Our commitment to audit quality
We are committed to serving the public interest by performing quality audits that promote trust and confidence in financial reporting. We are also committed to enhancing transparency into how we execute quality audits at the engagement level and our system of quality control.
Tone at the top and accountability
At Ernst & Young LLP (EY US or the Firm), we set a high standard for our delivery of audit quality. Our senior leaders and partners consistently deliver the message that performing high-quality audits and acting with integrity are our top priorities and that we are all accountable for the quality of our work. They also stress that, to maintain the public trust in our work as independent auditors, each of us must continue to demonstrate our commitment to quality, integrity and ethics.
Our values define who we are and shape our culture
- People who demonstrate integrity, respect and teaming
- People with energy, enthusiasm and the courage to lead
- People who build relationships based on doing the right thing
Quality is explicit in our messaging from our leaders about our purpose of building a better working world. It is also a key element in how we evaluate and compensate all of our professionals, including our leaders. This promotes accountability.
“Quality audits are, and always will be, our priority to serve the public interest and promote trust and confidence in financial reporting. Our message continues to be that quality is always the most important focus area for our auditors.”
Francis C. Mahoney,
Vice Chair of Assurance
Globally consistent audit quality
Through the EY global organization’s Sustainable Audit Quality (SAQ) program, we and other EY member firms around the world share a commitment to delivering the highest-quality audits in the profession. The SAQ program is the top focus for our Assurance practice in our global Vision 2020+ strategy.
The overarching elements are tone at the top and accountability. The other components are strengthen our people capabilities, audit technology and digital, enablement and quality support (including monitoring), and simplification (i.e., simplifying our tools and audit methodology so our people can better identify and respond to risk).
Transparency and engagement
We know that investors want more information about audits to make investment decisions, and we actively engage with audit committees, regulators and investors to discuss the role of the auditor, how to make the audit process more transparent and how to measure audit quality. We are also working with members of audit committees of the companies we audit to share engagement-level data and determine what type of information is most useful to them.
As required by the Public Company Accounting Oversight Board (PCAOB), we now disclose the name of the partner who leads each public company audit and information about certain other accounting firms in the audit. We are continuing to discuss with audit committees our use of other accounting firms and related risk assessment procedures. We are also preparing for significant changes to the auditor’s report under a new PCAOB standard that will require us to disclose critical audit matters and auditor tenure.
In our audits, we obtain an understanding of a company’s processes and controls related to information technology relevant to the audit, including how cybersecurity risks are identified and addressed. Audit procedures are designed to respond to identified risks of material misstatements to the financial statements. It is important to note that these procedures are not designed to provide assurance about the adequacy of a company’s cybersecurity controls.
To safeguard the confidentiality of information about the companies we audit, we also invest heavily in protective and detective technologies. We constantly monitor our systems. We also work hard to maintain a security-conscious culture by educating our professionals on how to protect confidential information and how to recognize security threats, among other things.
Preparing for change
As auditors, we have an important role to play in this period of unprecedented accounting change, and we are taking the necessary actions to promote trust and confidence in financial reporting as companies adopt major new standards on revenue recognition, leases and credit losses over the next few years.
With calendar year-end public companies set to adopt the new revenue recognition standard on 1 January 2018, we have been focusing our teams on identifying financial reporting and audit risks through training, enablement and coaching. We also established a network of more than 600 professionals with special training on this new standard to help teams design and execute appropriate audit procedures.
We are also expanding our use of data analytical tools to help us audit more effectively. Our professionals can now analyze larger populations of data, giving them better information about the big picture and helping them identify items for follow-up.
Our network of 550 data analytic professionals (up from nearly 400 last year) support our transformation to the audit of the future. We are also engaging with stakeholders to discuss how data analytics can be used to further audit quality.
We continue to issue thought leadership to help companies and investors understand changes in the regulatory environment, investors’ expectations regarding corporate governance and the implications of new accounting standards. We also continue to contribute to the public discussion on how companies use non-GAAP financial measures and the audit committee’s responsibility to oversee the use of these measures.
We continue to host roundtables for investors, directors and other stakeholders to discuss corporate governance and financial reporting, including how disclosures can be improved. Our thought leadership also discusses what companies can do and are doing to make their disclosures more effective, as well as the role audit committees can play as the SEC considers updating its disclosure regime.
Our thought leadership has highlighted:
- The decline in the number of public companies over the past two decades
- Improvements in financial reporting and audit quality in the 15 years since the Sarbanes-Oxley Act was enacted
- Trends in disclosures by companies in the Standard & Poor’s 500 index between the years of 2012 and 2015, based on a study we conducted with the Financial Executives Research Foundation
- Information audit committees at public companies disclose about their oversight of the audit and the auditor