Transparency Report 2021 - Kost Forer Gabbay & Kasierer (EY Israel)
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Transparency Report 2021 Kost Forer Gabbay & Kasierer (EY Israel)
Contents
Message from the EY Israel Chairman ............................................................................................................ 3
Message from the EY Israel Managing Partners and Assurance Leaders .............................................. 4
About us ...................................................................................................................................................5
Legal structure, ownership and governance .................................................................................................5
Network arrangements ...............................................................................................................................5
Creating long-term value for society ............................................................................................................7
Commitment to Sustainable Audit Quality ...................................................................................................... 9
Infrastructure supporting quality .................................................................................................................9
Instilled professional values ......................................................................................................................12
Internal quality control system ..................................................................................................................14
Client acceptance and continuance ............................................................................................................16
Performance of audits ..............................................................................................................................17
Review and consultation ...........................................................................................................................19
Rotation and long association.................................................................................................................... 21
Audit quality reviews ................................................................................................................................21
External quality assurance review ..............................................................................................................22
Root cause analysis ..................................................................................................................................22
Compliance with legal requirements ...........................................................................................................22
Independence practices .............................................................................................................................. 24
Continuing education and investing in exceptional talent .............................................................................. 26
Development of EY people ........................................................................................................................26
Revenue and remuneration ......................................................................................................................... 28
Financial information ................................................................................................................................28
Partner remuneration...............................................................................................................................28
Appendix 1: list of PIE audit clients.............................................................................................................. 30
EY Israel PIE audit clients..........................................................................................................................30
Appendix 2: approved EYG member firms .................................................................................................... 31
Appendix 3: ............................................................................................................................................... 33
Transparency Report 2021 | 2Message from the EY Israel Chairman
Welcome to the Transparency Report 2021 of Kost Forer Gabbay & Kasierer
(EY Israel). We believe that how we advance audit quality, manage risk and
maintain our independence as auditors should be transparent to our
stakeholders. This report is one of the ways in which we provide an update on
what we are doing in these areas.
Doron Sharabany Executing high-quality audits continues to be the top priority, and is at the
EY Israel heart of our commitment to serve the public interest. Auditors play a vital role
Chairman 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 high-
performing, diverse and inclusive teams, and building trust and confidence
through the audits we perform.
EY Israel’s reputation is based on and grounded in providing high-quality
professional audit services, objectively and ethically, to every company we
audit.
s/ Doron Sharabany
Chairman
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
Transparency Report 2021 | 3Message from the EY Israel Managing
Partner and Assurance Leader
We embrace the transparency objectives of the European Union’s 8th Company
Law Directive, which require Israeli statutory auditors of public interest entities
(PIEs) to publish annual transparency reports.
Yoram Tietz
The EY Israel Transparency Report 2021 complies with the Directive and
EY Israel covers the fiscal year ending 30 June 2021 and any more recent relevant
events. In this report, you can learn about how we are creating long-term value
Co- Managing partner and for society; our commitment to Sustainable Audit Quality (SAQ), including how
Assurance Leader we instill professional values, the performance of audits and internal quality
control; independence practices; and the impact of the COVID-19 pandemic on
operations.
The focus on delivering high-quality audits has remained paramount during the
global pandemic. A comprehensive set of actions has been developed to assess
and respond to risk, with a particular focus on fraud risks.
There has also been a continuing commitment to sustainability, as part of the
global organization’s NextWave strategy, to create long-term value for all
stakeholders. This includes an ambition to be carbon negative in 2021,
following the achievement of carbon neutrality in 2020, and to be net zero in
2025, which is an important step in the EY sustainability journey. EY Israel is
Sharon Shulman doing its part in achieving these goals.
EY Israel The need for trust and confidence in financial reporting in the capital markets
has never been greater, and auditors play an important role in this regard.
Co- Managing partner We encourage all our stakeholders — including 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.
/s/ Yoram Tietz /s/ Sharon Shulman
Co- Managing partner Co- Managing partner
and Assurance Leader
KOST FORER GABBAY & KASIERER
EY’s purpose: Building a A Member of Ernst & Young Global
better working world
EY is committed to doing its part in
building a better working world.
The audits delivered by EY people
help build trust and confidence in
financial reporting and the capital
markets. EY auditors serve the
public interest by delivering high-
quality, analytics-driven audits
with independence, integrity,
objectivity and professional
skepticism. In so doing, the EY
organization helps protect and
promote sustainable and long-term
value for stakeholders.
Transparency Report 2021 | 4About us
execution of global EY strategy in the Americas and
Legal structure, ownership and comprises: the Americas Area Managing Partner; the
governance Americas Deputy Managing Partner; the Area
Leaders for Accounts, Talent and Risk Management;
Kost Forer Gabbay & Kasierer (hereafter "EY Israel")
the Area Leaders for Assurance, Consulting, Strategy
is a partnership organized in Israel and is a member
and Transactions and Tax; and the Managing Partners
firm of Ernst & Young Global Limited, a UK company
of each of the Regions in the Americas.
limited by guarantee (EYG). In this report, we refer to
ourselves as “EY Israel”, “we”, “us” or “our”. EY Each Region elects a Regional Partner Forum (RPF),
refers collectively to the global organization of the whose representatives advise and act as a sounding
member firms of EYG. board for Regional leadership. The partner elected as
Presiding Partner of the RPF also serves as the
The EY Israel executive committee comprises 18
Region’s representative on the Global Governance
partners and deals with the Firm's general and
Council (see page 7).
operational management. Among other basic
matters, the EY Israel executive committee is
Americas Ethics Oversight Board
responsible for certain partner matters.
