work, complying with
“We have more than
identified the key behaviors necessary professional standards, reviewing audit
evidence skeptically, adhering to policies
100,000 engagements
to carry out a quality audit and have
and leading by example. worldwide and more than
70,000 auditors. Our people
Our culture supports a strong need are continually learning
for collaboration and places special new ways of working.”
emphasis on consultation when dealing
with complex or subjective accounting, Don Zimmerman, EY Global Vice
auditing, reporting, regulatory and Chair, Professional Practice
independence matters.
To reinforce the importance of quality,
we have also produced an internal
publication outlining the governance
structure for quality at EY, which includes
biographies of more than 100 key people.
The second edition of Audit Quality at EY:
Governance Structure was published in
August 2017. Our governance structure
promotes consistency, accountability
and transparency.
Our guiding principle is that no client
is more important than professional
reputation — the reputation of EY and
that of each of our auditors.
08 Audit Quality: A Globally Sustainable Approach
Viewpoint
It’s all in the detail
As such, our commitment to EY Canvas incorporates This is where our network
quality is unwavering. our Milestones project of QELs has been so
management program, important. The QELs are
SAQ is the means by which which has been broadly senior Assurance leaders
we achieve excellence. deployed since 2016 and who provide on-the-
Since launching SAQ in helps improve timeliness ground support to our
2015, we have experienced and efficiency. engagement teams.
significant progress. EY’s
internal and external Root-cause analysis shows In the past 18 months,
inspection findings globally that poor project management we have established QELs
are showing improvement, is associated with quality in every EY Region and
and we are producing greater deficiencies. Milestones have created the GAQC
Don Zimmerman, consistency in execution. addresses this head-on, and to consider strategy and
EY Global Vice Chair, introduces greater discipline policy decisions.
Professional Practice Our ability to provide into the audit.
consistency is based in part EY Canvas, Milestones, the
on the use of EY Canvas, our Embedding EY Canvas and QELs and the GAQC are all
online platform. EY Canvas Milestones globally has been crucial elements in driving
Details matter. The way we was deployed broadly in 2015 a major undertaking. We improvements to our audit
carry out our audit work, the and is now used globally on have more than 100,000 quality. They have been
way we document it and the our audits. It streamlines our engagements worldwide and a big part of our SAQ
way we check it matter. communications through an more than 70,000 auditors. efforts, and continue
integrated portal and enables Our people are continually to keep us on top of
EY is in the detail business. us to provide a seamless audit. learning new ways of working. the detail.
Sustainable Audit Quality
A series of initiatives across six components
Tone at the top
Strengthen people Audit technology Enablement Simplification
capabilities and digital and quality support
Accountability
Audit Quality: A Globally Sustainable Approach
09
Strengthen people
capabilities
To provide high-quality audits, we need forever or return to us at a later date, our
high-quality people. As a result, EY is aim is to ensure that they are constantly
committed to attracting, recruiting, developing during their time with us.
developing and retaining outstanding
audit professionals. We invest in our people by offering them
a broad range of opportunities to enhance
These audit professionals must be their professional skills and personal
knowledgeable and skilled at what they development. Alongside this, they benefit
do. In addition, we need them to act with from award-winning learning, as well
“We invest in our integrity and to demonstrate appropriate
behaviors, such as curiosity, good
as coaching and mentoring designed to
help them achieve their full potential and
people by offering judgment and professional skepticism.
We place a lot of emphasis on supporting
enjoy enriching career experiences. Our
approach is summed up in EY’s people
them opportunities our people to develop these skills and make
the most of their abilities throughout their
value proposition: “Whenever you join,
however long you stay, the exceptional
to enhance their career journey. EY experience lasts a lifetime.”
professional skills We understand that not everyone who joins
EY does so with the intention of staying
Attracting and recruiting
Recruitment is the first step in the process
and personal with us for their entire career. Nevertheless, of developing high-quality auditors.
whether they stay with us for a few years All around the world, we have rigorous
development.” or a few decades, whether they leave us selection processes in place so that we
10 Audit Quality: A Globally Sustainable ApproachStrengthen people capabilities
recruit bright people, with the right team will include more professionals who
attitudes and behaviors, who will excel have, for example, deep sector knowledge
in the audit profession and drive our and data analytics experience. There
Our leaders say…
organization forward. will continue to be a focus on all auditors
acquiring and improving analytical skills, “Our work with different
We are looking to recruit people who while the need for business acumen, sectors helps EY
have broader skills and backgrounds. In strong communication and project professionals to develop
addition to the core accounting graduates management skills will increase. deep industry knowledge
we have recruited in the past, we are and ensure that we have
looking for people who can interrogate The learning and development that the right people on the
data and competently handle technology. our people receive is delivered to a right engagements.”
