Audit quality:
a globally
sustainable
approach
Contents
EY structure and governance
03
Foreword
Mark Weinberger
Felice Persico 04
05
Introduction
Viewpoint: Sir Richard Lambert
SAQ: a sustainable focus on audit quality
Tone at the top
06
07
08
10
People
Americas
We are investing in our people to improve their engagement, enhance their
professional skills and provide them with an enriching career experience that
helps them to be the best they can be.
10
30
Regions
16
Simplification
Countries
By simplifying our audit methodology and processes, where possible, we create
effective and efficient systems that support consistency in our audits worldwide,
while still ensuring our approach is tailored to each individual engagement.
EMEIA
12
99
Regions
Countries
5
22
Regions
Countries
Japan
1
1
Region
Country
EY structure and governance
EY is a global leader in assurance, tax, transaction and advisory
services. Worldwide, 212,000 people in member firms in more
than 150 countries share a commitment to building a better
working world. In today’s global market, EY’s integrated audit
approach is particularly important in the delivery of high-quality
multinational audits.
20
Transformation and innovation
Technology has revolutionized the way we leverage data and analytics to execute
the audit, and we have invested in innovative new tools to make the EY audit even
more quality-conscious, agile, efficient and relevant.
EY refers to the global organization, and may refer to one or
more, of the member firms of Ernst & Young Global Limited
(EYG), each of which is a separate legal entity. EYG, a UK
company limited by guarantee, is the central entity of EY.
It does not provide services to clients.
26
Accountability and enablement
EYG sets policy, coordinates the member firms and promotes
cooperation among them. Its objectives include promoting the
provision of exceptional, high-quality client service by member
firms worldwide.
We strive to measure the quality of our performance wherever possible, and we
have established systems of accountability and enablement to help our auditors
perform audits that are of the highest quality.
The member firms’ obligations and responsibilities are
governed by the regulations of EYG and various other
agreements. The Executive layer of EY’s operating model
includes the Global Executive (GE), its committees and
teams, and the leadership of the four Areas — the Americas,
02
Asia-Pacific
Audit quality: a globally sustainable approach
Audit quality: a globally sustainable approach
EMEIA (Europe, the Middle East, India and Africa), AsiaPacific and Japan. The four service lines are also represented
on the GE.
This streamlined structure allows EY member firms to further
enhance their delivery of consistent, exceptional client service
worldwide, with the Executive coordinating a global approach
to strategy, quality, risk management, business planning,
investments and priorities.
This operating model allows for greater stakeholder focus in
the 28 Regions, permitting member firms to build stronger
relationships with clients and others in each country and be
more responsive to local needs.
The Global Vice Chair, Professional Practice, also known as
the Professional Practice Director (PPD), works directly with
Area PPDs to establish global audit quality control policies and
procedures. Area PPDs are overseen by the Global PPD and the
Area Assurance Leader, while the Global Vice Chair, Professional
Practice is overseen by the Global Vice Chair, Assurance. This
helps provide greater confidence as to the objectivity of audit
quality and consultation processes.
03
Building a better
working world
The quest
for quality
Mark Weinberger
EY Global Chairman and CEO
Felice Persico
EY Global Vice Chair, Assurance
EY
B
is committed to our purpose of building a better working
world. Through this purpose, we build trust and confidence in
the capital markets and help to drive sustainable growth. By
fulfilling this purpose, we honor our commitment and leave a
legacy for all of our stakeholders.
eyond any doubt, audit quality is — and will always be — the primary focus
of our audit practices. It is the single most important dimension for our
decision making and is the key measure on which our reputation stands.
Quality is the foundation for exceptional service to our clients; it is what we take
pride in; it is integral to all that we do; and it is central to our responsibility to
serve the public interest by providing confidence to the capital markets. Quality
is a core component of our global efforts to build a better working world for our
people, our clients and our communities.
For the world’s capital markets to function properly, the public must have
confidence in financial reporting. Our audits contribute to establishing this
confidence and it is therefore imperative that our audits are of the highest quality.
That is why I am committed to reinforcing in EY the importance of a culture
based on delivering high audit quality. This requires more than simply talking
about it from time to time — as partners and other senior leaders, we have to
make it happen. This is what we have done and what we will continue to do.
To support our quality objective we have developed our Sustainable Audit Quality
(SAQ) program, representing EY’s globally consistent approach, commitment
and ongoing focus to deliver the highest quality audits in the profession.
We will implement our approach to SAQ on a consistent basis to support our
professionals to deliver the highest quality work. In executing this program, we
will further embed integrity, auditor independence, professional skepticism and
objectivity into every facet of our work.
At EY, we work hard to embed our commitment to audit quality across our
organization globally. We have put in place the right structures and processes
to continuously improve our audit quality, and we demonstrate it through our
culture, our behavior and in the tone we set from the top.
You will see in this publication the approach we have taken to address each of the
components of the SAQ agenda — tone at the top, people, simplification, audit
transformation and innovation, accountability and enablement — and how much
of our focus is on delivering high-quality audits.
As auditors, we provide a vital function — to serve the public interest — and it is
imperative that we perform that function at the highest level. We are custodians
of the profession and we have a duty to strengthen it, future-proofing it for
generations to come.
04
Audit quality: a globally sustainable approach
Audit quality: a globally sustainable approach
05
Viewpoint
Quality must
always be EY’s
first priority
SAQ: a sustainable
focus on audit quality
Sir Richard Lambert
on behalf of the EY Independent Non-Executives
I
n May 2015, EY partners from around
the world voted to simplify and
strengthen the organization’s
governance arrangements, in line with
the recommendations of a Governance
Working Party on which I had sat. As a
result, the Global Advisory Council has
been reshaped into a stronger and more
focused Global Governance Council (GGC),
on which the five Independent NonExecutives (INEs) all sit, and which is
intended to give both clearer lines of
accountability for the organization’s
leadership, and a stronger voice for EY
partners around the world.
One consequence of the change that is
particularly relevant to this publication has
been the formation of a number of new
sub-committees — one Partner Matters
sub-committee for each EY geographic area,
along with Finance and Audit, Global Chair/
CEO Performance and Remuneration, and
the Public Interest.
From the perspective of the INEs, this latter
Public Interest Sub-Committee is perhaps
the most important initiative. It is made up
of all the INEs, together with Penny Stocks,
the Presiding Partner of the GGC, and Lou
Pagnutti, EY’s Global Managing Partner
— Business Enablement. I act as chair. At
our early meetings, we have decided to
focus our discussions on the big picture:
issues concerning the overall leadership of
the organization, big reputational
challenges if and when they arise and,
above all, audit quality.
06
Steve Konenkamp
EY Assurance Global Deputy Vice Chair
This must always be the first priority of EY,
and all the more so at a time when global
regulatory bodies such as the International
Forum of Independent Audit Regulators
(IFIAR) and the Financial Stability Board
are setting challenging targets for improved
results on the part of the audit profession
around the world, and placing a high priority
on root cause analysis of the big firms’
audit performance.
In response, EY has launched its Sustainable
Audit Quality framework around the world,
highlighting auditor integrity and ethics, and
focusing on issues such as tone at the top,
people and the simplification of the audit
process. The INEs welcomed this initiative,
and were enthusiastic about EY’s efforts to
simplify and bring greater consistency to its
work through innovations such as EY
Canvas, a new audit and workflow tool that
was introduced in May 2015.
Other topics covered by the Public Interest
Sub-Committee so far have included EY’s
whistleblowing procedures and its response
to regulatory changes. In the coming year,
we intend, among other things, to discuss
EY’s approach to network governance, an
issue on which regulators are placing more
emphasis as professional services firms
become increasingly integrated around
the world.
As well as focusing on the audit function,
we INEs are also concerned with those other
aspects of the organization’s business that
shape public perceptions of its brand and
values, and hence its long-term wellbeing. So
we take a keen interest in areas such as EY’s
approach to risk management, its acquisition
strategy, significant claims and litigation
affecting the business, and the way in which
EY manages the balance of its resources
between audit and non-audit services.
