Académique Documents
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Contents
Letter from Steve Howe and Tom Hough
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Appendix A: Glossary
33
G. Thomas Hough
Vice Chair of
Assurance Services
Ernst & Young LLP
a
global
leader
and preventing conflicts of in
interest. The than
global
Ernstentities.
& YoungThey
organization
is committed
to
4,000
range from
multi-national
assurance, advisory,
tax and
robust
andtransaction
transparentadvisory
communication with
audit
committees.
We also
believe
greater
public
companies
operating
around
thethat
globe
that
services.
investor understanding of audit firms quality
control statements
systems andwith
thethe
measures
such
audit
file financial
Securities
and
firms
are taking
to improve
audit
could further
bolster confidence
in the profession.
Commission
(SEC) to privately
-held,
Quality audits instill
confidence
in and
credibility
to qualityExchange
thatfor
may
supply
the financial reporting
that is soofvital
the efficient
The purpose
thisto
report
is to describefamily-owned
the system ofbusinesses
quality control
the
auditfinancial
practice
information
to
a
local
lender.
These
entities
operate in
functioning of the of
capital
markets.
The
substantial
EY, the US member firm of Ernst & Young Global Limited (EYG), and the significant
myriad
industries
from
software
to
financial
services,
procedures and analyses
performed
by
the
investments we have made and continue to make to enhance audit quality. We describe
from
retail
to
real
estate,
from
energy
to
consumer
independent auditor
enable
the
auditor
to
opine
on
the global Ernst & Young organization, processes and procedures that have one goal
products
and theto
public
sector. While EYG has
an entitys financial
statements
and, for
certain public
providing
seamless,
consistent
quality service
worldwide
stakeholders.
companies, internal
control
over
financial
reporting.
made significant investments in organizing
the
of member
firms
around the world
Who
is network
accountable
for audit
quality?
Performing this work
integrity,
andwith
operating
as aexpertise,
highly integrated, multidisciplinary global organization, this report
Theinvestments
answer herewe
is simple:
We all
Theand
objectivity and professional
ataudit
the heart
focuses onskepticism
the FirmsisUS
practice, the
have made
in are.
people
responsibility
for
quality
begins
at
the
top
of the
of our responsibility
as
independent
auditors
a
processes in the US, and initiatives resulting from practice monitoring activities,
including
global
organization
at
the
Global
and
Americas
responsibility we take
most
seriously.
internal and external inspection findings. For more information on the global Ernst & Young
Executive
Boards
andErnst
senior
leadership
level
of the
organization,
to the Transparency
Report
2012:
& Young
Global,
which
is
Our commitment to
audit qualityplease
meansrefer
we must
Firm
and
runs
throughout
the
Firm
to
our
partners
available
on
our
website
at
www.ey.com.
make continuous investment and continuous
and to our professional staff in all of our service lines
improvement. Audits
cant
staticcomplex
and remain
Audits
inbe
todays
financial environment
outstanding
people supported
involvedrequire
in performing
and supporting
audits. In
effective over time.
are conducted
a
byAudits
an organization
with in
a clear
focus on short,
quality.the
Our
passion for quality
begins
the
responsibility
for quality
is anatimportant
dynamic marketplace
top with
of theincreasingly
global Ernstchallenging
& Young organization,
permeates
everywho
levelworks
and isatan
attribute
of everyone
anongoing
Ernst & Young
and complex business
activities. To
Weexecute
recognize
commitment.
quality audits infirm.
todays
complex
andofchallenging
environment,
We are
mindful
the public franchise
that has
the importance of we
thisfocus
role and
take
seriously our service delivery model, including professionals
on our organization,
been entrusted to us. We recognize and embrace the
our commitment to
executingaudit
quality
audits. Ourteams, our people, our policies and procedures, and our
supporting
engagement
responsibility that this role represents and take our
organizational structure,
methodologies,
monitoring activities by:policies,
obligation to serve the public interest as independent
practices and procedures are all designed to fulfill
auditors
seriously.
Developing and executing a common global
audit
methodology designed to achieve
that important responsibility.
quality audits with seamless, consistent
service
regardless
of location
How is the Firm investing
in the audit practice to
The enactment of SOX marked a significant milestone
enhance
audit
quality?
Supporting
an by
audit
delivery
in the US audit professions
history
moving
themodel with an organization where a quality tone is stressed
and significant
investments
arefive
directed
continuously
maintain
a robust
Our
major to
quality
initiatives
are described
in the
audit profession fromthroughout
self-regulation
to the regulated
systemCompany
of qualityAccounting
control
introductory letter from Steve Howe and Tom Hough.
environment of the Public
Those
initiatives
(Resources
workload,
Training,
Oversight Board (PCAOB).
