Transparency Report 2020 - EY Nigeria
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Transparency Report 2020 EY Nigeria
Contents Message from the Country Managing Partner and the EY Nigeria Assurance Leader ............................. About us .......................................................................................................................................... 3 Legal structure, ownership and governance ..................................................................................... 5 Network arrangements .................................................................................................................. 6 Commitment to Sustainable Audit Quality ......................................................................................... 8 Infrastructure supporting quality .................................................................................................... 8 Instilled professional values ............................................................................................................ 9 Internal quality control system ..................................................................................................... 11 Client acceptance and continuance ............................................................................................... 12 Performance of audits ................................................................................................................. 13 Review and consultation .............................................................................................................. 15 Rotation and long association ....................................................................................................... 16 Audit quality reviews ................................................................................................................... 16 External quality assurance review ................................................................................................. 17 Compliance with legal requirements .............................................................................................. 17 Independence practices .................................................................................................................. 19 Continuing education of audit professionals ..................................................................................... 21 Revenue and remuneration ............................................................................................................. 22 Financial information ................................................................................................................... 22 Partner remuneration .................................................................................................................. 23 Appendix 1: List of PIE audit clients ................................................................................................ 24 EY Nigeria PIE audit clients........................................................................................................... 24 Appendix 2:.................................................................................................................................... 25 2 | Transparency Report 2020: EY Nigeria
Message from the
Country Managing
Partner and the
EY Nigeria Anthony Oputa Jamiu Olakisan
Managing Partner EY Nigeria Assurance Leader EY Nigeria
Assurance Leader Welcome to the Transparency Report 2020 of EY Nigeria. We believe that how
we advance sustainable audit quality, manage risk and maintain our
independence, as auditors should be transparent to our stakeholders. We value
regular dialogue, and this report is one of the ways in which we update our
stakeholders on what we are doing in each of these areas.
Executing high-quality audits continues to be our top priority and is at the heart
of our commitment to serve the public interest. It enables us to grow the global
EY network successfully and responsibly, while achieving our purpose of building
a better working world. Auditors play a vital role in the functioning of capital
markets by promoting transparency and supporting investor confidence.
Companies, regulators and other stakeholders count on us to deliver excellence in
every engagement.
We are focused on investing in tools to improve what we do, creating the highest-
performing teams, and building trust and confidence through the audits we
perform.
EY Nigeria ’s reputation is based on and grounded in providing high-quality
professional audit services objectively and ethically to every company we audit.
We embrace the transparency objectives of the European Union’s Regulation
537/2014 , which require statutory auditors of public interest entities (PIEs) to
publish annual transparency reports.
The EY Nigeria Transparency Report 2020 complies with the Regulation, and
covers the year ended 30 June 2020 and any more recent relevant events. In this
report, you can learn more about our internal quality control system; how we
instill professional values; how we perform an audit; our review and consultation
processes; our approach to audit quality reviews; our independence practices;
and the impact of COVID-19 on our operations.
EY Nigeria is focused on enhancing audit quality and upholding our
independence, informed by several factors, including external and internal
inspection results. Continuous improvement of audit quality requires us to
challenge approaches to audit execution, and we focus on this by evaluating
inspection findings and taking responsive actions.
The need for trust and confidence in financial reporting in our capital markets has
never been greater, and auditors play an important role in this regard.
3 | Transparency Report 2020: EY Nigeria
•
We encourage all our stakeholders including our clients and their investors, audit
committee members and regulators to continue to engage with us on our
strategy as well as any of the matters covered in this report.
Anthony Oputa Jamiu Olakisan
Managing Partner Assurance Leader
EY Nigeria EY Nigeria
EY’s purpose: building a better working world
EY is committed to doing its part in building a better working world.
The insights and quality services delivered by EY people help build
trust and confidence in business and the capital markets. EY
auditors serve the public interest by delivering high-quality audits
with independence, integrity, objectivity and professional
skepticism. In so doing, the EY organization plays a critical
role in building a better working world for EY people,
clients and communities.
4 | Transparency Report 2020: EY Nigeria
About us
Legal structure, ownership firm of EYG, has no financial operations and does not
provide any professional services.
and governance
Each Region elects a Regional Partner Forum (RPF),
In Nigeria ,Ernst & Young is a Partnership organized in whose representatives advise and act as a sounding
Nigeria and is a member firm of Ernst & Young Global board to Regional leadership. The partner elected as
Limited, a UK company limited by guarantee (EYG). In Presiding Partner of the RPF also serves as the
this report, we refer to ourselves as “EY Nigeria,” Region’s representative on the Global Governance
“we,” “us” or “our.” EY refers collectively to the global Council (see page 6).
organization of the member firms of EYG.
EY Nigeria is owned by the partners and governed by
an executive committee of partners as of 1 July 2020
Anthony Oputa, became the Managing Partner. He is
supported by the other four service line leaders and
Market leader who together provide leadership to the
four business lines: Consulting, Assurance, Strategy
and Transaction and Tax Services.
The firm has its head office in Lagos and other offices
in Abuja and Port Harcourt. EY Nigeria has 28
partners, 30 directors (Executive and associate) and
over 500 professional staff.
EYG member firms are grouped into three geographic
Areas: Americas; Asia-Pacific; and Europe, Middle
East, India and Africa (EMEIA). The Areas comprise
multiple Regions, which themselves consist of member
firms.
EY Nigeria is part of the EMEIA Area, which comprises
EYG member firms in 97 countries in Europe, the
Middle East, India and Africa. Within the EMEIA Area,
there are 10 Regions. EY Nigeria is part of the Africa
Region.