Regardless of their subject background, consistently high standard so that we
we expect the same high standards of all produce auditors of equally high caliber
Alison Kay, EY Global Vice Chair,
our recruits, including integrity, strong in every market in which we operate.
Industry
business acumen and leadership potential. We focus on equipping them with the skills
and technical knowledge they will need
As audit becomes more analytics-driven, to become effective auditors who are
we are recruiting from an increasingly recognized for their sound judgment
diverse talent pool. We now seek out more and professional skepticism.
individuals with a background in science,
technology, engineering and mathematics The Audit Academy
(STEM) for our audit teams, as well as EY has invested significantly in developing
those who graduated with an accounting the Audit Academy, which offers a
degree. Students from STEM disciplines consistent audit-training program for
have not traditionally been aware of career all of our people across the world.
opportunities in audit, so we need to make
sure they see us as an attractive employer. We take the learning and development of
We are working hard on campuses to raise our people very seriously and delivered
awareness of our brand, and the roles and more than 6.4 million hours of learning
opportunities available within Assurance. across Assurance services during 2016.
For example, we recently launched the
Thanks to the Audit Academy, everyone
across the practice has access to a
“Whenever you
@eystaycurious campaign on Instagram,
highlighting where STEM skills fit into the
consistently high standard of training. join, however long
audit. In 2017, we made Universum’s top
50 employers for engineering students for
We have been reviewing and modernizing
our audit curriculum by reducing
you stay, the
the first time, so our efforts are starting traditional, lecture-based classroom exceptional EY
to have the desired impact. education that involves the transfer
of knowledge from a facilitator experience lasts
a lifetime.”
We believe that the increasing complexity to participants. Our learning now
of businesses will mean that the audit incorporates a blend of on-demand
EY Assurance recruitment FY17
52%
female and
48%
male hires
Audit Quality: A Globally Sustainable Approach
11video- or web-based learning, classroom-
based activities focused on the
application of concepts and principles,
and reinforcement material that can
be used in the field.
In the classroom, people are given
technology-enabled simulations and
case studies, and work on them in small
groups, in the same way as they would in
an audit. This blend of learning is intended
to teach our auditors not just what to
think, but also how to think, since they will
be developing the deep, critical thinking
skills, professional skepticism and business
acumen that are essential to providing
high-quality audits.
The Audit Academy has now been
deployed to our managers and seniors,
with a new program for the rest of our
people being deployed in 2017.
In order to understand the impact of
the Audit Academy on audit quality
and other criteria, EY has measured
the effectiveness of the programs by
interviewing more than 340 participants,
Number of audit professionals and a selection of their managers and
class facilitators.
FY17 FY16 FY15 Overall, 86% of those who attended the
Audit partners 3,916 3,880 3,739 training said it was highly relevant to their
Executive directors, senior 12,519 12,081 11,564
work, and 91% said they had, or intended
managers and managers to, put the learning into practice. Of those,
92% could demonstrate how this had a
Seniors and staff 54,904 51,223 48,624
positive impact on their engagement.
Total 71,339 67,184 63,927 These results generally fall within the top
Ratios of partners to other quartile of results for learning programs
17.22 16.32 16.10
audit professionals at comparable organizations.
To date, the Audit Academy has won
six industry awards in recognition of its
success. However, we will invest further in
Retention of audit professionals enhancing our curriculum as part of our
continuing commitment to audit quality.
FY17 FY16 FY15 Engagement
Total 79.1% 78.4% 76.8% Research carried out by EY has found
that there is a strong correlation between
Source: EY
engagement and retention. Those Regions
that engage with their people effectively
do benefit from higher retention. So we
monitor engagement closely. Every year,
we conduct a Global People Survey, which
allows us to assess the engagement levels
of our people.