EY’s INE team has added one new member,
based in Asia, over the past year. We expect
our workload to increase in the coming 12
months, and the intention is to add one more
to our number in Europe. We believe we have
a duty of care to the global organization,
but we do not think of ourselves as
corresponding to the non-executive directors
of a listed company. Instead, we believe we
are accountable to the public interest — a
concept that is difficult to define in theory,
but relatively easy to identify in practice. We
keep this priority always firmly in mind,
which means we place a high premium on
constructive challenge and debate, on
independence and on transparency. We
work well together and are happy to be
questioned and challenged about our role
and our activities.
We are confident that EY’s leadership takes
our views seriously and responds in a timely
way to the questions and challenges we
raise. At a global level, the priority for us
INEs in the coming year will be to monitor
the success of the Sustainable Audit Quality
program, to build an effective Public Interest
Sub-Committee, and to help the new Global
Governance Council make a positive impact
around the global organization as a whole.
Audit quality: a globally sustainable approach
T
here are many important programs
that have been launched across EY’s
Assurance practices in the past few
years. But none is as important as
Sustainable Audit Quality (SAQ).
SAQ is our globally consistent approach
to implementing the highest level of
audit quality across the organization.
Launched in 2015, it is the highest priority
for our Assurance practices.
We intentionally used the word “sustainable”
in SAQ to demonstrate that this is not a
one-off, short-term initiative, but an ongoing
process of improvement. EY has had a
common audit methodology for some time,
and now we have a common language and
processes regarding audit quality across
the entire organization.
This is an essential part of our purpose of
building a better working world. Fulfilling
our purpose requires EY to serve the public
interest and strengthen trust and confidence
in the capital markets. We can only do this
by continually improving the quality of
our audits.
There are six components to SAQ. Each is
briefly summarized below and explained
in more detail in the later chapters of
this publication:
Tone at the top: The internal and external
messages around quality that EY’s
leadership team send, including from
all our audit partners.
Audit quality: a globally sustainable approach
People: Specific initiatives that support
our auditors in devoting time to performing
quality work. This covers recruitment,
retention, learning and workload
management, and includes consideration
of the type of skills and capabilities we
need now and into the future.
Simplification: How we are simplifying and
standardizing our methodology, forms,
templates and checklists to improve the quality,
consistency and efficiency of our audits.
Transformation and innovation: Our
investment to improve the audit process
through the use of the latest technology
and techniques. In addition to the use of
technology, the application of analytics to
the audit process is an essential focus.
Enablement, quality support and
monitoring: How we are helping teams
manage their responsibility to deliver
quality. This includes efforts to support
them through coaching and analysis
of the root causes of both defects and
high-quality work. We are building a
network of quality enablement leaders and
have established a Global Audit Quality
Committee. It also includes the introduction
of milestones execution expectations for
our public interest audit clients and the
monitoring of our teams’ achievement
of these milestones.
Accountability: Each of our partners
involved in executing audits is accountable
to deliver high-quality work.
EY has had a
common audit
methodology for
some time, and
now we have a
common language
regarding audit
quality.
We are enhancing our accountability
framework to provide for the highestquality audits.
We are constantly reinforcing the
importance of the six components.
It is something we talk about to every
regional Assurance leader and every
partner. Audit quality and the key elements
of SAQ are something every senior
manager, manager and team member
must understand and be committed to
implementing. SAQ is essential to all our
goals and ambitions.
We have much work to do. While the vast
majority of our audits currently are of a high
quality, and we reward and celebrate good
practice, we do not have the consistency of
execution that we would like, and improving
audit quality will remain a continuous effort.
We will report on our progress with
SAQ across the six components, and
ensure that quality remains our priority
in the years ahead.
07
Leadership
Tone at the top
The senior leadership at EY is responsible
for setting the right tone at the top
and demonstrating our commitment to
Sustainable Audit Quality (SAQ). This is why
“Tone at the top” is the first component of
SAQ and why we place
great emphasis on
culture, consultation
and communications.
Our shared values, which inspire our people
and guide them to do the right thing, and our
commitment to quality, are embedded in who
we are and in everything we do.
EY’s approach to
business ethics and
integrity is embedded
in our culture of
consultation, the
training programs we
use and our internal
communications.
Senior management
regularly reinforces
the importance of
performing quality
work, complying with
professional standards,
reviewing audit
evidence skeptically, adhering to policies
and leading by example.
Our culture
strongly supports
collaboration, and
places special
emphasis on the
importance of
consultation.
By “the top,” we do
not just mean the
Global Chairman and
Chief Executive or
the Global Vice Chair
for Assurance. The
messages sent by our
nearly 4,000 audit
partners across the
globe are an essential
part of the tone at the top as well. They have
strong visibility, both internally and externally,
and play a vital role in maintaining a culture
based on quality.
While tone at the top is vital, our people must
also understand that quality and professional
responsibility start with them.
We use internal communications to
reinforce that message — including
our recently launched campaign under
the slogan “What we do matters.” This
includes a video showing how an auditor,
undertaking high-quality work, can help to
build a better working world.
One part of how we are
setting the tone at the
top is a video showing the
way the “ripple effect” of
an audit can help build a
better working world.
It demonstrates the “ripple effect of
a quality audit.” By asking the right
questions, our auditors can serve the
public interest, and thereby help build
businesses, boost local economies and
support communities.
There are important roles for individuals
here, but there is also a crucial need for
teamwork. Our culture strongly supports
collaboration, and places special emphasis
on the importance of consultation in dealing
with complex or subjective accounting,
auditing, reporting, regulatory and
independence matters.
We believe it is important to determine
that engagement teams and clients
correctly follow consultation advice, and
we emphasize this when necessary.
Our stance has consistently been that no
client is more important than professional
reputation — the reputation of EY and the
reputation of each of our professionals.
Sustainable Audit Quality
A series of initiatives across six components
The auditing profession is facing a
period of change and challenge with
new accounting standards, a new
auditor’s report, innovation in methods
and processes using data analytics and
advanced technologies, an evolving
view of the public interest and increased
regulatory and other stakeholder interest
in the work we do.
One thing that is not changing, however,
is our commitment to the quality of the
audits we perform. Quality is central to
what we do and who we are. We know
that what we do, as auditors, matters
since audit services are vital to the public
08
interest and the effective working of the
capital markets around the world. Doing
the highest-quality work starts on each
audit, at the engagement team level, and
continues throughout to each and every
one of us at EY. Quality is the job of every
person at EY, not something that can be
outsourced to others.
Change and challenge is healthy and
we, at EY, do not shy away from the
changes and challenges we face. We are
embracing them and leading the way by
example. Our Sustainable Audit Quality
efforts described herein are evidence of
us leading the way.
Audit quality: a globally sustainable approach
Transforming
our people
model
Audit quality: a globally sustainable approach
Audit
transformation
and innovation
Enablement
and quality
support
Simplification
Accountability
Karen Golz, EY Global Vice Chair,
Professional Practice
Tone at the top
Leading by example
09
learning and development of our people
very seriously and delivered more than
5.6 million hours of learning across the
Assurance practice during 2015.
We have been reviewing and modernizing
our audit curriculum so that it is less biased
toward traditional classroom education that
involves the transfer of knowledge from a
facilitator to participants. Our learning now
incorporates a blend of on-demand video or
web-based learning and classroom-based
activities focused on simulation exercises.
In these, people are given simulations
on computer systems and work on them
in small groups, in the same way as they
would in an audit. This blend of learning
is intended not just to teach our auditors
what to think, but also how to think, since
they will be developing the deep, critical
thinking skills and business acumen that are
essential to delivering high-quality audits.
The first part of the curriculum redeveloped
to include blended learning was targeted
at managers, and we deployed our new
Assurance Manager Development Program
in 2014. Much of our Assurance Senior
Development Program has already been
deployed and programs for other grades
will be rolled out further into the future.
People
At EY, we recognize that the quality of our
people underpins the quality of the audit
work that we do. We are only able to deliver
high-quality audits because our people have
a high standard of skills, knowledge and
behaviors. So we have a number of global
initiatives in place to help our people make
the most of their abilities — at whatever point
they are at on their career journey.