Ernst & Young (EMEIA) Limited (EMEIA Limited), an
English company limited by guarantee, is the principal
coordinating entity for the EYG member firms in the
EMEIA Area. EMEIA Limited facilitates the coordination
of these firms and cooperation between them, but it
does not control them. EMEIA Limited is a member
5 | Transparency Report 2020: EY Nigeria
Network arrangements clients and others in each country, and be more
responsive to local needs.
Global Governance Council
EY is a global leader in assurance, tax, strategy,
transaction and consulting services. Worldwide, over The Global Governance Council (GGC) is the main
298,000 people in member firms in more than 150 oversight body of EYG. It comprises one or more
countries share a commitment to building a better representatives from each Region, other member firm
working world, united by shared values and an partners as at-large representatives and up to six
unwavering commitment to quality, integrity and independent non-executives (INEs). The Regional
professional skepticism. In today’s global market, the representatives, who otherwise do not hold senior
integrated EY approach is particularly important in the management roles, are elected by their RPFs for a
delivery of high-quality multinational audits, which can three-year term, with provision for one successive
span nearly every country in the world. reappointment. The GGC advises EYG on policies,
strategies, and the public interest aspects of its
This integrated approach enables EY member firms to
decision-making. The GGC approves, in some instances
develop and draw upon the range and depth of
upon the recommendation of the GE, certain matters
experience required to perform such diverse and
that could affect EY.
complex audits.
EYG coordinates the member firms and promotes Independent Non-Executives
cooperation among them. EYG does not provide
Up to six Independent Non-Executives (INEs) are
services, but its objectives include the promotion of
appointed from outside EY. The INEs are senior leaders
exceptional high-quality client service by member
from both the public and private sectors and reflect
firms worldwide. Each member firm is a legally distinct
diverse geographic and professional backgrounds.
entity. Their obligations and responsibilities as
They bring to the global organization, and the GGC,
members of EYG are governed by the regulations of
the significant benefit of their varied perspectives and
EYG and various other agreements.
The structure and principal bodies of the global depth of knowledge. The INEs also form a majority of
organization, described below, reflect the principle the Public Interest Sub-Committee (PIC) of the GGC.
that EY, as a global organization, has a common The role of the PIC includes public interest aspects of
shared strategy. decision-making, issues raised under whistle-blowing
policies and procedures, and stakeholder dialogue and
At the same time, the network operates on a Regional
engagement in quality and risk management
level within the Areas. This operating model allows for
discussions. The INEs are nominated by a dedicated
greater stakeholder focus in the Regions, permitting
committee.
member firms to build stronger relationships with
6 | Transparency Report 2020: EY Nigeria
Global Executive Global Practice Group
The Global Executive (GE) brings together EY’s This group brings together the members of the GE, GE
leadership functions, services and geographies. As of committees, Regional leaders and sector leaders. The
1 July 2020, it is chaired by the Chairman and CEO of Global Practice Group seeks to promote a common
EYG, and includes its Global Managing Partners of understanding of EY’s strategic objectives and helps
Client Service and Business Enablement; the Area drive consistency of execution across the organization.
Managing Partners; the global functional leadership
for Talent; the leaders of the global service lines — EYG member firms
Assurance, Consulting (previously Advisory), Strategy
Under the regulations of EYG, member firms commit
and Transactions (previously Transaction Advisory
themselves to pursue EY’s objectives, such as the
Services) and Tax; and one EYG member firm partner
provision of high-quality service worldwide. To that
on rotation.
end, the member firms undertake the implementation
The GE also includes the Global Vice Chair of Markets, of global strategies and plans, and work to maintain
the Global Vice Chair of Transformation, the Chief the prescribed scope of service capability. They are
Client Technology Officer, the Chair of the Global required to comply with common standards,
Accounts Committee, the Chair of the Emerging methodologies and policies, including those regarding
Markets Committee, as well as a representative from audit methodology, quality and risk management,
the Emerging Markets practices. independence, knowledge sharing, HR and technology.
The GE and the GGC approve nominations for the Above all, EYG member firms commit to conducting
Chairman and CEO of EYG and ratify appointments of their professional practices in accordance with
the Global Managing Partners. The GE also approves applicable professional and ethical standards, and all
appointments of Global Vice Chairs. The GGC ratifies applicable requirements of law. This commitment to
the appointments of any Global Vice Chair who serves integrity and doing the right thing is underpinned by
as a member of the GE. the EY Global Code of Conduct and EY values (see
page 10).
The GE’s responsibilities include the promotion of
global objectives and the development, approval and, Besides adopting the regulations of EYG, member
where relevant, implementation of: firms enter into several other agreements covering
aspects of their membership in the EY organization,
• Global strategies and plans
such as the right and obligation to use the EY name,
• Common standards, methodologies and policies to and knowledge sharing.
be promoted within member firms
• People initiatives, including criteria and processes Member firms are subject to reviews to evaluate
for admission, evaluation, development, reward adherence to EYG requirements and policies governing
and retirement of partners issues, such as independence, quality and risk
• Quality improvement and protection programs management, audit methodology and HR. Member
• Proposals regarding regulatory matters and public firms unable to meet quality commitments and other
policy EYG membership requirements may be subject to
• Policies and guidance relating to member firms’ termination from the EY organization.
service of international clients, business
development, markets and branding
• EY’s development funds and investment priorities
• EYG’s annual financial reports and budgets
• GGC recommendations
The GE also has the power to mediate and adjudicate
disputes between member firms.
GE committees
Established by the GE and bringing together
representatives from across the organization, the GE
committees are responsible for making
recommendations to the GE. In addition to the Global
Audit Committee, examples of other committees
include Assurance, Consulting, Tax, Strategy and
Transactions, Global Markets and Investments, Global
Accounts, Emerging Markets, Talent and Risk
Management.