Our most recent survey, conducted in 2017,
found that nearly three-quarters (72%) of
people in the Assurance service line had a
12 Audit Quality: A Globally Sustainable ApproachStrengthen people capabilities
favorable attitude in terms of engagement,
the same proportion as in 2015. Viewpoint
In addition, the survey highlighted that
our people feel overwhelmingly proud to
work for EY. We consider these results to
The future of Talent
be a significant achievement given that
the expectations of new joiners to the We concluded that the audit
workforce are rising all the time. professionals of the future will be
creative and curious individuals who
One of the ways we engage with our are confident using both established
people is through EY’s purpose, which is to and emerging technologies. They
build a better working world. We translate will be great communicators
this overall purpose into an audit context and have strong interpersonal
by explaining that what our people do skills so that they can easily build
helps to increase confidence in the capital trust-based relationships with
markets. We want them to be proud to stakeholders. Business acumen,
be auditors, which is why we participate professional skepticism, an
globally in the #AuditorProud social media analytical mindset and the ability
campaign. In 2016, we had the largest to interrogate large data sets will
voice globally, with a 41% share. also be critical to their success.
Karen Hochrein, EY Global
We also engage with our people in many Assurance Talent Leader Finding individuals who fit this
other ways. One example is through profile is no easy task. That’s
“Counseling Families”: small groups of why we will need to diversify our
around 25 people who meet on a quarterly recruitment to attract different
basis. These meetings are an opportunity Technology presents us with a skillsets, such as individuals from
for leaders and teams to connect and unique opportunity to raise the science, technology, engineering
drive two-way communication, as well as attractiveness of the auditing and mathematics disciplines.
an opportunity to recognize and celebrate profession to a broader talent Less routine tasks will result in
achievements. It is through these teams, pool. Advances in analytics, more valuable experiences for our
and our audit teams, that we engage our artificial intelligence and robotic people, enabling them to accelerate
people in our purpose and their role in process automation mean their career. In parallel, we will
protecting the interests of investors. Our that certain tasks traditionally continue our focus on improving
Global People Survey (GPS) proved the associated with auditing will engagement and retention by
effectiveness of our Counseling Families, be reduced. Instead, auditors providing exceptional experiences,
since people who belonged to a working will increasingly be engaged in learning and coaching. We are
Counseling Family were between 4% and activities that provide value- also ready to bring in contingent
7% more engaged. adding insight, innovation and workers with specialist expertise
challenge, resulting in better- as and when the need arises.
In addition, we realize that clarifying quality audits and enhanced
people’s career paths has an impact on career experiences for our people. This is a very exciting time to be
engagement, so we have created career the EY Global Assurance Talent
framework documents for every rank. EY has invested considerable time Leader. Our profession is currently
These explain what the organization and resources in evaluating the undergoing a transformation that
expects at each level and what learning skills that the audit professional I have not seen in my professional
and experiences people can undertake of the future will need, taking lifetime, enabling us to provide
to develop themselves. account of a variety of factors even higher-quality audits while
that are impacting our workplace. providing our people with more
As part of this commitment to clarifying These include digitalization, opportunities to grow and develop
career paths, we also focus on “experience regulators’ changing demands, in ways never previously imagined.
management” across the world. We clients’ expectations for auditors to The audit profession of the future
have changed the emphasis of our teams have increased sector knowledge will certainly be quite different
that assign people to audits so that it is and the fact that the number of from the audit profession of today.
less about assignment and more about complex, multi-location global I, for one, can’t wait to play my
experience management. It is their audits will continue to rise. part in it.
responsibility to confirm that our people
are scheduled onto engagements where
they can use their skills and competencies,
and which help them to develop new skills
while supporting the needs of EY.
Audit Quality: A Globally Sustainable Approach
13Managers and above in audit have identified discuss what we can do to improve their performance and their pay, or fostering
a primary and secondary industry sector to day-to-day experience. an environment where they have the
gain experience in. By developing in-depth flexibility they need to succeed.
knowledge of their clients’ sectors, they are We have introduced a retention database
better able to understand the risks involved that provides sophisticated reporting on Flexibility is more important today than
in the entities we audit. how we are retaining high performers and it was in the past, since it is especially
new hires, and what the push/pull factors prized by the Millennial generation that
Another important way in which we will for leavers are, at both a country and a forms a key part of our workforce. It is also
be engaging with our people is through regional level. We also have a globally critical to retaining audit professionals with
LEAD, our new leadership, evaluation aligned retention taskforce and regional parental or other caring responsibilities.