With membership drawn from the EY Americas
Our main offices are located in Tel Aviv and as of
leadership, the service lines and the member firms
June 30 we have 122 partners.
that make up the Americas Area, the Americas Ethics
EYG member firms are grouped into three geographic Oversight Board (AEOB) strives to create an
Areas: Americas; Asia-Pacific; and Europe, Middle environment that encourages all personnel to act
East, India and Africa (EMEIA). The Areas comprise responsibly, including reporting misconduct without
multiple Regions. Regions are groupings of member fear of retaliation. The AEOB is also responsible for
firms (and in the case of the US member firm use evaluating the findings of investigations, and
“within that member firm”) along geographical lines disciplinary actions taken by EY Americas Member
with the exception of the Financial Services Firms involving alleged or actual violations of the
Organization (FSO) Regions, which comprise the Code or other ethical standards applicable to the
financial services activities of the relevant member Member Firms of EY Americas and their partners and
firms within an Area. employees for fair and consistent enforcement and
imposition of consequences for violations thereof.
EY Israel is part of the Americas Area, which
comprises member firms in 34 countries. Within the
Americas Area, there are eight Regions. Network arrangements
It is a member of Ernst & Young Americas LLC
(EY Americas), the coordinating entity for the EY is a global leader in assurance, tax, strategy and
Americas Area. transactions, and consulting services. Worldwide,
over 312,000 people in member firms in more than
Partners and principals (referred to collectively as
150 countries share a commitment to building a
“partners”) of the EY member firms in the Americas
better working world, united by shared values and an
are also members of EY Americas. EY Americas has
unwavering commitment to quality, integrity and
no financial operations and does not provide services
professional skepticism. In today’s global market, the
to clients.
integrated EY approach is particularly important in
The coordinating body for EY Americas is the the delivery of high-quality multinational audits,
Americas Operating Executive (AOE). It oversees the which can span nearly every country in the world.
Transparency Report 2021 | 5This integrated approach enables EY member firms decision-making. The GGC approves, in some
to develop and draw upon the range and depth of instances upon the recommendation of the Global
experience required to perform such diverse and Executive (GE), certain matters that could affect EY.
complex audits.
Independent Non-Executives
EYG coordinates the member firms and promotes
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
exceptional high-quality client service by member leaders from both the public and private sectors and
firms worldwide. Each member firm is a separate reflect diverse geographic and professional
legal entity. Each member firm’s obligations and backgrounds. They bring to the global organization,
responsibilities as a member of EYG are governed by and the GGC, the significant benefit of their varied
the regulations of EYG and various other perspectives and depth of knowledge. The INEs also
agreements. form a majority of the Public Interest Sub-Committee
(PIC) of the GGC. The role of the PIC includes public
The structure and principal bodies of the global interest aspects of decision-making and stakeholder
organization, described below, reflect the principle dialogue, issues raised under whistleblowing policies
that EY, as a global organization, has a common and procedures, and engagement in quality and risk
shared strategy. management discussions. The INEs are nominated by
At the same time, the network operates on a a dedicated committee, approved by the GE and
Regional level within the Areas. This operating model ratified by the GGC.
allows for greater stakeholder focus in the Regions,
Global Executive
permitting member firms to build stronger
relationships with clients and others in each country, The GE brings together EY’s leadership functions,
and be more responsive to local needs. services and geographies. As of 1 July 2021, it is
chaired by the Chairman and chief executive officer
EY Areas, Regions and Countries*
Asia-Pacific
6 Regions
23 Countries
Americas
8 Regions
34 Countries
EMEIA
8 Regions
96 Countries
*Figures are as of 1 July 2021
(CEO) of EYG, and includes its Global Managing
Partners of Client Service and Business Enablement;
the Area Managing Partners; the global functional
Global Governance Council leadership for Talent; the leaders of the global service
lines — Assurance, Consulting, Strategy and
The Global Governance Council (GGC) is a key
Transactions, and Tax; and one EYG member firm
governance body of EYG. It comprises one or more
partner on rotation.
representatives from each Region, other member
firm partners as at-large representatives and The GE also includes the Global Vice Chair of
independent non-executives (INEs). The Regional Markets, the Global Vice Chair of Transformation, the
representatives, who otherwise do not hold senior Chief Client Technology Officer, the Chair of the
management roles, are elected by their RPFs for a Global Accounts Committee, the Chair of the
three-year term, with provision for one successive Emerging Markets Committee, as well as a
reappointment. The GGC advises EYG on policies, representative from the Emerging Markets practices.
strategies, and the public interest aspects of its
Transparency Report 2021 | 6The GE and the GGC approve nominations for the standards, methodologies and policies, including
Chairman and CEO of EYG and ratify appointments of those regarding audit methodology, quality and risk
the Global Managing Partners. The GE also approves management, independence, knowledge sharing,
appointments of Global Vice Chairs. The GGC ratifies talent and technology.
the appointments of any Global Vice Chair who
Above all, EYG member firms commit to conducting
serves as a member of the GE.
their professional practices in accordance with
The GE’s responsibilities include the promotion of applicable professional and ethical standards, and all
global objectives and the development, approval and, applicable requirements of law. This commitment to
where relevant, implementation of: integrity and doing the right thing is underpinned by
the EY Global Code of Conduct and EY values (see
• Global strategies and plans
page 13).