7 | Transparency Report 2020: EY Nigeria
Commitment to Sustainable Audit Quality
Infrastructure supporting This helps provide greater assurance as to the
objectivity of audit quality and consultation processes.
quality The Global PPD also leads and oversees the Global
Professional Practice group. This is a global network of
Quality in our service lines technical subject-matter specialists in accounting and
NextWave is EY’s global strategy and ambition to auditing standards, who consult on accounting,
deliver long-term value to clients, people and society. auditing and financial reporting matters; and perform
NextWave reconfirms EY’s purpose, ambition, and various practice monitoring and risk management
strategy. EY’s purpose of building a better working activities.
world continues to inspire EY people to not only serve
clients, but also to use our knowledge, skills and
experiences to support the communities in which we The Global PPD oversees the development of the EY
live and work. The insights and quality services we Global Audit Methodology (EY GAM) and related
deliver help build trust and confidence in the capital technologies so that they are consistent with relevant
markets and in economies around the world. professional standards and regulatory requirements.
The Global Professional Practice group also oversees
Delivering high-quality audits and continuously the development of the guidance; training and
improving what we do are fundamental to building a monitoring programs; and processes used by member
better working world. To do so, we recruit, develop and firm professionals to execute audits consistently and
retain the right people; embrace innovation; effectively. The Global, Area and Regional PPDs,
encourage simplification; and monitor what we do together with other professionals who work with them
closely. Serving the public interest through the in each member firm, are knowledgeable about EY
delivery of high-quality audits consistently around the people; clients; and processes; and they are readily
world is a top priority. Significant investments continue accessible for consultation with audit engagement
to be made to deliver state-of-the-art tools and teams.
develop EY people. EY audit teams embrace a digital-
first approach and are supported by a more than Additional resources often augment the Global
US$600m investment in new and emerging Professional Practice group, including networks of
technologies. professionals focused on:
EYG member firms and their service lines are • Internal-control reporting and related aspects of
the EY audit methodology
accountable for delivering quality engagements. EY
member firms’ service lines manage the overall • Accounting, auditing and risk issues for specific
process for quality reviews of completed engagements industries and sectors
and input for the quality of in-process engagements, • Event-specific issues involving areas of civil and
which helps achieve compliance with professional political unrest; or sovereign debt and related
accounting, auditing, reporting and disclosure
standards and EY policies.
implications
The Global Vice Chair of Assurance coordinates • General engagement matters and how to work
member firms’ compliance with EY policies and effectively with audit committees
procedures for services provided by Assurance.
Risk Management
Professional Practice
Risk Management (RM) oversees organization-wide
The Global Vice Chair of Professional Practice, referred activities designed to help EY people meet global and
to as the Global Professional Practice Director (PPD), is local compliance responsibilities and support client-
overseen by the Global Vice Chair of Assurance and facing teams in delivering quality and exceptional
works to establish global audit quality control policies client service. Responsibility for high-quality service
and procedures. Each of the Area PPDs is overseen by and ownership of the risks associated with quality is
the Global PPD and the related Area Assurance Leader. placed with the member firms and their service lines.
8 | Transparency Report 2020: EY Nigeria
Among other things, the Global RM Leader helps Cybersecurity
oversee the identification and management of these
Managing the risk of major and complex cyberattacks
risks, as well as other risks across the organization as
is a part of doing business for all organizations. While
part of the broader Enterprise Risk Management
no systems are immune from the threat of
framework.
cyberattacks, EY Nigeria is vigilant in the steps it takes
Member firm partners are appointed to lead risk to secure and protect client data. The EY approach to
management initiatives (supported by other staff and cybersecurity is proactive and includes the
professionals), including coordinating with the service implementation of technologies and processes
lines on such matters. The Global RM Leader is necessary to manage and minimize cybersecurity risks
responsible for establishing globally consistent risk globally. EY information security and data privacy
management execution priorities and enterprise-wide programs, consistent with industry practices and
risk management. applicable legal requirements, are designed to protect
against unauthorized access to systems and data.
These priorities cascade to member firms through an
There is a dedicated team of cybersecurity specialists
Enterprise Risk Management (ERM) program.
who constantly monitor and defend EY systems.
There were additional complexities in 2020 as the
Beyond technical and process controls, all EY people
world deals with the COVID-19 pandemic. This
are required to affirm in writing their understanding of
required a coordinated response across EY via
the principles contained in the EY Global Code of
activation of the Global Crisis Management Program
Conduct and their commitment to abide by them.
(GCMP). Every aspect and geography of the business
There are also required security awareness learning
was affected. The GCMP, led by the Global RM Leader,
activities. Various policies outline the due care that
involved EY’s leadership on a frequent and consistent
must be taken with technology and data, including, but
basis. The GCMP is an extensive program that is
not limited to, the Global Information Security Policy,
reviewed regularly. It includes plans that cascade from
and a global policy on the Acceptable Use of
the Global and Area levels.