We ahave
supported
thisprofessionals
Fostering
culture
where all
are
held accountable
forand
their
performance
Audit tools, Top-down emphasis on audit quality and
expansion in regulatory oversight of our audits of
Accepting
retaining clients
that share
our valuesfor
foraudit
integrity
in financial
reporting
Accountability
quality)
represent
significant
public companies because
it hasand
contributed
to
multi-milliondollar
investments
in
our
audit
rebuilding confidence
in
the
capital
markets
and
Attracting and developing the best talent from various professional disciplines to practice.
These fashion
initiatives
represent
major
focus of our
improving the qualityconduct
of our work.
audits in an independent, objective
with
integrityaand
professional
ongoing
commitment
to
executing
quality
audits.
skepticism
a
executives to help make sure such workloads are balanced and thatbegins
our at the top of the
global
organization
at
the
Global and Americas
responsibility
we
take
most
seriously.
people have the capacity to devote enough time to our audits so that they are executed
Executive
Boards
and
senior
leadership level of the
in commitment
a quality manner.
Thisquality
effort means
continues.
Our
to audit
we must
Firm and runs throughout the Firm to our partners
make
continuous
investmenttraining
and continuous
Training
The continuing
and education of our and
professional
staff are key
to our professional
staff in all of our service lines
improvement.
Audits
cant
be
staticinitiatives.
and remain
components of our audit quality
Over the past
year, weinhave
significantly
involved
performing
and supporting audits. In
effective
over
time. Audits
are conducted
in aFor our partners and senior managers, this
expanded
classroom
training
for all levels.
short, the responsibility for quality is an important
dynamic
marketplace
with
increasingly
challenging
added training comprises five days that can be tailored to
addressofcurrent
developments
attribute
everyone
who works at an Ernst & Young
and
complex
business
activities.
recognize
and
hot topic
practice
issuesWe
that
have been identifiedfirm.
in internal
external
We areand
mindful
of the public franchise that has
theinspections.
importanceThis
of this
and take
seriously
is arole
significant
but
critical investment for
us entrusted
and one that
we We
arerecognize and embrace the
been
to us.
our
commitment
to
executing
quality
audits. Our
committed to expanding.
responsibility that this role represents and take our
organizational structure, methodologies, policies,
obligation
to serve
Audit tools
Our policies,
and enablers
are important
tothe
thepublic interest as independent
practices
and procedures
are procedures,
all designed tools
to fulfill
auditors
seriously.
execution
of quality
audits. In the normal course, we refine such policies to be responsive
that
important
responsibility.
to new standards, current practice developments, and internal
inspection
How is and
the external
Firm investing
in the audit practice to
The
enactment
of SOXthe
marked
significant
milestone
findings.
Moreover,
AuditaTool
of the Future
project is
part
of
a
global
Audit
enhance audit quality?
in Transformation
the US audit professions
history
by moving
the
initiative and
investment
to design
and develop the next generation suite
Our five replacing
major quality
initiatives are described in the
audit
profession
from
self-regulation
to
the
regulated
of audit tools for managing and documenting the audit process,
our existing
introductory
letter
from
Steve Howe and Tom Hough.
environment
of
the
Public
Company
Accounting
audit support platform and integrating new techniques (including an expanded use
Those
initiatives
(Resources
Oversight
Board
(PCAOB).
We
have
supported
this
of data analytics) to deliver an improved audit. This initiative is a large and importantand workload, Training,
tools, Top-down
emphasis on audit quality and
expansion
in regulatory
oversight
of our audits
of that will Audit
investment
for our global
organization
and one
take several
years to complete.
Accountability
for
audit
public
companies
because
it
has
contributed
to
In the meantime, several smaller elements of this larger effort have been made quality) represent significant
investments in our audit practice.
rebuilding
confidence
the capital
markets
andto improvemulti-millionoperational
and are in
being
deployed
currently
the quality ofdollar
our work.
These initiatives represent a major focus of our
improving the quality of our work.
ongoing commitment to executing quality audits.
Cleveland, OH
Atlanta, GA
Communication is at
the heart of an open
relationship between the
audit committee and the
auditor. We recognize that
we work for and report to
the audit committee and
are firmly committed to
open, timely and robust
communication. We
believe this dialogue helps
to promote audit quality.
Boston, MA
Denver, CO
Chicago, IL
Quality begins with setting the right tone at the top of the organization. The global Ernst & Young organization
promotes a culture of integrity. EYGs Global Code of Conduct provides a clear set of standards and behaviors
that are grounded in our values and guide our actions and business conduct. Through a combination of many
of our activities, including our training, our coaching and supervision, and our compliance programs, we strive
to create an environment that encourages all of our people to act responsibly.