• Common standards, methodologies and policies
to be promoted within member firms Besides adopting the regulations of EYG, member
• People initiatives, including criteria and firms enter into several other agreements covering
processes for admission, evaluation, aspects of their membership in the EY organization,
development, and reward and retirement of such as the right and obligation to use the EY name,
partners and knowledge sharing.
• Quality improvement and protection programs
Member firms are subject to reviews to evaluate
• Proposals regarding regulatory matters and
adherence to EYG requirements and policies
public policy
governing issues, such as independence, quality and
• Policies and guidance relating to member firms’ risk management, audit methodology and HR.
service of international clients, business
Member firms unable to meet quality commitments
development, and markets and branding
and other EYG membership requirements may be
• EY’s development funds and investment
subject to termination from the EY organization.
priorities
• EYG’s annual financial reports and budgets
Creating long-term value for society
• GGC recommendations on certain matters
The GE also has the power to mediate and adjudicate While capitalism has created enormous global
disputes between member firms. prosperity, it has also left too many people behind.
Extreme poverty is already on the rise as a result of
GE committees the COVID-19 pandemic, and climate change is
threatening to deepen inequality still further as
Established by the GE, and bringing together
vulnerable communities are hit first and worst by its
representatives from across the organization, the GE
effects. EY believes an economic system that is fairer,
committees are responsible for making
recommendations to the GE. In addition to the Global more trustworthy and capable of addressing
Audit Committee, examples of other committees humanity’s most profound challenges is urgently
include Assurance, Consulting, Tax, Strategy and needed.
Transactions, Global Markets and Investments, Global From advising governments on how to build more
Accounts, Emerging Markets, Talent and Risk sustainable and inclusive economies, to encouraging
Management. businesses to focus and report on their creation of
long-term value for all stakeholders, EY services
Global Practice Group already play a vital role in this. However, more can
The Global Practice Group brings together the and must be done.
members of the GE, GE committees, Regional leaders As a proud participant in the United Nations Global
and sector leaders. It seeks to promote a common Compact (UNGC) since 2009, EY is committed to
understanding of EY’s strategic objectives and helps integrating the UNGC Ten Principles and the UN
drive consistency of execution across the Sustainable Development Goals (SDGs) into EY
organization. strategy, culture and operations.
EYG member firms Among other things, this commitment is reflected in:
Under the regulations of EYG, member firms commit
themselves to pursue EY’s objectives, such as the Corporate responsibility governance
provision of high-quality service worldwide. To that structures
end, the member firms undertake the Corporate responsibility across EY is coordinated by
implementation of global strategies and plans, and the EY Corporate Responsibility Governance Council
work to maintain the prescribed scope of service (CRGC). This body includes members of the EY Global
capability. They are required to comply with common Executive and provides senior leadership
Transparency Report 2021 | 7representation from across EY services lines, businesses and provide solutions to other
functions and geographic areas. sustainability challenges and opportunities
The EY social impact ambition
The global corporate responsibility program,
EY Ripples, brings together the global EY network
with a goal of positively impacting one billion lives by
2030. To date, EY Ripples initiatives have
cumulatively benefited more than 45 million people,
aided by:
• A rigorous focus on three areas (supporting the
next generation workforce, working with impact
entrepreneurs, and accelerating environmental
sustainability) where the distinctive skills,
knowledge and experience of EY people can
make the biggest difference.
• A collaboration with other like-minded
organizations to build ecosystems capable of
creating change at scale. For example, the
TRANSFORM initiative with Unilever and the UK
Foreign, Commonwealth and Development
Office, which aims to change the lives of 150
million people across sub-Saharan Africa and
South Asia by 2030, by tackling inequality.
The EY carbon ambition
EY aims to become carbon negative in 2021 and net
zero in 2025. EY endeavors to achieve this by
significantly reducing absolute carbon emissions, and
then removing or offsetting more than the remaining
amount every year. To reach net zero by FY25, EY
member firms plan to reduce absolute emissions by
40% across Scopes 1, 2 and 3 (versus an FY19
baseline), consistent with a 1.5°C science-based
target approved by the Science Based Targets
initiative (SBTi). Specific actions include:
• Reducing business travel emissions, with a target
to achieve a 35% reduction by FY25 against the
FY19 baseline
• Reducing overall office electricity usage, and
procuring 100% renewable energy for remaining
needs, earning RE100 membership by FY25
• Structuring electricity Power Purchase
Agreements (PPAs) to introduce more renewable
electricity than EY consumes into national grids
• Using nature-based solutions and carbon-
reduction technologies to remove from the
atmosphere or offset more carbon than emitted,
every year
• Providing EY teams with tools to calculate, then
work to reduce, the amount of carbon emitted in
carrying out client work
• Requiring 75% of EY suppliers, by spend, to set
science-based targets by no later than FY25
• Investing in EY services and solutions that help
clients create value from decarbonizing their
Transparency Report 2021 | 8Commitment to
Sustainable Audit
Quality
engagements and input for the quality of in-process
Infrastructure supporting quality engagements, which helps achieve compliance with
professional standards and EY policies.