Technology. EY cybersecurity policies and processes
recognize the importance of timely communication. EY
Global Confidentiality Policy
people receive regular and periodic communications
Protecting confidential information is ingrained in the reminding them of their responsibilities from these
everyday activities of EYG member firms. Respect for policies and of general security awareness practice.
intellectual capital and all other sensitive and
restricted information is required by the EY Global Components of our audit quality control
Code of Conduct, which provides a clear set of program
principles to guide the behaviors expected of all those
In the following sections, we describe the principal
who work with EY. The Global Confidentiality Policy
components of the audit quality control program,
further details this approach to protect information
which EY Nigeria follows:
and reflect the ever-changing restrictions on the use
of data. This policy provides added clarity for those • Instilled professional values
who work with EY and forms the fundamental broader • Internal quality control system
guidance that includes key policies on conflicts of • Client acceptance and continuance
interest, personal data privacy and records retention. • Performance of audits
Other guidance includes:
• Review and consultation
• Social media guidance • Rotation and long association
• Information-handling requirements • Audit quality reviews
In addition, the global policy on Reporting Fraud, • External quality assurance reviews
Illegal Acts and Other Non-compliance with Laws, • Compliance with legal requirements
Regulations and EY’s Global Code of Conduct requires
EY professionals to speak up on observing behavior
that is believed to be a violation of a law or regulation, Instilled professional values
applicable standard or EY’s Global Code of Conduct.
This includes the unauthorized or improper disclosure Sustainable Audit Quality
of confidential information.
Quality is the foundation of our work and central to
Furthermore, the global policy on Personal Data EY’s responsibility to provide confidence to the capital
Protection supports and builds upon provisions within markets. This is reflected in the Sustainable Audit
the EY Global Code of Conduct regarding respecting Quality (SAQ) program, which continues to be the
and protecting personal information, in accordance highest priority for EY member firms’ Assurance
with local law and professional standards, which has practices.
been updated consistent with the EU General Data
Protection Regulation (GDPR).
9 | Transparency Report 2020: EY Nigeria
SAQ establishes a strong governance structure that The SAQ infrastructure demonstrates that audit
enables each member firm to provide high-quality quality is the single most important factor in our
audits. It is implemented locally; and coordinated and decision-making and the key measure on which our
overseen globally. The word “sustainable” in SAQ is professional reputation stands.
used to demonstrate that this is not a one-off, short-
term initiative, but an ongoing process of Tone at the top
improvement.
EY Nigeria’s leadership is responsible for setting the
There are six SAQ pillars: tone at the top; exceptional right tone at the top and demonstrating EY’s
talent; simplification and innovation; audit technology commitment to building a better working world
and digital; enablement and quality support; and through behavior and actions. While the tone at the
accountability. The pillars are supported by a top is vital, our people also understand that quality
foundation of serving the public interest. and professional responsibility start with them and
that within their teams and communities, they are
Significant progress has been made through SAQ. EY
leaders too. Our shared values, which inspire our
member firms’ internal and external inspection
people and guide them to do the right thing, and our
findings globally are improving, and there is greater
commitment to quality are embedded in who we are
consistency in execution. EY has deployed world-class
and in everything we do.
technological tools that enhance the quality and value
of EY audits, including the EY Canvas online audit The EY approach to business ethics and integrity is
platform, the EY Helix analytics platform and the EY contained in the EY Global Code of Conduct and other
Atlas research platform. policies and is embedded in the EY culture of
consultation, training programs and internal
A key feature of EY Canvas is “My EY” (formerly known
communications. Senior management regularly
as the EY Canvas Client Portal), which enables clients
reinforces the importance of performing quality work,
to communicate with audit teams and confirm what
complying with professional standards, adhering to our
information auditors have requested and whether that
policies, and leading by example. In addition, EY
information has been provided. EY Canvas also
assesses the quality of professional services provided
facilitates the use of the “Milestones” project
as a key metric in evaluating and rewarding EY
management functionality, which helps audit teams
professionals.
stay on pace with their audit execution and drive
executive involvement. Finally, project management The EY culture strongly supports collaboration and
enhancements within Canvas empower audit teams to places special emphasis on the importance of
be focused on audit execution. consultation in dealing with complex or subjective
accounting, auditing, reporting, regulatory and
When Milestones, My EY, and the project management
independence matters. We believe it is important to
tools and enablement are used, engagement teams
determine that engagement teams and clients
can more effectively execute audit tasks with
correctly follow consultation advice, and we emphasize
appropriate skepticism and curiosity. As a result, audit
this when necessary.
quality is enhanced.
Other SAQ initiatives include: a new approach to The consistent stance of EY Nigeria has been that no
pictorially depict a company’s internal controls and client is more important than our professional
processes; the Personal Workload Tool, which reviews reputation — the reputation of EY Nigeria and the
personal responsibilities and assesses whether there is reputation of each of our professionals.
sufficient time to execute high-quality audits; Purpose-
Led Outcome Thinking (PLOT), a framework that
focuses on the behaviors that drive high-quality audits;
and Key Findings Review, which helps coach EY teams. Code of Conduct
There is also a network of Quality Enablement Leaders We promote a culture of integrity among our
(QELs), an overall Global Audit Quality Committee and professionals. The EY Global Code of Conduct provides
a Culture and Behaviors Taskforce. They help us in a clear set of principles that guide our actions and our
executing and reviewing root cause analysis and business conduct and are to be followed by all EY
understanding the impact of our initiatives in driving personnel. The EY Global Code of Conduct is divided
quality outcomes, better behaviors and a continuous into five categories:
improvement mindset.