We also recognize that we live in a world
where societal norms are changing rapidly.
We understand that not everyone who joins
EY does so with the intention of staying with
us until they retire. Nevertheless, whether
they stay with us for a few years or a few
decades, whether they leave us forever or
return to us at a later point in their career,
we want to see to it that they are always
developing their personal and professional
capabilities during their time with us.
The transformation of our people approach
is based on investing in our people to
improve their engagement, enhance
their professional skills and provide them
with an enriching career experience. Our
10
approach is summed up in EY’s employee
value proposition: “Whenever you join,
however long you stay, the exceptional
EY experience lasts a lifetime.”
Recruitment
The process of developing high-quality
auditors begins with recruitment. All
around the world, we have vigorous
selection processes in place so that
we recruit bright people, with the right
attitudes and behaviors, who will excel
in the audit profession.
In order to grow our audit practices — while
maintaining work of the highest quality —
we are making a considerable investment
in the recruitment of new auditors. As audit
practices grow, we will continue to recruit
high-quality people who possess the skills
required to drive the organization forward.
When we hire, we look for people who
have demonstrated an ability to work in
teams, operate with high integrity, have an
affinity for audit and accounting, and strong
business acumen, as well as leadership
Retaining good
people is critical
to audit quality,
so we have made
retention a priority.
In order to understand the impact of the
Assurance Manager Development Program
on audit quality and other criteria, EY
measured the effectiveness of the program
by interviewing 122 managers who had
participated in it.
Overall, 86% of those who attended the
training said it was relevant to their work,
91% rated it as an effective learning
experience and 85% confirmed they felt
confident about applying what they had
learned on the job.
EY invested more than US$5m in
developing the Assurance Manager
Development Program, which has already
won two industry awards. We will continue
to invest in enhancing our curriculum as
part of our commitment to audit quality.
Retention
Annual turnover within EY’s audit practice
is around 23% globally. Since we know
that retaining good people is critical to
maintaining audit quality, we have made
retention a priority, particularly in our
“attrition hotspots” (areas of the world
where the turnover rate appears to be
higher than it should be).
86% of those who
attended the
Assurance Manager
Development
Program said that
it was relevant to
their work.
Retention can be a particular issue in fastgrowing markets, where businesses are
rapidly expanding and recruiting personnel
from EY and our competitors in order to
populate their finance functions. We work
with local teams to agree on action plans
and engage with our people to improve
retention; for example, by running focus
groups to discuss what we can do to
improve their day-to-day experience.
Central to our retention strategy is ensuring
that people understand the career value of
audit. So we have international programs
for new seniors, new managers and
new senior managers where we provide
additional learning, reinforce the value of
audit and the importance of quality, and
also emphasize the long-term opportunities
EY can offer. During these programs, we
highlight the findings from our Career
EY’s people in numbers
material. Then we equip them with the
skills and technical knowledge to develop
the professional skepticism needed to be
effective auditors.
The initial training that our people receive
is delivered to a consistently high standard
so that we produce auditors of equally high
caliber in every market in which we operate.
Audit Academy
The Audit Academy is how we describe
the core audit learning that all our people
undertake around the world. We take the
Audit quality: a globally sustainable approach
72,650
45%
63,927
678
people work in EY’s Assurance service line globally
people work in EY’s audit practices globally
Audit quality: a globally sustainable approach
of EY’s audit professionals
are female
female audit partners
at EY globally
11
1. People
Value Study, last conducted in 2013, which
interviewed more than 6,000 former and
current employees (including those who
have left the organization and returned at
a later date) to find out why people choose
to leave or stay at EY.
The study uncovered three key findings that
underscore the value of building a longterm career at EY:
1.Time at EY means higher potential
earnings for your lifetime.
2.Time at EY can help you obtain a
top job.
3. The most valuable learning is at the
manager and senior manager level.
We also use the Career Value Study
to advise our leaders on how they
can personally help to retain talented
individuals within EY’s audit practices.
They are helped to encourage their people
to strive to become senior managers,
to recognize them for the contributions
that they make, to help them to better
understand the link between their
performance and their pay, and to foster
an environment that provides the flexibility
they need to succeed.
In our messaging to our people, we
highlight the huge variety that comes
with a career in audit — they get to work
with a variety of enterprises, carrying
out different roles, in different locations,
within different teams and for different
managers — and we explain that this variety
helps them to build a set of invaluable
skills that would be harder to acquire in a
different environment. These skills include
the ability to coach and to be coached, as
well as communication, negotiation and
presentation skills.
In order to focus the attention of our
leaders even more closely on retention, we
introduced a global retention goal for the
2016 financial year. Our aim is to reduce
attrition and, therefore, maintain greater
continuity of personnel on audit teams.
Engagement
Research carried out by EY has found
that there is a strong correlation between
engagement and retention; those regions
that engage with their people most effectively
also retain them most effectively. So we
monitor engagement closely.
We engage with our people in several ways.
The first is through “counseling families”:
12
We work with local
teams to agree on
action plans and
engage with our
people to improve
retention.
small groups of around 25 people who meet
every couple of months. These meetings
are an opportunity for leaders and teams
to connect and communicate on a two-way
basis, as well as an opportunity to recognize
and celebrate achievements. It is in these
teams and our audit teams that we engage
our people in our purpose and their role in
protecting the interests of investors.
Engaging people
Karen Hochrein, EY Global Assurance
Talent Leader
Number of audit professionals
FY15
FY14
FY13
3,739
3,589
3,604
Executive directors, senior
managers and managers
11,564
11,091
10,961
Seniors and staff
48,624
44,424
42,898
Total
63,927
59,104
57,463
16.10
15.47
14.94
Audit partners
Ratios of partners to other
audit professionals
Average length of EY service of
audit professionals (years)
FY15
FY14
FY13
Partners
18.1
18.0
17.7
Executive directors
16.2
17.6
17.7
Senior managers
10.4
10.4
10.3
Managers
6.9
7.0
6.9
Seniors
3.8
3.9
4.0
Staff
1.4
1.4
1.5
Retention of audit professionals
Total
FY15
FY14
FY13
76.8%
76.6%
78.8%
We are passionate at EY about
engagement. Engaged people are willing
go the extra mile, are more committed
and inclined to stay longer with the
organization for the right reasons.
So we are proud to see engagement
levels increasing. Our latest Global
People Survey showed improvements
to engagement in areas including the
intention to stay, recommending EY
firms as employers and being extremely
satisfied with EY as a place to work.
From research within EY, we know
engagement levels are strongly
influenced by the team environment,
interesting and challenging work and
opportunities to develop professionally
as well as personally. We therefore put
great emphasis on supporting teaming
by implementing counseling families,
assigning people to engagements where
they can excel and learn, and developing
highly effective training programs. I am
particularly proud of our audit academy,
which uses blended learning techniques,
including simulations that help to
build experience and allow for wider
discussions with colleagues and trainers.
We have reinvented our approach to
formal training and now offer a deeper
learning experience. It takes us closer
to our goal of providing “world-class
learning.” The results are teams and
individuals who are better prepared
to do high-quality audits, strongly
motivated and more highly skilled. They
enjoy their work and know that our audit
matters and they make a difference.
Source: EY
Audit quality: a globally sustainable approach
Audit quality: a globally sustainable approach
Second, we realize that clarifying people’s
career paths is a good way of engaging
with them. So we have created career
framework documents for every grade.
These explain what the organization
expects at each level and what learning
and experiences they can undertake in
order to develop themselves.
As part of this commitment to clarifying
career paths, we are also introducing a new
initiative called “experience management”
across the world. We have changed the
focus of our teams involved in assigning
people to audits from one of assignment to
that of experience management. It is their
responsibility to confirm that our people are
scheduled onto jobs on which they can utilize
their skills and competencies, and that help
them to develop new skills while supporting
the needs of EY. Managers and above in
audit are also in the process of identifying
a primary and secondary industry sector
to specialize in. By developing in-depth
knowledge of their clients’ sectors, they
will be able to better understand the risks
involved in the entities we audit.