Quality in the EY service lines
The Global Vice Chair of Assurance coordinates
NextWave is the EY global strategy and ambition to
member firms’ compliance with EY policies and
deliver long-term value to clients, people and society.
procedures for services provided by Assurance.
It has put EY in a strong position to adapt and
innovate, while the EY purpose of Building a better
working world continues to inspire EY people not only Global Audit Quality Committee
to serve clients, but also to use EY knowledge, skills The EY Global Audit Quality Committee (GAQC) is an
and experiences to support the communities in which important element of the culture of continuous
we live and work. The insights and quality services we improvement. It comprises senior leaders from across
deliver help build trust and confidence in the capital the EY organization with extensive, diverse and
markets and in economies around the world. highly relevant experience. The GAQC advises EY
Assurance leadership on the many aspects of the
In response to disruptions in the environment, EY
organization’s business, operations, culture, talent
member firms adapted to maintain the delivery of
strategy, governance and risk management that
high-quality audits. EY provided its audit
affect audit quality.
professionals with additional training and enablement
to help detect fraud. In addition, through a data-first The committee develops innovative ideas and
approach enabled by analytics and digital tools, approaches to delivering high-quality audits and is a
teams were able to deliver high-quality audits with forum for sharing best practices of EY member firms.
independence, integrity, objectivity and professional The committee also helps develop audit quality
skepticism. indicators (AQIs) and other forms of quality
monitoring that feed into the continuous
EY member firms continue to develop the audit of the
improvement cycle.
future, including ever more sophisticated data
analytics, efficiently delivering greater insight and Quality Enablement Leaders
assurance in support of the high-quality audits that
are valued by the companies that EY audits and the The EY Quality Enablement Leaders (QEL) network is
capital markets. a group of senior Assurance leaders around the world
who drive improvements in audit quality by providing
Our people are our greatest asset in delivering support to engagement teams.
quality and value and building trust. We are elevating
their experiences, using data and technology, so they Their responsibilities include: coaching teams;
can spend more time addressing risks and exercising supporting internal and external inspections; advising
professional judgment. By applying cutting-edge teams on remediating the root causes of significant
technologies and sophisticated data analytics, all audit deficiencies; driving practice and project
while serving the public interest, our people are able management; supporting portfolio risk analyses; and
to connect and contribute to the overall EY purpose implementing processes related to the EY system of
of Building a better working world. quality management, including global AQIs.
EYG member firms and their service lines are Using EY Canvas and Milestones (see page 12), as
accountable for delivering high-quality engagements. well as ever more sophisticated artificial intelligence
EY member firms’ service lines manage the overall (AI) tools, the QELs are able to build a picture of audit
process for quality reviews of completed quality performance in real time. This, in turn, gives
Transparency Report 2021 | 9greater clarity over where resources should be consistently and effectively. The Global, Area,
deployed to support audit teams and the companies Regional and Country PPDs, together with other
they audit. professionals who work with them in each member
firm, are knowledgeable about EY people, clients and
Professional Practice processes, and they are readily accessible for
consultation with audit engagement teams.
The Global Vice Chair of Professional Practice,
referred to as the Global Professional Practice Additional resources often augment the Global
Director (PPD), is overseen by the Global Vice Chair Professional Practice group, including networks of
of Assurance and works to establish global audit professionals focused on:
quality control policies and procedures. Each of the
• Internal-control reporting and related aspects of
Area PPDs as well as the Global Delivery Service
the EY audit methodology
center PPD is overseen by the Global PPD and the
• Accounting, auditing and risk issues for specific
related Area Assurance Leader. This helps provide
topics, industries and sectors
greater assurance as to the objectivity of audit
• Event-specific issues involving areas of civil and
quality and consultation processes.
political unrest; pandemics; or sovereign debt
The Global PPD also leads and oversees the Global and related accounting, auditing, reporting and
Professional Practice group. This is a global network disclosure implications
of technical subject-matter specialists in accounting • General engagement matters and how to work
and auditing standards who consult on accounting, effectively with audit committees
auditing and financial reporting matters; and perform
various practice monitoring and risk management
activities.