and development system designed for retention goals, and we advise our leaders
all EY professionals. This system, which on how they can personally help to retain In our messages to our people, we
supports performance development and talented individuals within EY’s audit highlight the huge variety that comes
encourages frequent feedback, received practices. This may mean encouraging with a career in audit — they get to work
very positive responses during the pilot their people to strive to become senior with a variety of enterprises, carrying
and led to higher engagement levels. It managers, recognizing them for the out different roles, in different locations,
is being rolled out globally in 2017. contributions that they make, helping them within different teams and for different
to better understand the link between their managers — this variety helps them to
Retention rapidly build a set of invaluable skills that
Annual turnover in audit for EY is would be significantly harder to acquire
around 21% globally. Since we know in another environment.
that retaining good people is critical to
maintaining audit quality, we have made
“Flexibility is prized Mobility and workload
retention a priority, particularly in our
“attrition hotspots” (areas of the world
by the Millennial management
Our resourcing strategy supports audit
where the turnover rate is higher than
we would expect). We work with local
generation that quality by ensuring that we have the right
people, with the right skills, in the right
teams to agree action plans and engage forms a key part place, at the right time. At one end of
of our workforce.”
with our people to improve retention; the spectrum, this may entail relocating
for example, by running focus groups to a leader with in-depth financial services
14 Audit Quality: A Globally Sustainable ApproachStrengthen people capabilities
knowledge to a member firm across the
world in order to support a banking audit.
We have also charged all our senior leaders
with planning for their succession. There is “Our resourcing
At the other end, we may support audit
teams by arranging for one of our Global
a big emphasis on diversity as part of this
succession planning — in terms of achieving strategy ensures
Talent Hubs (support centers in India, the
Philippines and other locations) to handle
the right balance between leaders from
mature and emerging markets, as well
that we have the
some of the work associated with an audit. as the right gender balance. We are
focused on promoting more women into
right people, with
We also have dedicated mobility programs
in place for our high-potential people,
senior positions and on giving the right
development opportunities to potential
the right skills,
which help them to become better auditors
of international clients. Our New Horizons
future leaders. in the right place,
program offers placements that are
three to six months long, while our Global
We promote an inclusive environment
where difference is encouraged, enabling
at the right time.”
Exchange Program offers placements of us to recruit and retain a diverse
between 18 months and two years. workforce. Whenever we are considering a
proposal, we ask ourselves whether this is
Although audit is gradually becoming less “preference, tradition or requirement” to
seasonal, our auditors still have peaks help us promote an inclusive approach. In
in their workloads. We recognize that addition, considerable effort is undertaken
a flexible approach works for both EY by the Regions, including the establishment
and our people. We encourage teams to of network communities and the training
discuss individuals’ flexibility needs at the of our leaders to highlight and counter
start of every engagement and to support unconscious bias. These activities are
one another in ensuring that these needs working — in the 2017 GPS survey, 72%
are met. In the Americas, for instance, we of our people responded favorably to
have a program for some professionals the statement: “EY provides a work
who only want to work at certain times of environment where I feel free to be myself.”
the year. We have also instigated programs
to better phase the annual audit cycle to Awards
improve workload and quality. At EY, we are committed to continually
Our leaders say…
improving the working environment for all
In every Region, the Assurance service our people around the world. As a result of
line works closely with its talent leader, our efforts, the organization and member
“Our profession is currently
who is responsible for overseeing the firms regularly feature on rankings of undergoing a transformation
talent agenda. Their overall objective is to “best places to work” around the world. that I have not seen in
develop first-class audit professionals and my professional lifetime,
they focus on areas such as onboarding Here are some examples of where we enabling us to provide even
of new recruits and managing individual have featured: higher-quality audits while
client portfolios, as well as ensuring providing our people with
attendance at learning events. The __DiversityInc Top 50 Companies for more opportunities to grow
different Regions also work closely Diversity (2017) — ranked 1 and develop.”
to develop the global talent agenda __DiversityInc Top 15 Companies for
and contribute to projects such as the Mentoring (2017) — ranked 1
Karen Hochrein, EY Global
Assurance Professional of the Future. __Universum’s Most Attractive Employer
Assurance Talent Leader
rankings — Business (2017) — ranked 4
Diversity and inclusiveness __Sunday Times 25 Best Big Companies
Diversity is an important component of to Work For (2017) — ranked 17
high-quality audit teams, since different __The World’s Best Multinational
people are attuned to different risks. We Workplaces (2016) — ranked 21
have focused on promoting gender diversity __Fortune 100 Best Companies to Work
within our audit teams over recent years. In For (2017) — ranked 29
2017, 31% of our new partners in Assurance
around the world were female, compared As mentioned above, EY won six awards
with 30% in 2016. EY has a proactive for the Audit Academy in the 2016
strategy toward female audit professionals. Brandon Hall Group Human Capital
We identify women at key transition points Management Awards, which recognize
during their career at EY — for example, at excellence in the learning industry. A
manager and senior manager levels — and further six Brandon Hall awards were
connect them with our senior leaders, given to learning programs in other
both male and female. parts of the organization.