Third, we are helping our leaders to become
more inspirational to the people who report
to them. We are inviting every audit partner
at an EY member firm in the world to have
a 90-minute career conversation with a
very senior leader within the organization.
Having received good coaching themselves,
our leaders will be better equipped to give
good coaching to others.
Every year, we conduct a Global People
Survey, which allows us to assess the
engagement levels of our people. Our
most recent survey, conducted in 2015,
found that nearly three quarters (72%) of
people in the Assurance service line had a
favorable attitude in terms of engagement —
a considerable increase from 2014, when
that figure stood at 68%.
Furthermore, the proportion of Assurance
people who said that they would prefer
to remain with EY rather than leave had
climbed to 66% from 62% in 2014.
Another important way in which we
engage with our people is through the
Global Assurance Talent Forum. This is a
representative group of high-performing
managers and senior managers from every
Region, which meets three times a year to
discuss various topical issues, including
audit quality.
Mobility and workload management
Our resourcing strategy supports audit
quality by ensuring that we have the right
people, with the right skills, in the right
place, at the right time. At one end of the
spectrum, this may entail relocating a leader
with in-depth financial services knowledge
to a member firm across the world in order
to head up a banking audit. At the other end,
we may support an audit team by arranging
for our Global Talent Hubs (support centers
in India, the Philippines and other locations)
to handle some of the more objective work
associated with an audit.
We also have dedicated mobility programs
in place for our high-potential people, which
help them to become better auditors of
international clients. Our New Horizons
program offers placements that are three
to six months long, while our Global
Exchange Program offers placements of
between 18 months and two years.
Audit is seasonal, particularly where
all companies have the same year end.
This means that our auditors have peaks
and troughs in their workload. A flexible
approach works for both EY and our people.
So we allow our people to take more time
off in quieter periods and have developed
innovative solutions. In the Americas, for
instance, we have a program for some
professionals who only want to work at
certain times of the year. We have also put
in programs to better phase the annual audit
cycle to improve workload and quality.
In every Region, we have an Assurance
Talent Leader who is responsible for
overseeing the Assurance talent agenda.
Their overall objective is to develop first-class
audit professionals and they will focus on
areas such as onboarding of new recruits and
managing individual client portfolios, as well
as ensuring attendance at learning events.
Diversity
We have focused particularly hard on
promoting gender diversity within our
audit teams over recent years. In 2015,
over a third (34%) of our new partners in
assurance around the world were female,
13
1. People
World view
By developing in-depth
knowledge of their
clients’ sectors, our
people better understand
the risks involved in the
entities we audit.
up from 28% the previous year. This
achievement is the result of our proactive
strategy toward female audit professionals.
We identify women at key transition points
during their career at EY — for example, at
manager and senior manager levels — and
connect them with our senior leaders, both
male and female.
As an organization, we are focused on
promoting more women into senior
positions, and female talent is always
considered when we undertake succession
planning. We also look to recruit audit
professionals from a broader range of
backgrounds than in the past.
Awards
At EY, we are committed to continually
improving the working environment for all
our people around the world. As a result of
our efforts, the organization and member
firms regularly feature on rankings of “best
places to work” around the world. Here are
some examples of where we have featured:
DiversityInc Top 10 Companies for
gg
Mentoring (2015) — ranked 1
Best Companies for Mums in
gg
Singapore (2014) — ranked 1
Universum’s Most Attractive Employer
gg
rankings — Business (2015) — ranked 3
DiversityInc Top 50 Companies for
gg
Diversity (2015) — ranked 4
Sunday Times 25 Best Big Companies
gg
to Work For (2015) — ranked 14
Fortune 100 Best Companies to Work
gg
For (2015) — ranked 79
14
Americas
Asia-Pacific
EMEIA
Japan
The scarcity of accounting
professionals in the area,
particularly in the US, means
that talent retention is a
focus for Frank Mahoney,
EY’s Assurance Leader in
the Americas.
“People are the most
important element in driving
audit quality,” says Edward
Ho, EY’s Asia-Pacific
Assurance Leader. He
takes every opportunity to
emphasize this message in
leadership meetings.
EMEIA is experiencing an
unprecedented wave of tenders
in response to the upcoming
implementation of EU audit
legislation and the recently
introduced Companies Act
in India.
Hitoshi Matsuoka, Japan’s
new Assurance Leader,
says that there is a renewed
focus in Japan on equipping
EY’s people with the skills
and training they need to
be effective auditors.
“More than ever, audit quality
is our foundation,” says JeanYves Jégourel, EY’s EMEIA
Assurance Leader. “We are
reallocating resources in terms
of sector expertise, client
experience and capabilities to
bring together the best of EY
to execute these new audits
and enhance quality.
“We know that to deliver
quality audits, the focus has to
be on ensuring that our people
have the right technical skills
and knowledge, and that starts
with attracting the right talent
to our audit teams.”
Frank Mahoney
EY Assurance Leader
How I am delivering
audit quality
Camille Douglin
Senior Manager, US, Ernst & Young LLP
I joined EY as a manager four years ago. What struck me
immediately was that the people at EY were down-to-earth
and easy to work with, and there was a lot more teaming and
collaboration than I was used to.
I now spend a lot of my time coaching my team, supporting them
on their day-to-day activities and answering their questions. EY
has supported my own development by sending me on training
programs and to executive events. I also find the webcasts, the
region-wide calls and the weekly Audit & Assurance guidance
emails extremely useful in ensuring that I apply the guidance
appropriately and provide a high-quality audit.
EY is working hard in the
Americas to retain its audit
professionals, including
through the rewards and
recognition system, workload
management and the
celebration of high-quality
work. It is also streamlining its
client portfolio. “We are very
focused on managing our client
portfolio so that our teams
are not spread too thinly and
have time to do quality work,”
Mahoney explains.
Edward Ho
EY Assurance Leader
“In global meetings, Area
meetings and Regional
meetings, I talk about
developments across the
Assurance practice. Every
time, the first sentence from
me is about quality and the
role that our people play in
delivering this.”
Rapid growth in some markets
means that EY in Asia-Pacific
has to work to ensure our
people are encouraged to take
a flexible approach and achieve
a better work/life balance.
Jean-Yves Jégourel
EY Assurance Leader
”This competitive environment
creates an increasing demand
for innovation that, in turn,
will help our audit practices
transform themselves
to contribute to a better
working world.”
Hitoshi Matsuoka
EY Assurance Leader
In Japan, there are significant
efforts under way locally to
support our people to develop
the right attributes that
help them to become better
auditors at each and every
step of their career.
As an auditor, what I like is the fact there is so much trust in us,
the interaction that I get with clients and the challenge of the
work. Audit is a high-speed industry and a high-performance
one. It’s always evolving and it brings out skills that I didn’t know
I had. I would like to become a partner with EY in the future and
I’m working towards that goal.
What we do is ultimately for the greater good of the global
markets. Keeping that mind-set at the forefront of what I do on
a daily basis helps even the most mundane tasks make sense.
Audit quality: a globally sustainable approach
Audit quality: a globally sustainable approach
15
has also helped us to change the way
in which we present GAM and to make
it flexible and topic-based rather than
workflow-driven.
GAM is now categorized to bring together
the requirements of the auditing standards
and related guidance so that auditors
can easily identify the appropriate
methodology to apply to their audits.
Our topic-based GAM includes all the
requirements of the International
Standards on Auditing (ISAs) and the
Public Company Accounting Oversight
Board (PCAOB) auditing standards.
Since our auditors use links on EY Canvas
to access GAM, they will automatically be
directed to the part of the methodology
that is relevant in the context of their
work. For example, if they are trying to
document a client’s revenue process in
EY Canvas, they can click on a link that
takes them to the appropriate part of the
methodology that will provide guidance
on that activity.
Simplification
The simplification of our audit methodology
and associated guidance is an important
component of our strategy to deliver
Sustainable Audit Quality. Simplification
underpins efficient and effective audit
processes that are customized to
the requirements of each individual
engagement. It also supports consistency
of processes on audits.