Risk Management
The Global PPD oversees the development of the EY
Global Audit Methodology (EY GAM) and related audit Risk Management (RM) coordinates organization-
policies and technologies so that they are consistent wide activities designed to help EY people meet
with relevant professional standards and regulatory global and local compliance responsibilities and
requirements. The Global Professional Practice group support client-facing teams in delivering quality and
also oversees the development of the guidance, exceptional client service. Responsibility for high-
training and monitoring programs, and processes quality service and ownership of the risks associated
used by member firm professionals to execute audits
Assurance Governance*
* Illustrative to show global alignment; actual reporting lines may vary based on legal, regulatory and structural considerations
Transparency Report 2021 | 10with quality is placed with the member firms and the Global Security SharePoint portal to serve as
their service lines. a centralized repository
• Maintained a daily list of high-risk locations and
Among other things, the Global RM Leader helps provided a consolidated daily report for each
monitor the identification and mitigation of these Area
risks, as well as other risks across the organization as
• Produced a daily report for leadership on the
part of the broader enterprise risk management Global, Area, Region and local impacts
(ERM) framework. The ERM priorities are
The GCMP also had a role in managing confirmed
communicated to member firms. cases by:
The Global RM Leader is responsible for establishing • Developing pandemic checklists for local crisis
globally consistent risk management execution management teams to manage confirmed cases
priorities and co-ordinating risk management across in the workforce
EY. • Conducting training on how to respond to
confirmed cases
Member firm partners are appointed to lead risk
• Assisting Talent with contact tracking for
management initiatives (supported by other staff and
confirmed cases
professionals), including coordinating with the
• Providing input and advice on travel, meetings
service lines on such matters.
and events, resulting in several global directives
There have been additional complexities as the world • Identifying international travelers to help them
continued to deal with the COVID-19 pandemic. This return to their home countries safely
has required a coordinated response across EY via Now that the focus has shifted to a safe return to the
activation of the local crisis management plans office, the GCMP team has developed a recovery plan
(CMPs) that reside in nearly all EY member firm that includes:
offices. CMPs detail specific actions to be taken to
both protect the EY workforce and respond in the • Leading the effort to develop return-to-work
protocols and track the easing of government
event of a COVID-19 infection within an EY
restrictions
workspace. However, while individual offices had to
• Creating a timeline for reopening offices
deal with issues around contact tracing and safe
workspace practices, there was a need to provide a • Determining worksite leader responsibilities and
set of uniform guidance across all EY Areas. Even procedures for building management, office
setup, workspaces and meetings
before the World Health Organization (WHO) declared
the existence of a pandemic, the EY Global Crisis • Establishing personal responsibilities including
office entry, workspaces, breaks and meetings
Management Program (GCMP) was activated. The
GCMP allowed for the creation of a Steering • Developing a post-vaccine recovery plan
Committee led by the Global RM Leader who Global Confidentiality Policy
convened key Global and Area leadership daily for six
months (and thereafter regularly but less frequently) Protecting confidential information is ingrained in the
to address issues relevant to all geographies and everyday activities of EYG member firms. Respect for
service lines. intellectual capital and all other sensitive and
restricted information is required by the EY Global
The Steering Committee issued regular guidance on
Code of Conduct, which provides a clear set of
EY’s COVID-19 response protocols and addressed
principles to guide the behaviors expected of all
issues related to travel, meetings and events as well
those who work with EY. The Global Confidentiality
as adoption and promotion of best practices, and
Policy further details this approach to protect
relayed specific safe working practices guidance from
information and reflect ever-changing restrictions on
the WHO. Guidance is still being issued and risk
the use of data. This policy provides added clarity for
factors are being monitored during the second year
those who work with EY member firms and forms the
of the global pandemic.
fundamental broader guidance that includes key
In implementing the GCMP, the goal was to keep policies on conflicts of interest, personal data privacy
people safe and informed, manage confirmed cases, and records retention. Other guidance includes:
adjust the handling of travel and events, enable a • Social media guidance
fully remote workforce and plan for recovery. • Information-handling requirements
With a robust GCMP in place, we were able to act In addition, the global policy on reporting fraud,
quickly to keep EY people safe — the top priority illegal acts and other noncompliance with laws and
throughout the entire process. Throughout the regulations, and EY’s Global Code of Conduct
pandemic, the GCMP team: requires EY professionals to speak up on observing
behavior that is believed to be a violation of a law or
• Created guidance for various stages of the
pandemic and developed a resource library on regulation, the applicable standard or EY’s Global
Transparency Report 2021 | 11Code of Conduct. This includes the unauthorized or • Client acceptance and continuance
improper disclosure of confidential information. • Performance of audits
• Review and consultation
Global Personal Data Protection Policy • Rotation and long association
The global policy on personal data protection • Audit quality reviews
supports and builds upon provisions within the EY • External quality assurance reviews
Global Code of Conduct, regarding respecting and • Root cause analysis
protecting personal information, in accordance with
• Compliance with legal requirements
applicable law, regulatory frameworks and
professional standards. This has been updated to be
consistent with the EU General Data Protection
Instilled professional values
Regulation (GDPR) and other local regulations across
Sustainable Audit Quality
the globe.
