Establishing the right team
The partner in charge of the audit sets the tone for the team and has overall responsibility for the audit. On all public company audits, another partner serves as engagement quality reviewer and evaluates significant judgments made by the team. The engagement quality review is an important element in our system of quality control.
When we assign partners to these roles, we consider their skills, workload and experience with a particular industry and with auditing internal control over financial reporting in addition to the SEC’s partner rotation requirements. Our leaders also consider the company’s risk designation and the risk factors identified in our firmwide assessment process when determining assignments.
About 54% of our audit partners serve as the partner in charge of a public company audit, and they each lead an average of two public company audits. If audit partners who serve as engagement quality reviewers on public company audits are included, the percentage rises to 73%. Our other audit partners serve as engagement partners to gain experience, in quality or leadership roles, or as partners in charge of private company audits. To make sure our partners and managing directors have enough time to execute quality audits, we also review their workloads semiannually and when the scope of an audit changes significantly. We also perform an annual review of each team to make sure we are staffing our audits with audit professionals and specialists who have the right skills and capacity to execute quality audits, given the risk factors identified in each engagement.
The professionals in shared service centers that support the EY global organization perform certain audit procedures and other tasks under the supervision of our US audit teams. Our shared service center personnel execute less-complex audit procedures to help our audit teams devote more time to more complex aspects of the audit. In fiscal 2019, shared service center professionals accounted for 12% of US public company audit hours.
Managing the audit
We have long believed that strong project management, including timely supervision and review by audit executives, is an important driver of audit quality. Our experience indicates that teams that track and complete their work at the appropriate time, including reviews by audit executives, execute higher-quality audits.
Our milestones program drives strong project management, discipline and timely executive involvement. It focuses our teams on monitoring progress and completing procedures, related documentation and reviews to meet certain milestones by a specified date for key phases of the audit.
While a significant amount of audit work needs to be completed at or after year end, our milestones program helps our teams perform as many tasks as possible before that busy period. In recent years, our teams have been able to perform 35% of their work three months before the fiscal year end of the company under audit and about 60% of their work before the fiscal year end. Performing work earlier in the audit cycle gives teams more time to address any issues that arise before the year-end crunch.
Our teams use EY Canvas to track the progress of their audits in real time. Our Quality Network also uses EY Canvas to track teams’ progress on milestones and identify teams that may need coaching or more resources to keep the audit on track in a timely manner.
Performing the audit
Our teams develop a deep understanding of key business processes and the risks involved by applying an approach that leverages the power of teaming and builds quality in at the source.
Under the approach, which we implemented last year as Project Insight, all of our teams that perform integrated audits meet early in the audit cycle and collaborate with IT, tax and valuation professionals to drive a deeper understanding of key business processes and risks. Our senior executives provide timely on-the-job coaching and supervision when the work is being performed. As a result, our teams are able to resolve issues earlier in the audit.
We also reimagined our audit documentation to more readily pinpoint risks and more clearly document how transactions are processed and recorded. This approach is enhancing audit quality and enabling our people to ask better questions about the company’s processes and risks.