The more consistency we can achieve,
and the more transportable our audit
processes are, the easier the coaching and
training of our people becomes, since they
can work in a similar way on each audit
that they are assigned to. This, in turn,
helps them to do a better job because
they will be able to immerse themselves
in the most important areas of the audit
even more quickly.
Global Audit Methodology
Our Global Audit Methodology (GAM) is
what we use to interpret and apply both the
international and domestic audit standards
that exist in the jurisdictions in which we
operate. As the number of audit standards
16
has increased in volume and complexity
over time, so has our GAM.
Realizing that we needed to make GAM
easier to use, we began the process of
simplifying it as part of our strategy. We
started by creating a more simplified
methodology for our private company audit
clients and then extended that simplified
methodology to the rest of our client base.
Throughout the process, we worked with
audit practitioners to develop and review
the new GAM.
Although we redesigned certain aspects
of our methodology, this process of
simplification was focused on simplifying
the manner in which GAM is presented and
making it easier to understand by using
external editors to help us to write more
clearly, concisely and consistently. We have
made greater use of interactive graphics to
display the methodology.
Our leaders say…
“This is a difficult and
complex endeavor. But we
don’t have to make it more
difficult than it needs to be.
So we’re working to simplify
by making this difficult job
as easy as it can be, while
recognizing that it never
will be easy.”
Bob Landwehr, Deputy Director,
Global Professional Practice, EY
Topic-based GAM is made even more
dynamic by the existence of on-demand
“tips” and “examples” that are only
displayed once an interactive icon has
been clicked. A tip is a helpful reminder
to auditors, whereas an example might
be a practical explanation of how an audit
requirement can be met. This means that
auditors may first read the requirements
and guidance in the methodology and then
click on the tips and examples if they need
more information.
Following its revision, GAM is more
accessible and easier to understand,
with the volume of methodology that
a user typically experiences being reduced
by more than 50%. This is beneficial to all
our auditors, but particularly those for
whom English is a second language.
Not only does our revised, topic-based
GAM read very well, it also translates
easily into multiple languages.
Customization
Our audit methodology is based on the
ISAs, which are applied either directly
or indirectly in more than 100 countries
around the world. Yet, while it is based on
the international standards, it also includes
profiling functionality that means it can be
customized according to the requirements
of a particular audit.
The introduction of EY Canvas, the new
technology tool we are using to plan, perform
and document our audits (see page 21),
Audit quality: a globally sustainable approach
Audit quality: a globally sustainable approach
For example, where appropriate, it can be
customized to display methodology relating
to the PCAOB auditing standards, which
apply to US listed companies. It can also be
customized according to whether an audit
is of a complex or a non-complex entity,
and whether it’s a listed audit or a complex
group audit. The result is that we have a
number of different audit approaches that
share a single methodology.
Regardless of the nature of the audit, GAM
specifies that risk assessments be carried
out to determine the nature, timing and
extent of our audit procedures. It also
emphasizes the requirement to exercise
appropriate professional skepticism in the
execution of audit procedures.
The more
consistency we
can drive, the
easier the coaching
and training of our
people becomes.
Application of methodology
It is not just the audit methodology itself
that matters; equally important is how we
apply it. That is why we have developed
customized forms and templates that help
our teams to complete the requirements
stipulated by the methodology more quickly,
more easily, or both.
While the forms and templates are Wordand Excel-based, they have additional
functionality that makes it possible for them
to be customized according to the work
the auditor is doing. We call these “smart”
forms. This functionality brings guidance
into the form on demand as and when the
auditor needs it.
For example, one of our smart forms relates
to the audit of the sales process, whereby
the auditor documents how the sales
process works on a step-by-step basis. The
auditor can use the form to identify the
points in the process where errors are likely
to occur or where risks are likely to arise,
and they can also use it to document the
controls that exist to mitigate those risks.
Since there are consequences to what they
enter, the information they include on the
form will have a direct impact on the way
in which they plan the audit, and they may
have to complete further documentation.
Using customizable forms and templates
to apply our audit methodology allows us
to deliver the less difficult aspects of our
audits both consistently and in a timely
manner. The result is that our auditors
can more easily and effectively apply the
requirements of the auditing standards and
our methodology.
17
2. Simplification
Coaching kits
We use coaching kits to further support
the application of our audit methodology.
A coaching kit is a guidance pack that is
designed to help the members of an
audit team to coach themselves on a
particular topic and transform knowledge
into practice.
Normally, a team will meet for a few hours
to upskill themselves using the content of
the coaching kit. Within each kit is a series
of exercises that help team members to
use the facts and circumstances of their
engagement to better understand and apply
audit concepts, along with related guidance
and tools.
A significant advantage of using coaching
kits is that the training is highly relevant to
the specific audit that the team is working
on, rather than simply being generic
classroom education. Auditors at all levels
participate in this coaching.
The coaching kit topics, which address
issues that we have observed in our internal
and external inspections, include:
Evaluating and testing management
gg
review controls
Auditing management’s estimates
gg
Using the work of internal audit
gg
and others
Auditing income taxes
gg
Scoping a multi-location engagement
gg
Commitment to excellence
By streamlining our methodology and
following consistent, clear processes, we
are able to provide a more relevant audit
to private companies. We can look more
deeply into our clients’ businesses and
provide actionable recommendations for
improvement, which increases the value
of our audits.
We regularly update both GAM and
our associated forms and templates to
reflect new standards, emerging auditing
issues and practical experience, as well
as to respond to internal and external
inspection results.
We have also revised GAM in key areas
such as fraud risks, auditing management’s
estimates and performing substantive
analytical procedures.
18
World view
How I am
delivering
audit
quality
Susie Kuo
Director, Ernst & Young (Australia)
What’s great about audit is that you get to work on a variety
of tasks and projects. My day or week is never dull.
EY reinforces the importance of audit quality in a number of
ways. These range from regular technical training to feedback
from external regulatory reviews, peer file reviews, internal
audit quality reviews and regular email updates on areas of
external regulatory focus.
Audit quality requires having a deep understanding of the
client’s operations, including the risks faced by the business. As
a team, we confirm that these risks are addressed in our audit
approach and reflected in the extent of our audit procedures.
To be an effective auditor, I believe that you need to have a
flexible and open approach with both clients and colleagues.
Having a good network is also important — I don’t have the
solution to all queries, but I know who to contact to obtain
the correct or most appropriate answer.
Americas
Asia-Pacific
EMEIA
Japan
“Topic-based GAM is a great
vehicle to improve audit quality
because it has made our
guidance easier to read and
follow,” says Frank Mahoney,
EY’s Assurance Leader in the
Americas. “Our people want to
succeed, they want to perform
high-quality audits and they
want to do great work.”
Quality is always top of the
agenda, says Edward Ho,
EY Asia-Pacific Assurance
Leader, and he believes that
EY’s revised GAM helps to
underpin high quality across
Asia-Pacific.
“In EMEIA, we have more
than 100,000 engagements
each year,” says JeanYves Jégourel, EY’s EMEIA
Assurance Leader. “We are
very diverse practices that
range from auditing small taxi
firms in the Nordics to auditing
large, global accounts. This
diversity of clients means
that we need to have a
methodology that is simple
for people to understand and
can be implemented in all our
different markets.”
Hitoshi Matsuoka, EY’s
Assurance Leader in Japan,
says that the introduction
of topic-based GAM will
significantly help its people
deliver audit quality.
Mahoney believes that the
topic-based nature of GAM,
together with the “robust
examples” included in the
methodology, mean that EY
professionals are equipped
with the knowledge to perform
audits to the very best of their
ability. “Topic-based GAM
is another tool to help our
professionals in their journey
to get it right.”
Ho particularly values the
way that all the relevant
audit methodology is easily
accessible and summarized in
EY Canvas. Taking the example
of audit risk, he says: “You
can identify all the audit risks
of major accounts. It makes it
easier to identify them.”