Quality is the foundation of our work and central to
Cybersecurity EY member firms’ responsibility to provide
confidence to the capital markets. This is reflected in
Managing the risk of major and complex cyberattacks
the Sustainable Audit Quality (SAQ) program, which
is a part of conducting business for all organizations.
continues to be the highest priority for EY member
While no systems are immune from the threat of
firms’ Assurance practices.
cyberattacks, EY Israel is vigilant in the steps it takes
to secure and protect client data. SAQ establishes a strong governance structure that
enables each member firm to provide high-quality
The EY approach to cybersecurity is proactive and
audits. It is implemented locally, and coordinated and
includes the implementation of technologies and
overseen globally. The word “sustainable” in SAQ is
processes necessary to manage and minimize
used to demonstrate that this is not a one-off, short-
cybersecurity risks globally. EY information security
term initiative, but an ongoing process of
and data privacy programs, consistent with industry
improvement.
practices and applicable legal requirements, are
designed to protect against unauthorized access to The SAQ program, which continues to be the highest
systems and data. There is a dedicated team of priority for EY member firms’ Assurance practices,
cybersecurity specialists, who constantly monitor and has six pillars: tone at the top; exceptional talent;
defend EY systems. simplification and innovation; audit technology and
digital; enablement and quality support; and
Beyond technical and process controls, all EY people
accountability. These pillars are supported by a
are required to annually affirm in writing their
foundation of serving the public interest.
understanding of the principles contained in the EY
Global Code of Conduct and their commitment to Significant progress has been made through SAQ. EY
abide by them. There are also required security member firms’ internal and external inspection
awareness learning activities. Various policies outline findings globally are improving, and there is greater
the due care that must be taken with technology and consistency in execution. The trend in results also
data, including, but not limited to, the Global reflects the involvement of the QEL network and a
Information Security Policy, and a global policy on focus on culture and behaviors.
the acceptable use of technology. EY cybersecurity EY has deployed leading technological tools that
policies and processes recognize the importance of enhance the quality and value of EY audits, including
timely communication. the EY Canvas online audit platform, EY Helix
EY people receive regular and periodic analytics platform and EY Atlas research platform.
communications reminding them of their EY Canvas facilitates the use of the “Milestones”
responsibilities outlined in these policies and of project management functionality, which helps audit
general security awareness practice. teams stay on pace with their audit execution and
drive executive involvement. The EY Canvas Client
Portal, which is a component of EY Canvas, magnifies
Components of our audit quality its importance in having a secure and user-friendly
control program platform in transmitting data between engagement
In the following sections, we describe the principal teams and the companies audited while effectively
components of the audit quality control program, monitoring the pacing of the audit. This suite of tools
which EY Israel follows: played a key role in helping EY navigate this past
year: having the right technology and tools in place
• Instilled professional values
for EY audit teams to work together effectively in a
• Internal quality control system
Transparency Report 2021 | 12remote environment continues to be a key success The EY culture strongly supports collaboration and
factor and differentiator. places special emphasis on the importance of
Additionally, EY Helix and the entire suite of data consultation in dealing with complex or subjective
analytic tools represent key ways to address the risk accounting, auditing, reporting, regulatory and
of fraud in audit execution. Increasing the required independence matters. We believe it is important to
use of these tools provides a more robust response to determine that engagement teams and clients
audit risks associated with companies facing correctly follow consultation advice, and we
economic challenges, especially in light of the emphasize this when necessary.
pandemic. Broader adoption of these data analytic
tools is occurring this year. The consistent stance of EY Israel has been that
no client is more important than our professional
EY Atlas is a cloud-based platform for accessing and
reputation — the reputation of EY Israel and the
searching accounting and auditing content, including
reputation of each of our professionals.
external standards, EY interpretations and thought
leadership.
Current SAQ initiatives are focused on supporting EY
teams in understanding the business of the Global Code of Conduct
companies audited. By leveraging data and
technology and executing enhanced engagement risk We promote a culture of integrity among our
assessment, EY is continuing to drive quality audit professionals. The EY Global Code of Conduct
execution. Additionally, a network of coaches is provides a clear set of principles that guide our
actively supporting engagement teams in staying on actions and our business conduct and are to be
track with respect to the pace of their audits, driving followed by all EY personnel. The EY Global Code of
timely executive involvement and providing positive Conduct is divided into five categories:
direction and enablement when necessary. • 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 • Maintaining our objectivity and independence
ambitions, and each Regional and Area leader has a • Protecting data, information and intellectual
role in achieving these goals. capital
The SAQ infrastructure demonstrates that audit Through our procedures to monitor compliance with
quality is the single most important factor in our the EY Global Code of Conduct and through frequent
decision-making and the key measure on which our communications, we strive to create an environment
professional reputation stands. that encourages all personnel to act responsibly,
including reporting misconduct without fear of
Tone at the top retaliation.
EY Israel’s leadership is responsible for setting the
right tone at the top and demonstrating EY’s Whistleblowing
commitment to building a better working world The EY Ethics Hotline provides EY people, clients and
through behavior and actions. While the tone at the others outside of the organization with a means to
top is vital, EY people also understand that quality confidentially report activity that may involve
and professional responsibility start with them and unethical or improper behavior, and that may be in
that within their teams and communities, they are violation of professional standards or otherwise
leaders too. EY shared values, which inspire EY inconsistent with the EY shared values or Global Code
people and guide them to do the right thing, and the of Conduct. Globally, the hotline is operated by an
EY commitment to quality are embedded in who we external organization that provides confidential and,
are and in everything we do. if desired, anonymous hotline reporting.
The EY approach to business ethics and integrity is When a report comes into the EY Ethics Hotline,
contained in the EY Global Code of Conduct and other either by phone or internet, it receives prompt
policies and is embedded in the EY culture of attention. Depending on the content of the report,
consultation, training programs and internal appropriate individuals from Risk Management,
communications. Senior leadership regularly Talent, Legal or other functions are involved in
reinforce the importance of performing quality work, addressing the report. The same procedures are
complying with professional standards, adhering to followed for matters that are reported outside of the
EY policies and leading by example. In addition, EY EY Ethics Hotline.
member firms assess the quality of professional
services provided as a key metric in evaluating and
rewarding EY professionals.