Audit Quality: A Globally Sustainable Approach
15World view
Frank Mahoney Jean-Yves Jégourel
EY Americas Assurance Leader EY EMEIA Assurance Leader
SAQ is part of our core teams; and a number of My goal is for EY to have the The Audit Quality Committee
culture at EY. It’s how we mobile apps. highest-quality audits in the has also been established
operate, central to daily profession. This is essential at EMEIA level. This is
activity, and embedded in Our Statutory Audit Center to support our ambition to chaired by the Area QEL and
our people from the day of Excellence has also been be a market-leading brand includes me and other senior
they join us and throughout an important technological and to respond to our Area Assurance leaders,
their careers. innovation. This provides purpose of building a better plus representatives from
coordination and support for working world. operations, talent, technology
We are automating, statutory audits, allowing us and Professional Practice.
simplifying and freeing audit to track their status and spot One of our strategic We examine the trends and
teams from administrative trends and inconsistencies. initiatives in EMEIA is to situations that might affect
tasks, so they can instill SAQ as a foundational quality and discuss any
concentrate on higher-risk And, of course, we are element of the EY culture. operational activities that
or more complicated areas. supporting our people To help us achieve this, we could be changed.
With businesses evolving through the QEL network. continue to work closely
faster than ever before, our They have evolved from a with our regulators. Overall, In some countries we have
auditors need to be more responsive network focused we are on track to improve run quality days. These are
nimble. We should be more on inspection support and our quality measures over one-day seminars bringing
focused on the future and coaching to a proactive previous years, but we together the audit executives
on risk elements resulting group engaged in front-end acknowledge that we can of the practices to discuss
from changes to the business risk assessment. always do better and will audit quality. We also invite
model, the economy and continue to strengthen our the local regulator, so
the business environment. All these developments have investment in quality. they can be involved in the
helped to boost audit quality. discussion and witness the
Advances in technology, like The impact can be seen in We have now moved from tone from the top.
the EY Canvas online audit our improved internal and concept to reality in our
tool, are not just supporting external inspection results execution of SAQ. A common Quality days have been an
our engagement teams, and in the reduced number methodology has been important innovation and I am
they are helping us to drive of restatements. We see a established for root-cause encouraging other countries
and manage our activities. direct correlation between analysis, the Milestones across EMEIA to run similar
EY Canvas is an innovative such metrics and the project management events. We won’t achieve a
tool that is used by audit SAQ program. program has been fully step-change in quality by
teams around the world. It implemented and we have ourselves. There is a common
incorporates Milestones, SAQ has changed how we supported the Simplification objective between us and
our project management operate and the way our Task Force (see page our regulators. The more we
program; a Client Portal, people function every day 19), with two senior audit collaborate, the more we can
allowing companies to on an audit. Quality is, and partners from EMEIA find solutions to problems,
provide data directly to audit always will be, our priority. involved in the project. and the more we can achieve.
16 Audit Quality: A Globally Sustainable ApproachWorld view
Edward Ho Hitoshi Matsuoka
EY Asia-Pacific Assurance Leader EY Japan Assurance Leader
Audit quality is of the audit quality. In many The foundation of an audit (AQCC), which monitors the
upmost importance. It sets respects, they can be seen organization’s social mission status of audits.