• Working with one another
Audit quality is something that every team member • Working with clients and others
must understand and be committed to implementing • Acting with professional integrity
locally. SAQ is essential to all our goals and ambitions, • Maintaining our objectivity and independence
and each Regional and Area leader has oversight of
• Protecting data, information and intellectual
the efforts to achieve those goals.
capital
10 | Transparency Report 2020: EY NigeriaThrough our procedures to monitor compliance with We recognize that in today’s environment —
the EY Global Code of Conduct and through frequent characterized by continuing globalization, the rapid
communications, we strive to create an environment movement of capital and the impact of technology
that encourages all personnel to act responsibly, changes — the quality of our audit services has never
including reporting misconduct without fear of been more important. As part of NextWave, we
retaliation. continue to invest heavily in developing and
maintaining our audit methodology, tools and other
The EY Ethics Hotline provides EY people, clients and
resources needed to support quality service.
others outside of the organization with a means to
confidentially report activity that may involve While the market and stakeholders continue to demand
unethical or improper behavior, and that may be in high-quality audits, they also demand an increasingly
violation of professional standards or otherwise effective and efficient delivery of audit services. In
inconsistent with the EY shared values or Global Code addition to the investments mentioned, EY continues
of Conduct. Globally the hotline is operated by an to seek ways to improve the effectiveness and
external organization that provides confidential and, if efficiency of its audit methodology and processes,
desired, anonymous hotline reporting. while improving audit quality.
When a report comes into the EY Ethics Hotline, either We work to understand where our audit quality may
by phone or internet, it receives prompt attention. not be up to our own expectations and those of
Depending on the content of the report, appropriate stakeholders, including independent audit regulators.
individuals from Risk Management, Talent, Legal or We seek to learn from external and internal inspection
other functions are involved in addressing the report. activities and to identify the root causes of adverse
The same procedures are followed for matters that are quality occurrences to enable us continually to
reported outside of the EY Ethics Hotline. improve audit quality. We believe that taking effective
and appropriate actions to improve quality is
important.
Our values: who we are
Effectiveness of the quality control system
People who demonstrate integrity, EY has designed and implemented a comprehensive
respect, teaming and inclusiveness set of global audit quality control policies and
practices. These policies and practices meet the
requirements of the International Standards on Quality
People with energy, enthusiasm and
Control issued by the International Auditing and
the courage to lead
Assurance Standards Board (IAASB). EY Nigeria has
adopted these global policies and procedures and has
People who build relationships based supplemented them as necessary to comply with local
on doing the right thing laws and professional guidelines, and to address
specific business needs.
We also execute the EY Audit Quality Review (AQR)
Internal quality control program to evaluate whether our system of audit
system quality control has operated effectively to provide
reasonable assurance that EY Nigeria and our people
comply with applicable professional standards, internal
Structure policies and regulatory requirements.
EY Nigeria’s reputation for providing high-quality
The results of the AQR program and external
professional audit services independently, objectively
inspections are evaluated and communicated within EY
and ethically is fundamental to our success as
Nigeria to provide the basis for continual improvement
independent auditors. We continue to invest in
in audit quality, consistent with the highest standards
initiatives to promote enhanced objectivity,
in the profession.
independence and professional skepticism. These are
fundamental attributes of a high-quality audit. The Global Executive has responsibility for the
implementation of quality improvement. As such, it
At EY Nigeria, our role as auditors is to provide
reviews the results of the internal AQR program and
assurance on the fair presentation of the financial
external audit firm regulatory reviews, as well as any
statements of the companies we audit. We bring
key actions designed to address areas for
together qualified teams to provide audit services,
improvement.
drawing on our broad experience across industry
sectors and services. We continually strive to improve The recent results of such monitoring, together with
our quality and risk management processes so that the feedback from independent audit regulators, provide
quality of our service is at a consistently high level. EY Nigeria with a basis to conclude that our internal
11 | Transparency Report 2020: EY Nigeriacontrol systems are designed appropriately and are We believe that the requirements within ISQM 1 can
operating effectively. help to improve quality at the firm and engagement
level as an effective system of quality management is
Update to the control framework – ISQM 1 foundational to achieving consistent engagement
quality.
In September 2020, the IAASB approved a quality
management standard that includes significant
changes to the way professional accountancy firms
manage quality. The International Standard on Quality Client acceptance and
Management 1 (ISQM 1) will replace the current
International Standard on Quality Control 1 (ISQC 1)
continuance
and take a more proactive and risk-based approach.
EY policy
ISQM 1 will be effective as of December 2022 but
remains subject to final approval by the Public Interest The EY global policy on Client and Engagement
Oversight Board, in accordance with due process. Acceptance sets out principles for member firms to
determine whether to accept a new client or a new
ISQM 1 will require firms to design, implement, engagement or to continue with an existing client or
monitor and assess the overall system of quality engagement. These principles are fundamental to
management (SQM) that provides reasonable maintaining quality, managing risk, protecting EY
assurance a firm will meet its quality objectives. people and meeting regulatory requirements. The
The standard includes more robust requirements for objectives of the policy are to:
the governance, leadership and culture of professional • Establish a rigorous process for evaluating risk
accountancy firms, and a risk assessment process that and making decisions to accept or continue clients
evaluates risks to achieving quality objectives and or engagements
identification of controls that address those risks. It • Meet applicable independence requirements
also requires more extensive monitoring of the SQM to • Identify and deal appropriately with any conflicts
evaluate the effectiveness and identify deficiencies of interest
that require corrective actions. • Identify and decline clients or engagements that
Many steps have already been taken to improve the pose excessive risk
SQM. An effective SQM is the foundation for EY’s • Require consultation with designated
quality initiatives and is key to quality and operating professionals to identify additional risk
management procedures for specific high-risk
effectiveness. The EY approach is to implement an
factors
SQM that is consistently applied across the entire
network of member firms. This is especially important • Comply with legal, regulatory and professional
requirements
in a global economy where many audits involve the use
of other EY member firms. A globally consistent SQM In addition, the EY global policy on Conflicts of Interest
helps ensure engagement quality and consistent defines global standards for addressing categories of
execution. potential conflicts of interest and a process for
identifying them. It also includes provisions for
While the standard is effective as of December 2022, managing potential conflicts of interest as quickly and
EY Nigeria has commenced work to implement the efficiently as possible using appropriate safeguards.