Transparency Report 2021 | 13Diversity and inclusiveness
Our values: who we are
EY has a long-standing commitment to diversity and
inclusiveness (D&I). This commitment to building People who People with People who
high-performing, diverse and inclusive teams is demonstrate energy, build
especially important in audit, where diverse integrity, enthusiasm relationships
perspectives drive professional skepticism and critical respect, and the based on
teaming and courage doing the
thinking. Greater diversity and inclusive inclusiveness to lead right thing
environments drive better decision-making, stimulate
innovation and increase organizational agility.
1 2 3
EY has been on a D&I journey for decades, and while
substantial progress has been made, under the global Internal quality control system
NextWave strategy and ambition EY has committed to
increasing D&I progress throughout the organization.
Structure
The Global Executive has made a visible commitment EY Israel’s reputation for providing high-quality
to EY people and to the market to accelerate D&I at professional audit services independently, objectively
EY through signing the Global Executive Diversity & and ethically is fundamental to our success as
Inclusion Statement. Not only does this reinforce that independent auditors. We continue to invest in
D&I is a key business lever, it ensures that EY initiatives to promote enhanced objectivity,
member firms hold themselves accountable for independence and professional skepticism. These are
progress, starting with the tone at the top. fundamental attributes of a high-quality audit.
There has been a particular focus on promoting
At EY Israel, our role as auditors is to provide
gender diversity over recent years. In 2021, 36.8% of
assurance on the fair presentation of the financial
new audit partners, globally, were women. A strong
statements of the companies audited. We bring
pipeline of female leadership has been built,
together qualified teams to provide audit services,
supported by 52.4% of all audit hires across the globe
drawing on our broad experience across industry
in 2020 being female.
sectors and services. We continually strive to improve
Inclusive organizations maximize the power of all quality and risk management processes so that the
differences. Employees need to feel they are working quality of our service is at a consistently high level.
for an organization that not only values them as
individuals, but also sees differences as strengths In today’s environment, characterized by continuing
and values their contributions. Fostering this sense of globalization, rapid movement of capital and the
belonging is critical to helping the EY organization impact of technological changes, the quality of our
attract the most talented individuals, and helping our audit services has never been more important. As
professionals stay motivated and engaged. part of NextWave, there is a continued and strong
investment in the development and maintenance of
In the November 2020 employee listening survey,
the EY audit methodology, tools and other resources
82% of auditors said the EY organization prepares
needed to support high-quality audits.
them to work effectively with clients and colleagues
from different countries and cultures, and 86% While the market and stakeholders continue to
agreed that the people they work with make them demand high-quality audits, they also demand an
feel that they belong to a team. increasingly effective and efficient delivery of audit
Leaders across EY make D&I a priority and it is a key services. In addition to the investments mentioned,
metric across all the organization’s talent EY continues to seek ways to improve the
management programs. To enable greater effectiveness and efficiency of its audit methodology
accountability across the EY organization, the Global and processes, while improving audit quality.
D&I Tracker helps track progress with consistent EY works to understand where member firms’ audit
diversity and inclusiveness metrics and reporting quality may not be up to their own expectations and
across the organization globally. EY also created the those of stakeholders, including independent audit
Global Social Equity Task Force (GSET) to develop regulators. This includes seeking to learn from
cohesive action plans specifically addressing inequity external and internal inspection activities and to
and discrimination, including racism. It includes EY identify the root causes of adverse quality
leaders with a wide range of backgrounds and occurrences to enable a continual improvement of
perspectives, spanning geographies, service lines and audit quality.
functions.
Transparency Report 2021 | 14Effectiveness of the quality control system Update to the control framework – ISQM 1
EY has designed and implemented a comprehensive The IAASB approved a quality management standard
set of global audit quality control policies and that includes significant changes to the way
practices. These policies and practices meet the professional accountancy firms manage quality. The
requirements of the International Standards on International Standard on Quality Management 1
Quality Control issued by the International Auditing (ISQM 1) will replace the current International
and Assurance Standards Board (IAASB). EY Israel Standard on Quality Control 1 (ISQC 1) in December
has adopted these global policies and procedures and 2022 and requires a more proactive and risk-based
has supplemented them as necessary to comply with approach to managing quality at the firm level.
local laws and professional guidelines, and to address ISQM 1 requires firms to design, implement, monitor
specific business needs. and evaluate the overall system of quality
We also execute the EY Audit Quality Review (AQR) management (SQM) that provides reasonable
program to evaluate whether our system of audit assurance a firm will meet prescribed quality
quality control has operated effectively to provide objectives.
reasonable assurance that EY Israel and our people The standard includes more robust requirements for
comply with applicable professional standards, the governance, leadership and culture of
internal policies and regulatory requirements. professional accountancy firms, and introduces a risk
assessment process for firms to assess risks to
The results of the AQR program and external
achieving quality objectives and design responses
inspections are evaluated and communicated within
that address those risks. It also requires more
EY Israel to provide the basis for continual
extensive monitoring of the SQM to identify
improvement in audit quality, consistent with the
deficiencies that require corrective actions and to
highest standards in the profession.
provide the basis for evaluating the overall
The Global Executive has responsibility for the effectiveness of the SQM.
coordination of quality improvement implementation. The EY approach is to design an SQM that is
As such, it reviews the results of the internal AQR consistently applied across the entire network of
program and external audit firm regulatory reviews, member firms to promote consistent engagement
as well as any key actions designed to address areas quality and operating effectiveness. This is especially
for improvement. important in a global economy where many audits are
The recent results of such monitoring, together with transnational and involve the use of other EY
feedback from independent audit regulators, provide member firms.