EY apart, supports our as an operational review as has been, and always will be,
reputation, and is my priority much as a quality summit. protecting capital markets To develop our people, we are
when I address both internal by providing confidence providing external training
and external audiences. The QELs have also been in companies’ financial sessions and other activities
an important initiative in statements. We have to be to help them understand the
One of the most significant Asia-Pacific. If we have constantly mindful of what thinking of a wide range of
SAQ initiatives in Asia- an audit quality issue, the public expects of us. stakeholders. We also transfer
Pacific has been our audit identified through a root- people between divisions
quality summits. These are cause analysis, then we To keep meeting the public’s and offices, and second them
one-day events, attended immediately have a network changing expectations, we to other service lines and
by all the audit partners in a of partners who can cascade need to embed a professional external organizations.
country. So far, we have run the appropriate message culture that encourages our
them in Malaysia, Indonesia, quickly. It is a powerful people to be open and to We have strengthened reviews
Thailand, Vietnam, Korea communications vehicle. exchange opinions, information of partner performance so that
and the Philippines. and knowledge across the evaluations are conducted
So is the Milestones project organization. We want change with a stricter assessment
We carry out a survey of audit management program — both to be seen in a positive light. of audit quality. Evaluations
partners to discuss quality at a global and Area level. for audit quality are discussed
issues two weeks ahead of In Asia-Pacific, we have To embed this culture, we and decided at the AQOB
each summit. Then we use focused on our top 100 have embraced SAQ, updated after a primary evaluation is
the results to determine the engagements, checking that our organizational structure, executed through the ongoing
agenda for the event. On the each audit is on schedule. improved our quality control monitoring of the AQCCs.
day, action points are collated This is now being extended system for audit work and
and an implementation plan to the top 200 engagements, strengthened our approach We launched the Assurance
developed. The Assurance and could be extended still to talent development Innovation Lab in November
Leader in the relevant further in the future. and evaluation. 2016, aimed at creating the
country is then asked to “Smart Audit of the Future” by
monitor and execute the The summits, QEL network We have established using technology such as data
implementation plan, with and Milestones program have a professional Culture analytics, artificial intelligence
support from the Area and all helped to maintain our Improvement Committee, a and blockchain.
regional QELs. focus on audit quality. We Public Interest Committee and
have established a strong an Audit Quality Oversight By capturing public
Every market is different, tone from the top and a Board (AQOB). Each of the expectations of us and
and the summits are a great supportive culture, which we seven divisions in Japan has adapting to change, we work
opportunity to discuss will continue to build on in the also established an Audit to deliver our social mission
particular ways to improve months and years ahead. Quality Control Committee as an audit organization.
Audit Quality: A Globally Sustainable Approach
17Simplification
As the world of accounting and auditing which creates additional work not only for
becomes more complex, the need for management, but also for auditors.
simplification becomes more pronounced.
The pace of standard setting — both We are also in the middle of implementing
accounting and auditing — continues to new auditor reporting requirements and
accelerate and the scope of regulatory expect some significant auditing standards
oversight is expanding. New accounting to be issued during the coming year.
standards relating to financial instruments,
leasing and revenue recognition are Since it takes many years to develop
changing the way that certain assets a senior member of an audit team,
and transactions are recognized, responding to this level of change
18 Audit Quality: A Globally Sustainable ApproachSimplification
“By converting
inevitably puts pressures on our resources. GAM is configurable to bring together the
We need to find ways to save our people requirements of the auditing standards
time so that they can be more productive
in the workplace, while enhancing their
and related guidance so that auditors
can obtain a customized version of the complexity to
knowledge and skills. By simplifying
the complex as far as possible, we are
methodology to apply to their audits; for
example, different versions for a group simplicity, we
supporting our teams to carry out better-
quality work. The less time they spend on
audit or an individual non-complex entity
audit. Our topic-based GAM includes all
are supporting
basic tasks, the more time they have to
focus on higher-risk matters.
the requirements of the International
Standards on Auditing (ISAs) and, when
our teams to
The simplification of our audit
needed, the additional requirements of
the Public Company Accounting Oversight
carry out better
methodology and associated guidance is
an important component of our strategy
Board (PCAOB) auditing standards. quality work.”
to deliver SAQ. Simplification underpins Our auditors can use links in EY Canvas to
efficient and effective audit processes that access GAM, to take them to EY Atlas and
are customized to the requirements of each directly to the part of the methodology that
individual engagement. It also supports is relevant in the context of their work.
consistency of processes on audits.
For example, if they are trying to
Where we have applied simplification document a client’s revenue process in
comprehensively and vigorously within EY Canvas, they can click on a link that
our network, we have already seen a
measurable improvement in audit quality.