GAM is even more successful
at meeting these criteria
now it has been simplified,
he adds, “so I expect a
better understanding of the
methodology, better access
to it and greater consistency
in implementation.”
“Our focus as auditors has
to be on spending time on
the more difficult parts of
the audit. GAM provides
customizable forms and
templates to apply our
methodology, which allows
us to focus our time on the
areas of risk.”
We can look more
deeply into our
clients’ businesses
and provide actionable
recommendations
for improvement.
Audit quality: a globally sustainable approach
Audit quality: a globally sustainable approach
19
Our enhanced audit
execution tools
EY Canvas
It is our belief that the better the audit
process, and the better the project
management of an audit, the better the
auditors can focus on the more important
elements of an engagement, such as risk.
We have developed our global audit platform,
EY Canvas, to help our auditors focus on
risks and our responses to those risks.
Fundamentally, EY Canvas helps auditors
spend less time on the administration of
an audit and more time carrying it out.
More than 90% of the design and
content requirements of EY Canvas were
influenced by audit managers, senior
managers and partners who are current,
active practicing professionals.
EY Canvas helps us to communicate a
centralized plan to the global network of
participating teams, as well as the dayto-day tracking and management of the
Transformation
and innovation
Developments in global business and
technology capabilities over recent
years have provided an opportunity to
innovate the audit and to rethink the
way we leverage data and analytics to
execute the audit. We recognize that
continuous improvement in quality
requires challenging prior approaches
to audit execution.
We have embarked on a major initiative
to create an improved audit through
new technology and innovation. Our
investment in our tools is about making
an EY audit even more quality-conscious,
agile, efficient and relevant, so that teams
can deliver against our primary aim:
to provide the highest-quality audits
in the profession.
During our development process, we
have worked to focus our audits on
uncompromising quality and regulatory
compliance, ensuring that we act in the
interest of investors and stakeholders.
20
Our global capabilities mean we can
provide an audit with greater emphasis on
risk identification, and the opportunity for
our people to demonstrate an increased
level of professional skepticism.
We have made significant strides toward
integrating analytics and data capture
into the fabric of EY’s audit approach.
It will become the “new normal” for EY
auditors. By combining audit-relevant client
data with intelligent analytics, we can bring
a more valuable audit experience to our
clients. Our existing analytics apps are
already being used on more than 32,000
audits. Our rollout of our new serverbased apps designed for large data sets
has been prudent, focusing on a small
number of engagements at first, and
then steadily increasing.
execution of audit work. We better connect
our teams with the companies we serve
by providing real-time status updates on
audit processes and issues, regardless of
location. Greater transparency allows us
to capture, flag and share global audit
findings as they arise.
With color and visualization used to provide
a clearer, more comprehensive overview
of the audit plan, EY Canvas enhances
quality and performance by enabling our
teams to better align the significant risks
identified with the procedures that address
those risks. This helps our teams to better
tailor audit procedures to the specific
characteristics of the entity being audited
and, as the workflow is streamlined, it
improves the overall project management.
As the platform can be configured to the
specific characteristics of any organization,
our teams can quickly customize how they
approach the audit, and can have the latest
and most relevant information, such as
industry-specific tasks, delivered directly
to them. EY Canvas is designed to allow
us to adapt and evolve our software as we
enhance the functionality and respond to
changes in the accounting profession and
regulatory environment. This means that,
as the regulatory environment changes and
new guidance becomes available, relevant
updates will also be delivered to teams
through EY Canvas in real time.
The full version of EY Canvas has been
deployed in a phased approach, beginning
in May 2015. We currently have more than
85,000 engagements globally using EY
Canvas, covering 99% of our auditors.
In the initial deployment of the audit
platform, our auditors told us that it
allowed them to align procedures with audit
risks; conduct an effective review of audit
evidence; and tailor an audit approach to
the specific needs of the engagement.
What we are also seeing from our
auditors deploying the tool is that it is
making issues, challenges and items
identified in the audit more visible and
transparent, allowing faster communication
The right tools for the job
Our investment
in our tools is
about making
an EY audit
even more
quality-conscious,
agile, efficient
and relevant.
The impact of Big Data on the audit is
to transform how the audit is carried
out and it will allow us to better analyze
client information.
Audit quality: a globally sustainable approach
We’ve been working to transform the audit at
EY, with the primary goal of performing the
highest-quality audits in the profession. To
do this requires leading-edge technology, a
knowledgeable, experienced team, and new
approaches to project management to keep
the audit process on track, avoid surprises
and deliver on the audit plan. Our investments
help EY auditors to place greater emphasis
on identification and response to risk, and
to understand our clients’ businesses better
and provide insights.
EY Canvas can be tailored to respond to
our full range of clients. Our one system
worldwide supports day-to-day tracking
and managing of the execution of audit
work, better connecting our teams.
analytics, we will be poised to
provide better perspectives, deliver
richer insights and gain a deeper
understanding of transactions and
areas of risk.
Our analytics approach through EY Helix
will transform the audit by analyzing
larger populations of audit-relevant data,
identifying hidden patterns and trends
in that data and helping to direct our
audit efforts. As we successfully embed
The rapid pace of change in technology
means that our tools will be constantly
evolving. There will be continuous,
ongoing developments and new
innovations over the coming years,
incorporating lessons learned.
How our audit tools improve quality
EY Canvas
(our audit platform)
Facilitates early and active involvement of audit team members
gg
Offers real-time validation checks
gg
Provides a platform for increased practice monitoring
gg
EY Helix
(our analytics platform)
Increases our ability to focus on areas of risk, rather than testing a smaller sample
gg
Enhances ability to detect anomalies and unusual items
gg
Allows auditors to better understand clients’ operations and risks
gg
EY Atlas
(our research platform)
Improves relevancy of search results and ability to filter
gg
Improves access to desired content using enhanced browse functionality
gg
Provides a single source of technical accounting and auditing content
gg
Audit quality: a globally sustainable approach
21
3. Transformation and innovation
Integrating analytics and
data capture into the fabric
of our audit approach will
become the “new normal”
for EY’s auditors.
The two components of our global analytics approach
1. O
ur analytics tool
EY Helix will consist of a global analytics platform and audit
analytics library, which will allow our auditors to select the most
relevant analytic apps for their clients.
2. Audit analytics
professionals
A network of assurance-based analytics professionals focused on
transforming the audit and embedding analytics into their local
practice. Experienced teams manage the data capture and analytics
delivery process, while coaches help teams to adopt and embed
analytics into their audits.
to senior executives in the engagement.
This allows them to address and resolve
issues and findings earlier.
EY Helix
There has been a rapid expansion in the
types and volumes of data that our clients
produce — providing rich information that
can be leveraged in delivering an audit.
With the expansion of available auditrelevant data, we see the opportunity to
enhance what we do in an audit; to deliver
higher quality and a more robust service
that is of greater value to our clients.
Our analytics platform, EY Helix, allows
us to take advantage of advances in data
capture and analytics technologies. With
the key tenets of our audit investment
being audit quality, professional skepticism
and client relevance, we are using analytics
to enhance our risk focus and increase the
coverage of our audit procedures.
fraud and operational business risks. It is a
much better way of looking at information
than traditional sampling techniques.
Our analytics capabilities provide us with
the ability to analyze larger volumes of
audit-relevant data in order to derive
insights and a more in-depth understanding
of our clients’ financial close and business
operations. This helps us to better enhance
each of the key audit phases.
The key to EY Helix is structuring an audit to
take advantage of the analyses and embed
them in the audit from beginning to end. As
auditors work through the audit cycle, they
gain insights that allow them to develop
their approach, leveraging analytics to draw
more effective conclusions, develop a better
understanding of a client’s business and
stay focused on the risks identified.
By analyzing larger data populations, we
will bring new discovery techniques and
unique evidence into our audits, enabling our
auditors to better identify financial reporting,
Analyzing larger populations of data allows
our auditors to better understand the
business, be better equipped to identify risk,
ask better questions about the audit findings
and, with their attitude of professional
skepticism, appropriately challenge the
outcome. Analytics can be applied from the
scoping and planning of an audit, through to
assessing risks and details testing.