EY Israel with a basis to conclude that our internal The standard requires firms to design and implement
control systems are designed appropriately and are a system of quality management by December 2022.
operating effectively. EY Israel has commenced work to implement the new
standard alongside the EY System of Quality
Audit quality indicators
Management transformation program. Our initial
Audit quality is not defined in professional standards, steps have included:
and stakeholders may have different views on how it
• Identifying the functions and service lines that
should be measured. While no single reportable
provide support for, or perform engagements
metric or set of metrics can be viewed as a sole within the scope of ISQM 1
indicator of audit quality, a set of metrics can be used
• Establishing a program governance structure to
to give an indication of audit quality. manage design and implementation of a system
Assurance leadership monitors the execution of the of quality management that complies with ISQM
EY strategy and vision by local geographies through a 1 with representatives from various functions
and service lines
combination of metrics or audit quality indicators
(AQIs). These include: external and internal • Identifying and assessing quality risks, and
documenting responses in accordance with the
inspection results; Milestones performance; people
network-developed approach
surveys; and retention rates.
• Identifying and understanding network resources
AQI dashboards help to inform the leadership about and their implementation or use by the country
whether particular actions are having the intended in its SQM
effect, to provide an early warning where • Challenging and identifying enhancements to the
intervention is warranted and to support the existing quality control system to achieve
effectiveness of the overall EY system of quality compliance with the new standard
management. We believe that implementing the requirements
within ISQM 1 will be useful to improving quality at
Transparency Report 2021 | 15the firm and engagement level, because an effective takes users through the acceptance and continuance
system of quality management is foundational to requirements, and identifies the policies and
achieving consistent engagement quality. references to professional standards needed to
assess both business opportunities and associated
Client acceptance and continuance risks.
Global policy on client and engagement As part of this process, we carefully consider the risk
acceptance characteristics of a prospective client or engagement
and the results of due diligence procedures. Before
The EY global policy on client and engagement
taking on a new engagement or client, we determine
acceptance sets out principles for member firms to
whether we can commit sufficient resources to
determine whether to accept a new client or a new
deliver quality service, especially in highly technical
engagement, or to continue with an existing client or
areas, and if the services the client wants are
engagement. These principles are fundamental to
appropriate for us to provide. The approval process is
maintaining quality, managing risk, protecting EY
rigorous, and no new audit engagement may be
people and meeting regulatory requirements. The
accepted without the approval of Regional or
objectives of the policy are to:
local PPD.
• Establish a rigorous process for evaluating risk
and making decisions to accept or continue In the EY annual client and engagement continuance
clients or engagements process, we review our service and ability to continue
• Meet applicable independence requirements to provide a quality service, and confirm that clients
share EY Israel’s commitment to quality and
• Identify and deal appropriately with any conflicts
of interest transparency in financial reporting. The lead audit
engagement partner of each audit, together with our
• Identify and decline clients or engagements that
Assurance leadership, annually reviews our
pose excessive risk
relationship with the audit client to determine
• Require consultation with designated
whether continuance is appropriate.
professionals to identify additional risk
management procedures for specific high-risk As a result of this review, certain audit engagements
factors are identified as requiring additional oversight
• Comply with legal, regulatory and professional procedures during the audit (close monitoring), and
requirements some audit clients are discontinued. As with the
In addition, the EY global policy on conflicts of client acceptance process, our local PPD is involved in
interest defines global standards for addressing the client continuance process and must agree with
categories of potential conflicts of interest and a the continuance decisions.
process for identifying them. It also includes Decisions about acceptance or continuance of clients
provisions for managing potential conflicts of interest and engagements consider the engagement team’s
as quickly and efficiently as possible, using assessment of several risk factors across a broad
appropriate safeguards. Such safeguards may include range of categories including management’s attitude,
obtaining client consent to act for another party internal controls and related parties.
where a conflict of interest may exist, establishing
separate engagement teams to act for two or more
parties, implementing appropriate separations
between engagement teams or declining an
engagement to avoid an identified conflict.
The EY global policy on conflicts of interest and
associated guidance consider the increasing
complexity of engagements and client relationships,
and the need for speed and accuracy in responding to
clients. They also align with the latest International
Ethics Standards Board for Accountants (IESBA)
standards.
Putting policy into practice
We use the EY Process for Acceptance of Clients and
Engagements (PACE), an intranet-based system, for
efficiently coordinating client and engagement
acceptance and continuance activities in line with
global, service line and member firm policies. PACE
Transparency Report 2021 | 16You can also read