new standard alongside EY’s System of Quality Such safeguards may include obtaining client consent
Management transformation program. Our initial steps to act for another party where a conflict of interest
have included: may exist, establishing separate engagement teams to
• Identifying the functions and service lines that fall act for two or more parties, implementing “Chinese
within the scope of ISQM 1 Walls” between engagement teams or declining an
• Establishing a program governance structure to engagement to avoid an identified conflict.
manage the design and implementation of a
The EY global policy on Conflicts of Interest and
system of quality management that complies with
ISQM 1 with representatives from the various associated guidance consider the increasing
functions and service lines complexity of engagements and client relationships,
and the need for speed and accuracy in responding to
• Identifying and assessing quality risks and
documenting controls in accordance with the clients. They also align with the latest International
network developed approach Ethics Standards Board for Accountants (IESBA)
• Identifying network resources and requirements standards.
and how they are implemented or used by the
country in SQM Putting policy into practice
• Identifying enhancements to the control We use the EY Process for Acceptance of Clients and
framework and challenging current controls for Engagements (PACE), an intranet-based system, for
compliance with the new standard
efficiently coordinating client and engagement
12 | Transparency Report 2020: EY Nigeriaacceptance and continuance activities in line with entity we audit. Making risk assessments;
global, service line and member firm policies. PACE reconsidering and modifying them as appropriate; and
takes users through the acceptance and continuance using these assessments to determine the nature,
requirements, and identifies the policies and timing and extent of audit procedures are fundamental
references to professional standards needed to assess to EY GAM. The methodology also emphasizes
both business opportunities and associated risks. applying appropriate professional skepticism in the
execution of audit procedures. EY GAM is based on
As part of this process, we carefully consider the risk
International Standards on Auditing (ISAs) and is
characteristics of a prospective client or engagement
supplemented in Nigeria to comply with the local
and the results of several due diligence procedures.
Nigeria regulatory or statutory requirements.
Before we take on a new engagement or client, we
determine whether we can commit sufficient resources Using an online tool, EY Atlas, an EY auditor is
to deliver quality service, especially in highly technical presented with a version of EY GAM organized by topic
areas, and if the services the client wants are and designed to focus the audit strategy on the
appropriate for us to provide. The approval process is financial statement risks, and the design and execution
rigorous, and no new audit engagement may be of the appropriate audit response to those risks. EY
accepted without the approval of Regional or GAM consists of two key components: requirements
local PPD. and guidance; and supporting forms and examples.
The requirements and guidance reflect both auditing
In the EY annual client and engagement continuance
standards and EY policies. The forms and examples
process, we review our service and ability to continue
include leading practice illustrations and assist in
to provide a quality service and confirm that clients we
performing and documenting audit procedures.
serve share EY Nigeria’s commitment to quality and
transparency in financial reporting. The partner in EY GAM can be “profiled” or tailored to present the
charge of each audit, together with our Assurance relevant requirements and guidance, depending on the
leadership, annually reviews our relationship with the nature of the entity being audited — e.g., there are
audit client to determine whether continuance is profiles for listed entities and for those considered
appropriate. non-complex entities.
As a result of this review, certain audit engagements Following a successful pilot in 2019, EY GAM was
are identified as requiring additional oversight updated to include the profession’s first data-first
procedures during the audit (close monitoring), and approach to auditing, which is called Digital GAM.
some audit clients are discontinued. As with the client Utilizing the suite of EY Helix analyzers, the flow of
acceptance process, our PPD is involved in the client audit procedures, supplemented with new
continuance process and must agree with the requirements and guidance, enhances the way EY
continuance decisions. member firms perform audits. The EY audit approach
combines the vast amounts of financial and non-
Decisions about acceptance or continuance of clients
financial data available from an entity’s systems with
and engagements consider the engagement team’s
broad sources of knowledge to enable EY auditors to
assessment of whether the company’s management
obtain sufficient and appropriate audit evidence.
may pressure us to accept inappropriate accounting,
Through visualizing whole populations of data and
auditing and reporting conclusions to undermine
applying professional skepticism, EY auditors can
quality. Considerations and conclusions on the
provide an additional challenge to management’s
integrity of management are also essential to
assertions to drive high audit quality.
acceptance and continuance decisions.
Other enhancements have been made to address new
Performance of audits standards; emerging auditing issues and matters;
implementation experiences; and external and internal
There has been significant investment by EY in
inspection results. Recently, EY GAM was updated for
improving audit methodologies and tools, with the goal
the requirements of ISA 540 (Revised), Auditing
of performing the highest-quality audits in the
Accounting Estimates and Related Disclosures
profession. This investment reflects EY’s commitment
(effective for audits of periods beginning on or after
to building trust and confidence in the capital markets
15 December 2019) and a suite of enablement to
and in economies the world over.
implement those requirements was issued.
Audit methodology In addition, current and emerging developments are
monitored, and timely audit planning and execution
EY GAM provides a global framework for delivering
communications are issued that emphasize areas
high-quality audit services through the consistent
noted during inspections as well as other key topics of
application of thought processes, judgments and
interest to local audit regulators and the International
procedures in all audit engagements, regardless of
Forum of Independent Audit Regulators (IFIAR).
size. EY GAM also requires compliance with relevant
Specifically, with respect to the impact that COVID-19
ethical requirements, including independence from the
is having on the global economy, guidance has been
13 | Transparency Report 2020: EY Nigeriaissued to address the accounting and financial through the analysis of larger populations of audit-
reporting concerns that the entities EY member firms relevant data; identifying unseen patterns and trends
audit are facing, as well as audit considerations when in that data; and helping to direct our audit efforts.
performing audits in the current environment. The use of data analytics also allows us to obtain
better perspectives; richer insights; and a deeper
Technology understanding of transactions and areas of risk.