EY Helix is also used for journal entry testing
and transaction testing. This technology
provides a better way of testing the integrity
of transactional information and the accuracy
of that information.
EY Atlas
EY Atlas is our state-of-the-art global
accounting and financial reporting research
platform. This tool provides our auditors
with an integrated, consistent, easy-to-use
way to find information. This helps us to
deliver high-quality audits, because our
teams will have faster, better and more
relevant research results.
EY Atlas will be fully integrated with EY
Canvas by the end of 2016 and will provide
our teams with the most relevant up-todate accounting, auditing and industry
information for a client’s audit. Our EY Atlas
Client Edition will also give clients direct
access to EY technical insights relating
to accounting, financial reporting and
regulatory filing matters.
At EY, there’s a really strong tone set at the top
regarding audit quality, both at a global and a local level.
We get lots of communications containing technical
updates and there are monthly quality podcasts that tell
us about recent changes in accounting regulations and
guidance aimed at continually improving audit quality.
We also have “champions” in the office who we can go
to with our technical and quality queries when we are
conducting an audit.
How I am
delivering
audit
quality
Tim West
Assistant Manager, UK,
Ernst & Young LLP
22
Audit quality: a globally sustainable approach
With audits, preparation is key in terms of ensuring
that sufficient time is devoted to planning. It is vitally
important to understand the client’s business. For an
audit to be high-quality, you need to understand the
risks and needs that the business has and to discuss
those with management.
Executive participation is an important part of a quality
audit. When experienced leaders coach more junior
members of the team, quality pervades the whole team,
rather than simply being the preserve of the team’s
senior members. I like the fact that senior members of
the team have always sought out and valued my opinion
in a variety of situations. By involving the whole team
in the planning and discussion process, you get a more
complete outcome.
Audit quality: a globally sustainable approach
A time of change
Jeanne Boillet, EY Global Assurance
Innovation Leader
The need to enhance confidence in
the capital markets, coupled with
technological innovation and digitization,
will drive unprecedented changes in the
Assurance profession.
EY has made and will continue to make
significant investment in technology and
innovation. We see the development of
new audit tools as just the start, and are
creating a culture based on sustained
innovation. We believe innovation is key
to quality and vice versa.
By harnessing new technology and
innovative approaches, we provide
higher-quality audits and a better service
to our clients.
The direction of travel for Assurance
professionals is clear. There will be greater
automation, more use of analytics, a
broader approach to risk and a different
profile for the audit team (more data
scientists and engineers). We see these
as short- or medium-term developments.
Longer-term predictions are harder to
make. There will be cases of “disruptive
innovation” where new technologies lead
to new business models, markets and
solutions. To keep one step ahead, we
have created work streams examining
what is in store for the profession,
covering analytics, process automation,
cognitive intelligence, risk and talent.
These will help develop our future plans.
There is a long journey ahead. It may
occasionally be bumpy, but it will be an
exciting ride.
23
3. Transformation and innovation
World view
24
Audit quality: a globally sustainable approach
Americas
Asia-Pacific
EMEIA
Japan
“EY Helix is a significant
component of improving audit
quality,” says Frank Mahoney,
EY’s Assurance Leader in the
Americas. “Applying analytics
to the audit process helps
us improve how we search
for and identify risk areas or
anomalies within a company’s
financial statements. This
means our teams can better
identify trends and anomalies
in the business, and outliers in
the data population, as well as
looking at larger populations
of data rather than relying on
statistical samples.”
“Having access to a single
source of technical accounting
and auditing content through
EY Atlas is hugely beneficial
to auditors, as it is easy to
identify the information you
would like to look for,” says
Edward Ho, EY’s Asia-Pacific
Assurance Leader.
“Whether looking at accounts
receivables, invoices or
purchases, applying analytics
to this data means we can
provide better assurance in
terms of audit procedures,”
says Jean-Yves Jégourel, EY’s
EMEIA Assurance Leader.
“This is because the findings
that come from looking at
larger populations of data are
more powerful and relevant
than looking across a sample
of records.”
“As part of our quality
improvement plan to respond
to our specific needs in Japan,
our primary goal is utilizing
new technology that can
support us in improving our
processes. EY Canvas will
play a critical part in this,”
says Hitoshi Matsuoka, EY’s
Assurance Leader in Japan.
He believes it is particularly
valuable in helping junior
professionals to understand
the audit process. This is
because it is similar to a
web search engine. “If an
auditor is doing a revenue
recognition audit test, they
can go to EY Atlas and easily
find information stipulated in
IFRS 15 organized in a way
that it is easy to read and
understand,” Ho adds.
Audit quality: a globally sustainable approach
Deployment of EY Canvas
began in Japan in September
2015, with auditors welcoming
the opportunity to better
manage the audit process.
The global audit platform
requires auditors to focus
more on the organization of
the audit and risk preparation,
and EY Canvas uses color
and visualization to provide a
clearer, more comprehensive
overview of the entire
audit plan.
25
IMAGE TO COME
Enablement, quality
support and monitoring
ISQC-1. However, we recognize that we must
continue our efforts to improve the quality
of audit work globally.
Across EY, there are systems and structures
in place to help analyze our audit quality and
improve working practices, skill levels and
resources where necessary. We understand
the importance of supporting our people,
who often work in stressful and demanding
environments. It’s crucial that we monitor
audit quality and have open discussions
when there has been a problem.
Pre-issuance reviews
The AQR program is the most obvious
example of post-issuance reviews
undertaken by EY; it is a quality check
that takes place after the completion of
an audit. It is also possible, however, to
carry out internal quality checks while still
undertaking the audit. This is the basis for
our increased use of pre-issuance reviews as
part of the evolution of the AQR process.
Inspection results
Each year, the EY network conducts the
AQR program as an important element of
assessing our system of quality control.
This includes work at the member firm,
Regional and Global level consistent with the
requirements of the International Standard
on Quality Control 1 (ISQC-1).
Accountability
and enablement
Many factors affect the quality of an audit
and it can be hard to sum it up in a succinct
way. Moreover, quality is, to some extent,
intangible, and assessing it can be a
subjective exercise.
There are some objective measures of audit
quality. For EY, these involve our inspection
results — both through external regulators
and our own internal Audit Quality Review
(AQR) program — plus the results of
pre-issuance reviews, our performance in
terms of the timeliness of the audit, and the
competencies and experience of our teams.
We strive to measure our performance on
quality wherever possible, to analyze any
quality challenges and to take corrective
action. Quality is central to our offering
as auditors. It is our brand.
We provide a vital function — to serve the
public interest. It is imperative that we
26
perform this function at the highest level.
Companies and their audit committees are
making quality a key factor when choosing
an auditor. Tenders require evidence
of quality levels, and companies are
specifically hiring or not hiring because
of quality considerations.
It is not commercial considerations that are
driving our SAQ program. It is professional
duty and pride — our auditors want to be
as good as they can be. The systems of
accountability and enablement that we
have established are helping them to
achieve this goal.
Reward and recognition
Given that quality is EY’s priority, it is
important that the performance of audit
leaders is measured and rewarded with
this in mind. Therefore, we evaluate our
leaders’ performance so that quality is
a significant factor in an audit leader’s
overall evaluation.
We have a range of criteria against which
we measure performance, including
external inspection results, our own
audit quality reviews, embracing SAQ
initiatives, compliance with assurance and
risk management policies, commitment to
consultation, setting the tone at the top,
feedback from third parties and attendance
at mandatory training events.
It is important to note that leaders are not
rewarded for selling non-audit services to
audit clients.
Accountability framework
We have also established a framework for
evaluation of the leadership responsible
for the Assurance practice within the EY
Regions, so that these leaders are assessed
and rewarded based on quality.
Audit quality: a globally sustainable approach
The engagements reviewed each year are
selected on a risk-based approach, including
consideration of audits that are large,
complex or of significant public interest. The
AQR program includes detailed, risk-focused
reviews covering a large sample of listed and
non-listed audit engagements to measure
compliance with internal policies and
procedures, EY’s Global Audit Methodology
and relevant professional standards and
regulatory requirements.