Simplification Taskforce Case study
To maintain our focus on continuous
simplification, we have established a
Simplification Taskforce. This taskforce How I am providing audit quality
consists of practicing auditors from
across the world — a mix of partners, project management capabilities.
executive directors and senior managers. I depend on it to manage my
It is responsible for exploring the audits effectively.
processes, forms, RPA and project
management approaches that we People are also essential to delivering
use in our audits globally to find high-quality audits. EY has a very good
better, faster and more efficient people culture. I find it a rewarding
ways of working. environment where my efforts are
acknowledged and the partners take a
We recognize that the more we can keen interest in my career development.
standardize, the more we can free up our The partners also spend time with the
people to focus on the most important managers, providing them with on-the-
aspects of the audit and execute more job coaching as well as holding career
consistently across different locations. discussions with them every quarter.
Global Audit Methodology Nadij Panday, Manager, Since EY is a global professional
Our Global Audit Methodology (GAM) is Johannesburg, South Africa services organization, I am able to draw
what we use to interpret and apply both on the skills and experiences of people
the international and domestic audit right across our international business.
standards that exist in the jurisdictions When it comes to delivering quality This enables me to deliver quality
in which we operate. audits, effective project management is audit engagements that are of a high
as important as technical competencies. standard and meet the expectations
We simplified GAM in 2015, redesigning Sound project management means that of all stakeholders.
certain aspects of our methodology and audit issues can be identified early in the
changing the manner in which GAM is process and addressed adequately. For I believe that audit makes an important
presented. We hired external editors to this reason, it is essential to incorporate contribution to the business world and I
help us to write more clearly, concisely communication with the client into the value the experience that I have gained
and consistently and we made greater project management plan. EY Canvas, in the profession. I aspire to become a
use of interactive graphics to display our online audit platform, has excellent partner at EY one day.
the methodology.
Audit Quality: A Globally Sustainable Approach
19“We have gathered
takes them to the appropriate part of the methodology a user typically experiences
methodology that will provide guidance being reduced by more than 50%.
feedback from on that activity.
This is beneficial to all our auditors,
our practitioner Topic-based GAM is made even more
dynamic by the existence of on-demand
but particularly those for whom English
is a second language. Not only does our
community and “tips” and “examples” that are only
displayed once an interactive icon has
revised, topic-based GAM read very
well, it also translates more easily
acted on it to been clicked. A tip is a helpful suggestion
to auditors, whereas an example might
into multiple languages.
refine and be a practical explanation of how an audit
requirement can be met. This means that
We have also taken the approaches and
methodology from topic-based GAM
improve the auditors may first read the requirements
and guidance in the methodology and
and applied them to our new Assurance
Reporting Manual, which supports the new
user experience.” then click on the tips and examples when
they need more information.
auditor reporting, and will soon do the
same with our Assurance Policy Manual.
Other than GAM, these two manuals are
We regularly update both GAM and our the biggest auditing knowledge tools
associated forms and templates to reflect that our auditors use and they are both
new standards, emerging auditing issues contained within EY Atlas, along with
and practical experience, as well as to GAM. They will contain tips and examples,
respond to internal and external in the same way that GAM does.
inspection results.
Customization
As we have developed GAM, we have Our audit methodology includes profiling
gathered feedback from our practitioner functionality that means that it can be
community and acted on it to refine customized according to the requirements
and improve the user experience — for of a particular audit.
example, by adding a new topic or better
clarifying an existing one. Following its For example, where appropriate, it can
revision, GAM is more accessible and be customized according to whether an
easier to understand, with the volume of audit is of a complex or a non-complex
Case study
How I am providing audit quality
I believe that audit quality must also appreciate the of the knowledge I have. I
is about understanding the wider context behind it. also like being able to teach
why and how of what we the people in my team and
are doing. We can follow What I enjoy most about being helping them to grow.
procedures, but if we don’t an auditor with EY is that I
understand why we are am always learning — whether EY is a large organization
following them, then we that’s to do with a new client, a that offers a wide variety
won’t uncover the most new audit or a new accounting of career experiences. I
important issues. requirement. There’s always have found that EY leaders
an opportunity for me to grow. are always willing to listen
To gain that understanding, to my interests and they
we need to know our clients’ I can’t think of another support me to seek out new
Rachel Morales, Manager, business, their industry and profession where, five years challenges. I find our new
Houston, US the standards they must in, I would be meeting with analytics tools particularly
abide by. It’s not enough to CFOs and other directors and exciting and I am looking
look at individual transactions they would be listening to forward to making even more
or documentation; we what I have to say because use of them in future.
20 Audit Quality: A Globally Sustainable ApproachYou can also read