Los Angeles, CA
Our Quality
& Risk
Management
structure
supports
quality across
the Firms four
service lines.
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12
Dallas, TX
Performing audits in todays environment is increasingly challenging. Reporting deadlines are shorter.
Accounting and auditing standards are more complex, business models and technologies are changing,
and the global business environment remains uncertain. Quality audit execution begins with an appropriate
risk assessment and development of the appropriate nature, timing and extent of audit procedures that are
responsive to the risks identified. EY GAM focuses on the entitys business and financial statement risks and
how those risks can be addressed during the audit of the financial statements.
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14
Seattle, WA
Audits today are increasingly complex as new financial instruments have been
introduced, new revenue recognition models developed, and new accounting and
auditing standards issued all against a backdrop of the financial crisis and worldwide
recession. Effective integration and communication between the audit team and
service lines that support the audit team greatly enhance audit quality and service
execution.
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New York, NY
Consultation requirements and related policies and procedures are designed to involve
the right resources so that audit teams can reach appropriate and timely conclusions.
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St. Louis, MO
Providing
services to
the right
organizations
is an essential
foundational
element
of the
Ernst & Young
organizations
quality
and risk
management
processes.
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Philadelphia, PA
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People development:
On-the-job training supplemented
by classroom learning
CPA exam assistance
Performance reviews
Opportunities for advancement
throughout ones career
Mobility (domestic and international)
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Performance management
A comprehensive performance management process
requires our professionals to set goals, have clear
work expectations, receive feedback and talk about
their performance. The Performance Management
and Development Process (PMDP) is designed to help
our professionals grow and succeed in their careers.
Under the PMDP, periodic performance reviews are
combined with annual self-appraisal and annual
reviews. As part of the annual review process, each
professional, in conjunction with a counselor (an
assigned, more experienced professional), identifies
opportunities for further development. Professionals
and their counselors are guided by a set of service
line competencies that articulate the knowledge and
skills that should be developed for a particular rank.
Mobility
Fellow programs
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Cleveland,
Miami,OH
FL
Independence is a fundamental concept of the audit profession that pervades all our
dealings with our stakeholders. Maintaining the independence of all Ernst & Young
member firms is essential to achieving audit quality.
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Independence system
Independence confirmations
The Global Independence System (GIS) is an intranetbased tool that identifies the public entities for which
independence is required and the independence
restrictions that apply to each one. Most often these
proscribed entities are public companies and their
affiliates, but they can be other entities for which
we provide attest or assurance services. The tool
includes family tree data relating to affiliates of the
public companies we audit and is updated periodically
by audit teams. The entity data includes notations
that indicate the independence rules that apply to
each entity so that our professionals can readily see
the entity and the independence notations. GIS is
frequently used by our professionals to determine the
type of services that can be provided based on the
independence notations.
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Independence:
We view it as fundamental to our role
as auditors.
We provide extensive tools to monitor
compliance.
We require annual learning.
We require regular confirmation of
independence compliance.
25
Detroit, MI
Quality is at
the center of
our business
strategy
and is a key
component
of our
performance
management
systems.
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Houston, TX
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PCAOB inspections
The PCAOB conducts annual inspections of our
system of quality control and selected public company
audit engagements. We value this process and review
the PCAOBs findings to determine if changes or
enhancements are required in our policies, processes
or procedures. A PCAOB report on its inspection
activities is presented in two parts: a public portion
and a non-public portion.
The public portion of the PCAOB report (Part I)
describes the procedures performed during the
inspection and certain observations regarding audit
performance on specific engagements. When the
PCAOB identifies an audit deficiency that it believes
warrants disclosure in Part I of the inspection report
(which the PCAOB refers to as an audit failure),
we evaluate the comment and respond with our
assessment of the facts. That assessment includes
evaluating the significance of the matter and our
ability to support our previously expressed opinion.
In some cases, we determine that we need to
supplement the audit documentation in specific
areas or perform additional procedures. As part
of our assessment, we often arrange for a team
independent of the engagement to review the
relevant audit work papers.
While we agree with most of the PCAOBs findings,
as can be expected, there can be instances where we
have a difference in view, particularly in areas that
involve judgment, as to whether a PCAOB finding
(or common findings) in a particular area constitutes
non-compliance with professional standards. In this
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Appendix A: Glossary
AAC
GIS
AICPA
GPPM
AQR
GTAC
ASB
IASB
BRET
IMS
CAML
INE
Independent Non-Executive
representatives
CPA
ISA
EITF
PCAOB
EMEIA
PCIP
EQR
PMDP
EY
PPD
EYG
PWT
EY GAM
QCC
EYU
QIL
FASB
SEC
Firm
SORT
FSI
SOX
GAC
SubArea
AMP
GEP
33
www.ey.com
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