Our audit engagement teams use technology to assist EY is deploying data analyzers to analyze the business
in executing and documenting the work performed in operating cycles of the companies that we audit,
accordance with EY GAM. supported by analytics-based audit programs to aid
the application of these data analyzers.
EY Canvas, the global EY audit platform, lies at the
heart of the audit and enables us to provide a high- Using the EY Helix library of data analyzers, EY audit
quality audit. EY Canvas is built using state-of-the-art engagement teams can enhance their audit risk
technology for web applications. This allows us to assessment, enabling the audit of higher-risk
provide data security and to evolve our software to transactions, and assisting EY people in asking better
respond to changes in the accounting profession and questions about audit findings and evaluating the
regulatory environment. outcomes.
Through the use of profile questions, audit EY Atlas is a global technology platform that enables
engagements in EY Canvas are automatically EY auditors to access the latest accounting and
configured with information relevant to an entity’s auditing content, including external standards, EY
listing requirements and industry. This helps to keep interpretations and thought leadership.
our audit plans customized and up-to-date, and
provides direct linkage to our audit guidance, Formation of audit engagement teams
professional standards and documentation templates.
EY Nigeria’s policies require an annual review of
EY Canvas is built with a user interface that allows the
partner assignments by our Assurance leadership and
team to visualize risks and their relationship to the
Regional or Cluster PPD as applicable. This is carried
planned response and work performed in key areas. It
out, among other things, to make sure that the
also enables a linkage for group audit teams to
professionals leading audits of listed entities and other
communicate inter-office risks and instructions so that
public-interest entities possess the appropriate
the primary audit team can direct execution and
competencies (e.g., the knowledge, skills and abilities)
monitor performance of the group audit.
to fulfill their engagement responsibilities and are in
EY Canvas includes the My EY client portal to assist compliance with applicable auditor rotation
teams in communicating with clients and streamlining regulations.
their client requests. Mobile applications are
The assignment of professionals to an audit
integrated with EY Canvas to help our people in their
engagement is also made under the direction of our
audit work — e.g., in monitoring the status of the audit,
Assurance leadership. Factors considered when
capturing audit evidence securely and performing
assigning people to audit teams include engagement
inventory observations.
size and complexity; specialized industry knowledge
Audit engagement teams use other applications, data and experience; timing of work; continuity; and
analyzers and forms during various phases of an audit opportunities for on-the-job training. For more
to assist in executing procedures, making and complex engagements, consideration is given to
documenting audit conclusions and performing whether specialized or additional expertise is
analysis. This includes EY Smart Automation, a needed to supplement or enhance the audit
collection of applications that are being developed and engagement team.
deployed globally through EY Canvas to digitally
In many situations, internal specialists are assigned as
enable EY audit professionals in executing audit
part of the audit engagement team to assist in
procedures and processes.
performing audit procedures and obtaining
appropriate audit evidence. These professionals are
used in situations requiring special skills or knowledge,
Digital GAM and data analytics
such as tax, forensics, information systems, asset
At EY, we are making data analysis integral to our valuation and actuarial analysis.
audits. Our use of data and analysis is not about
additive procedures or visualizations. It is about taking Fraud
large populations of company data and applying our
Part of the EY commitment to quality is a policy of
globally consistent technology (EY Helix) and
continuous improvement, which has resulted in
methodology (EY GAM) to audit that data.
innovations to risk and audit procedures regarding
EY Helix is a library of data analyzers for use in audits. fraud. These innovations include:
These data analyzers are transforming the audit
14 | Transparency Report 2020: EY Nigeria• Leveraging the power of advanced technology culture of consultation has become even more
through: important to help EY member firms reach the
• Mandating the use of data analytics for fraud appropriate conclusions for entities that they audit on
testing a timely basis. Consultation requirements and related
• Enhancing risk assessments and audit policies are designed to involve the right resources so
scoping by using more external data and that audit teams reach appropriate conclusions.
information, such as social media
• Using electronic confirmations for audit
evidence wherever possible, moving in time
The EY culture of consultation enables
to matching the audited company’s records of
engagement teams to deliver seamless,
banking transactions with those provided by
consistent and high-quality services that
the bank
meet the needs of audited entities, their
• Mandating annual forensics training for all audit
governance bodies and all stakeholders
professionals
Review and consultation For complex and sensitive matters, there is a formal
process requiring consultation outside of the audit
engagement team with other personnel who have
Reviews of audit work
more experience or specialized knowledge, primarily
EY policies describe the requirements for timely and Professional Practice and Independence personnel. In
direct senior professional participation, as well as the the interests of objectivity and professional skepticism,
level of review required for the work performed. EY policies require members of Professional Practice,
Supervisory members of an audit engagement team Independence and certain others to withdraw from a
perform a detailed review of the audit documentation consultation if they currently serve, or have recently
for technical accuracy and completeness. Senior audit served, the client to which the consultation relates. In
executives and engagement partners perform a this circumstance, other appropriately qualified
second-level review to determine the adequacy of the individuals would be assigned.
audit work as a whole and the related accounting and
EY policies also require that all consultations are
financial statement presentation. Where appropriate,
documented, including written concurrence from the
and based on risk, a tax professional reviews the
person or persons consulted, to demonstrate their
significant tax and other relevant working papers. For
understanding of the matter and its resolution.