AQR reviewers and team leaders are
selected for their knowledge and
professional competence in accounting
and auditing, as well as their industry
specialization. They often work on the
Global AQR program for a number of years
and are highly skilled. Team leaders and
reviewers are assigned to inspections
outside of their home location and are
independent of the audit teams reviewed.
The results of the AQR process are
summarized globally (including for
Areas and Regions), along with any
key areas where the results tell us that
continued improvements are required.
This information, along with remediation
and improvement plans, is presented to
the Global Executive; Global Assurance,
Global PPD and Global Risk Management
Executives; and others.
Pre-issuance reviews provide an analysis of
selected audits of public companies before
the audit report is issued. We also use
these reviews to assess how well our teams
understand and are applying new guidance,
tools and enablers.
Our auditors want
to be as good
as they can be.
The systems of
accountability and
enablement we
have established
are helping them to
achieve this goal.
Audits that have undergone pre-issuance
reviews have demonstrated improved postissuance inspection results. We therefore
believe the pre-issuance review program is
an important component in our drive to
improve audit quality.
The program provides timely and important
feedback, benefiting not only the individual
audit reviewed, but also other audits. It
offers valuable coaching for our teams and
allows for appropriate adjustments to be
made, where necessary, before we issue
the audit reports. We also believe the preissuance reviews provide EY with important
information that can be used more broadly
for the benefit of all our audit teams.
Our leaders say…
“We believe we have made real progress in
improving quality. Our external inspection results
have improved quite significantly over the past
two years and the feedback we get from the
field is that the quality network is the go-to
organization for help in performing an audit.”
Dave Jones, EY Americas Quality Enablement Leader
Overall, we have concluded that our systems
of quality control meet the requirements of
Audit quality: a globally sustainable approach
27
4. Accountability and enablement
The importance of the
quality enablement leaders
has been enhanced, and it is
consistently emphasized by
the Assurance leadership
that they are senior leaders.
Quality enablement network
Our quality enablement leaders are
responsible for a network of professionals
who carry out actions that enhance
audit quality.
These include:
Performing root-cause analyses
gg
Performing pre-issuance reviews
gg
and coaching audit teams
Supporting internal and
gg
external inspections
Evaluating significant audit deficiencies
gg
Some of these initiatives have been
established for a period of time, while
others are new. But the importance
of the quality enablement leaders has
been enhanced, and it is consistently
Milestones
Timing is critical to the execution of
a quality audit. EY has established a
Milestones program in which our teams
establish goals early on in the audit cycle
for when they will complete planning,
internal control evaluation, interim audit
work and other key efforts. We have
seen a positive correlation between
teams that have produced strong quality
results and those that are disciplined in
completing the phases of the audit at
the appropriate time.
enhancing the quality of our Assurance
practices. It also provides thought
leadership and guidance on accounting,
auditing, financial reporting, regulatory
matters and other technical and risk matters
to our audit teams, the entities we audit and
other stakeholders.
Many of the features of Milestones are on
the EY Canvas dashboard, so it will allow
assurance leadership, Professional Practice
and quality enablement leaders to see
when the different phases of the work
have been completed.
It also oversees our internal inspections
processes, including AQR, engagement
quality reviews and pre-issuance reviews —
as well as liaising with regulators on
external inspections.
Professional Practice
Our Professional Practice group is
responsible for monitoring, controlling and
28
Professional Practice is responsible
for responding to proposals from
standard setters, writing guidance on
new standards and dealing with any
challenges of deployment.
Our leaders say…
“The role of Professional
Practice and quality
enablement leaders is to
support the delivery of
quality audits by analyzing
and monitoring what we
are doing to make it better.
But they are not the only
owners of quality. That
remains primarily with
the Assurance leader, the
partners and teams.”
Bernard Heller, EY EMEIA Professional
Practice Director
Professional Practice is an important part
of our assurance quality infrastructure, and
works closely with the Assurance leadership
on any areas of challenge.
Audit quality: a globally sustainable approach
emphasized by the Assurance leadership
that they are senior leaders. They are
some of our best people and are very
talented individuals.
Assurance leadership, Professional Practice
and the quality enablement leaders
collaborate to develop, maintain and
oversee key SAQ initiatives.
Audit Quality Committee
We have established an Audit Quality
Committee, which includes Assurance
leadership, Professional Practice
representatives and quality enablement
leaders. The committee’s remit is to monitor
quality globally, drive our efforts in the
regions, highlight leading practice and
identify emerging quality issues.
How I am delivering
audit quality
Happiness Vundla
Senior Manager, Ernst & Young (Zimbabwe)
I have worked for EY for nearly 10 years,
since I graduated from Midlands State
University with a degree in accounting.
Over time, I’ve realized how much
people value an audit report — the type
of reliance that everyone outside EY
places on that audit report is actually
immense. Audit is about more than just
financial statements; it’s about what
Audit quality: a globally sustainable approach
has brought the numbers to life.
There’s a strong emphasis on quality
at EY. We get frequent information
about audit quality from both the global
leadership and our local member firm.
We also go on training courses tailored
to the level of our experience, and what
is expected of us in terms of quality is
embedded in the training.
Being better
Jay Paulson, EY Global Quality
Enablement Leader
At EY, we expect continuous
improvement in our audits and from
our auditors. We desire to be better
tomorrow than we are today.
There are systems and structures in
place to make this happen — to monitor
our performance and encourage
ever-higher quality levels. We have
a network of quality enablement
leaders to help us with local and
global monitoring and initiatives, a
focused reward system, and improving
inspection results, to name just three.
But systems and structures alone
cannot guarantee continuous
improvement. It requires a mindset
and a culture of both personal and
collective responsibility. At EY, we
are all accountable for Sustainable
Audit Quality. Every leader, every
senior manager and every trainee in
every member firm has a duty and
responsibility to provide high-quality
work. It is one of the strongest markers
that sets us apart.
I see on a daily basis the commitment
and expertise of EY’s auditors and
support teams. They have a passion for
what they do and take great pride in
their audits. It is not just EY’s work; it
is their own personal work.
We always seek to be better. We learn
from every audit and put what we learn
into practice. In doing so, I believe
we make a difference to the investing
society and to society as a whole.
29
4. Accountability and enablement
World view
Americas
Asia-Pacific
EMEIA
Japan
“The Milestones program
helps our teams get the
right support and the right
resources, so if they are not
on time, we can interject
and help them,” says Frank
Mahoney, EY’s Assurance
Leader in the Americas.
EY’s Assurance quality
infrastructure is becoming
increasingly important, says
Edward Ho, EY’s Asia-Pacific
Assurance Leader.
Ho says that Professional
Practice works closely with
Assurance leadership and
local quality enablement
leaders in Asia-Pacific to
drive key initiatives under
the SAQ program.
One of the main priorities
in EMEIA as part of SAQ is
the establishment of quality
enablement leaders in each
Region. “There are many
aspects that contribute to
audit quality — whether it is
operations, talent or the way
we teach our people,” says
Jean-Yves Jégourel, EY’s
EMEIA Assurance Leader.
“I believe it is very important
to have someone who is going
to act like the conductor of
an orchestra in leading the
Assurance leadership agenda,
to make sure we have the right
focus and the right efforts to
improve audit quality.”
Japan’s primary focus is to
improve audit quality and it
is committed to improving
its working practices and
structures to monitor quality.
If, for instance, the team
is unable to get planning
completed, the leadership will
try to determine what the
issue is. “We can then work
through the workload issues
to make sure the teams in the
field have the right resources
to get the job done at the
highest quality possible,”
Mahoney explains.
30
Audit quality: a globally sustainable approach
“We work together to
maintain a culture and develop
appropriate systems and
processes that place quality
as our first priority.”
Audit quality: a globally sustainable approach
“Audit quality is an unwavering
commitment for us in Japan.
Implementing best practice
across our processes, systems
and talent will help us respond
to our local priorities,” says
Hitoshi Matsuoka, EY’s
Assurance Leader in Japan.
31
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