listed and certain other companies, an engagement
quality reviewer (described below) reviews important
Engagement quality reviews
areas of accounting, financial reporting and audit
execution, as well as the financial statements of the Engagement quality reviews are performed by audit
company we audit and our auditor’s report. partners in compliance with professional standards for
audits of all listed companies, certain public-interest
The nature, timing and extent of the reviews of audit
entities and those considered to need close
work depend on many factors, including:
monitoring. Engagement quality reviewers are
• The risk, materiality, subjectivity and complexity experienced professionals with significant subject
of the subject matter matter knowledge. They are independent of the
• The ability and experience of the audit team engagement team and provide an objective evaluation
members preparing the audit documentation of the significant judgments the engagement team
• The level of the reviewer’s direct participation in made, and the conclusions reached in formulating the
the audit work auditor’s report. The performance of an engagement
• The extent of consultation employed quality review, however, does not reduce the
responsibilities of the partner in charge of the
Our policies also describe the roles and responsibilities
engagement for the engagement and its performance.
of each audit engagement team member for
In no circumstances may the responsibility of the
managing, directing and supervising the audit, as well
engagement quality reviewer be delegated to
as the requirements for documenting their work and
another individual.
conclusions.
The engagement quality review spans the entire
Consultation requirements engagement cycle, including planning, risk
assessment, audit strategy and execution. Policies and
EY consultation policies are built upon a culture of
procedures for the performance and documentation of
collaboration, whereby audit professionals are
engagement quality reviews provide specific guidelines
encouraged to share perspectives on complex
on the nature; timing and extent of the procedures to
accounting, auditing and reporting issues. As the
be performed; and the required documentation
environment in which EY member firms work has
evidencing their completion. In all circumstances, the
become more complex and globally connected, the EY
15 | Transparency Report 2020: EY Nigeriaengagement quality review is completed before the For PIEs, the EY Global Independence Policy requires
date of the auditor’s report. the lead engagement partner, the engagement quality
reviewer and other audit partners who make key
The Regional AMP (or Regional Audit Leader) and
decisions or judgments on matters significant to the
Regional or Cluster PPD approve all engagement
audit (together, the “key audit partners”) to be rotated
quality review assignments.
after seven years. For a new PIE (including a newly
listed company), key audit partners may remain in
Audit engagement team resolution process for
place for an additional two years before rotating off
differences of professional opinion
the team if they have served the company for six or
EY has a collaborative culture that encourages and more years prior to the listing.
expects people to speak up, without fear of reprisal, if
Upon completing the maximum service period for
a difference of professional opinion arises or if they
rotation, a key audit partner may not lead or
are uncomfortable about a matter relating to a client
coordinate professional services to the PIE audit client
engagement. Policies and procedures are designed to
until after completing a cooling-off period. This period
empower members of an audit engagement team to
is five years for a lead audit engagement partner,
raise any disagreements relating to significant
three years for an engagement quality reviewer and
accounting, auditing or reporting matters.
two years for other partners subject to rotation.
These policies are made clear to people as they join
Where the required cooling-off period for the lead
EY, and we continue to promote a culture that
audit engagement partner established by the local
reinforces a person’s responsibility and authority to
legislative body or regulator is less than five years, the
make their own views heard and seek out the
higher of that cooling-off period or three years may be
views of others.
substituted for the otherwise required five-year
Differences of professional opinion that arise during an cooling off period. This jurisdictional exception for
audit are generally resolved at the audit engagement the lead audit engagement partner may only be
team level. However, if any person involved in the applied for audit periods beginning prior to 15
discussion of an issue is not satisfied with the decision, December 2023.
they refer it to the next level of authority until an
In addition to the audit partner rotation requirements
agreement is reached or a final decision is made.
applicable to PIE audit clients, EY has established a
Furthermore, if the engagement quality reviewer long association safeguards framework that,
makes recommendations that the engagement partner consistent with the requirements of the IESBA Code
does not accept or the matter is not resolved to the includes consideration of the threats to independence
reviewer’s satisfaction, the auditor’s report is not created by the involvement of professionals over a
issued until the matter is resolved. Differences of long period of time on an audit and a safeguards
professional opinion that are resolved through framework to address such threats.
consultation with Professional Practice are
We employ tools to effectively monitor compliance
appropriately documented.
with internal rotation and requirements for audit
Rotation and long association partners and other professionals who have had a long
association with the audit client . There is also a
EY supports mandatory audit partner rotation to help process for rotation planning and decision-making that
reinforce auditor independence. EY Nigeria complies involves consultation with, and approvals by, our
with the audit partner rotation requirements of the Professional Practice and Independence professionals..
IESBA Code, the Securities and Exchange Commission External rotation
of Nigeria, and the Nigerian Code of Corporate
Governance issued by the Financial Reporting Council For public interest entities, we comply with the
of Nigeria, and other regulated industries requirement, external rotation requirements of Art. 17 (1) of the EU
as well as the U.S. Securities and Exchange Audit Regulation.
Commission (SEC), where required. EY Nigeria
supports audit partner rotation because it provides a
fresh perspective and promotes independence from
company management, while retaining expertise and Audit quality reviews
knowledge of the business. Audit partner rotation,
The EY Global AQR program is the cornerstone of the
combined with independence requirements, enhanced
EY process to monitor audit quality. EY Nigeria
systems of internal quality controls and independent
executes the Global AQR program, reports results and
audit oversight, helps strengthen independence and
develops responsive action plans. The primary goal of
objectivity, and are important safeguards of audit
the program is to determine whether systems of
quality.
quality controls, including those of EY Nigeria, are
appropriately designed and followed in the execution
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