Crowe Horwath Perth Transparency Report 2015

Transcription

1 Crowe Horwath Perth Transparency Report June 2015

2 Contents Introduction... 4 Welcome to the Crowe Horwath Perth Transparency Report... 5 Network of Australian & New Zealand offices... 6 Message from the Audit & Assurance Leader... 7 Our Structure, Ownership and Governance... 8 Legal Structure... 8 Corporate Governance... 8 Oversight of the Audit & Assurance Service Line... 9 Our international affiliation with the Crowe Horwath International Network Legal Structure Forum of Firms Governance Membership Crowe Howarth International presence Our Internal Quality Control Structure Our People Client Acceptance and Continuance Our Audit Process Review and Consultation Monitoring

3 Our Independence and Ethics External Regulation and review ASIC Other Regulators Financial Information Partner Remuneration Internal Quality Control Effectiveness Statement Our Public Interest Entity Client List

4 Introduction In June 2012, the Corporations Legislation Amendment (Audit Enhancement) Act was passed by the Australian Parliament. It requires all audit firms conducting ten or more audits of listed or other Public Interest Entities to publish an annual Transparency Report. This report has been prepared in accordance with the requirements of Corporations Amendment Regulation 2012 (No. 5) which requires the disclosure of certain information by audit firms, including information on the firm s legal structure, network arrangements, quality control systems, and public interest entity clients. It covers the audit partnership of Crowe Horwath Perth, which is one of the constituent partnerships of the Australian audit practice of Crowe Horwath Australasia Ltd (hereafter referred to as the firm or Crowe Horwath Australia ). 4

5 Welcome to the Crowe Horwath Perth Transparency Report Welcome to Crowe Horwath Perth s annual transparency report which covers the financial year ending 30 June It has been an exciting year for Crowe Horwath. We have joined the Findex Group, one of Australia s leading providers of financial and wealth management services. This has allowed us to cement our position as Australia s largest provider of professional services to small and medium business and families. Sharing the same commitment to the provision of high quality advice, Findex and Crowe Horwath hold the inherent values of delivering best of breed, non-aligned financial solutions, and are, through their strategic alliance, ultimately setting a new paradigm in the financial service industry. Within Western Australia, economic conditions remain challenging. The effects of the recent downturn in commodity prices have flowed beyond the resources sector and into the wider economy. In this environment, auditors are, quite rightly, under pressure to demonstrate that the value in an audit extends beyond a mere compliance exercise, but that it also provides a genuine insight for investors and other stakeholders into the company s financial statements. As a firm we pride ourselves on our honesty and integrity and our ability to provide excellent audit, tax, advisory and financial services. We have a public interest role as auditors, and executing audit quality continues to be at the heart of our strategy as a firm. As part of the broader Findex Group and Crowe Horwath International network we are proud to share this report with you, and look forward to continuing to share our progress with you over the coming year. Mervyn Kitay Chief Executive, Crowe Horwath Perth 5

6 Network of Australian & New Zealand offices Member of the 9th largest global network 5 th largest firm in Australia and New Zealand Over 3000 Principals and staff throughout Australia and New Zealand 6

7 Message from the Audit & Assurance Leader This is our third annual Transparency report following the amendments to Section 332 of the Corporations Act in In that time, the value of the audit, and the role of the auditor has been a topic of discussion, both within the profession itself, and among the wider public. Our commitment is to maintaining a strong focus on integrity and on audit quality even while navigating through change. This is essential to providing the level of service our clients expect, and to fulfilling the role expected of us not just by them, but by the communities we represent. The value of assurance is often overlooked, but it is a key component of effective, transparent capital markets and, as such, a foundation of our economy. Globalisation and digital disruption have required all auditors to seek to be efficient and effective in the delivery of assurance services. However, we recognise that this cannot be achieved at the expense of quality, and we continue to work with clients, businesses, standard setters and regulators to enhance the quality of financial reporting in Australia. We are continuing to make, a substantial investment in our people, our methodologies, and our quality control framework. In particular, we are focussed on investing in technology in order to automate routine tasks, and ensure that our professionals can focus on those areas that are considered higher risk, or that require judgment or specialist expertise. We have updated our risk-based audit methodology and customised software to reflect this growing trend. We believe that excellence in audit quality complements excellence in client service. Our structure allows us to ensure a high level of Partner involvement on audit engagements. The close involvement of our partners in client relationships ensures that we are able to bring the right level of experience and industry expertise to each engagement, and ensures that we can communicate and respond quickly to issues for all our clients. This is supplemented by direct access to senior technical resources where appropriate. I would like to invite all clients, audit committees, regulatory bodies and other stakeholders to take this opportunity to gain an insight into our business, and how we continue deliver audit quality and exemplary service to our clients and stakeholders. Sean McGurk Head of Audit & Assurance, Crowe Horwath Perth 7

8 Our Structure, Ownership and Governance Legal Structure On 6 October, Crowe Horwath Australasia Ltd announced to the ASX that it had entered into a Scheme Implementation Arrangement with Financial Index Wealth Accountants ( FIWA ) under which FIWA proposed to acquire all of the shares in Crowe Horwath. The scheme was implemented in January 2015, and, as a result, Crowe Horwath Australasia was de-listed from the ASX, and became part of the FIWA Group of Companies. Sharing the same commitment to the provision of high quality advice, FIWA and Crowe Horwath hold the inherent values of delivering best of breed, holistic financial solutions, and are, through their strategic alliance, ultimately setting a new paradigm in the financial service industry. The Crowe Horwath Perth audit partnership consists of a number of individuals and Crowe Horwath ( Aust) Pty Ltd. Crowe Horwath ( Aust) Pty Ltd is a wholly owned subsidiary of Crowe Horwath Australasia Ltd, which is a part of the Findex Group of Companies. The Australian operations of Crowe Horwath Australia sit within Crowe Horwath (Aust) Pty Ltd. Crowe Horwath (Aust) Pty Ltd is the employer of all Australian staff and Partners within the Crowe Horwath Perth audit practice. Corporate Governance As part of the Financial Index Wealth Accountants group of companies, Crowe Horwath Australasia places great importance on achieving high standards of corporate governance. Accordingly, it operates within a set of corporate governance principles that take into account relevant best practice and legislative and regulatory requirements. Further information on the Group s corporate governance policies and practices can be found on its website at and FIWA is governed by a Board of Directors. The Board of directors provides oversight, support, resources and supervision to the CEO and senior management. This is done whilst maintaining a high level of transparency, ethical standards and corporate governance and ensuring that all obligations to, and interests of, all stakeholders and shareholders are known and met accordingly. The composition of the Board, and biographies of Board members are set out at The responsibility for managing the day-to-day operations of the Group is held by the Group Chief Executive Officer and the Chief Operations Officer. 8

9 Oversight of the Audit & Assurance Service Line Audit & Assurance Group ( AAG ) The Audit & Assurance Group is charged with oversight responsibility for audit quality and compliance structures and initiatives across the Audit & Assurance service line. The AAG is comprised of one representative from each of our six regions (Queensland, New South Wales, Victoria, Tasmania, Western Australia, and New Zealand) and the Head of Risk Management. The AAG elects a Chair who is subject to re-election every two years. The Chair is responsible for communicating the AAG s activities to the executive leadership team. Crowe Horwath Perth is represented on the AAG by the head of the service line. The AAG meets at least monthly in order to address issues relating to audit quality and risk management, as well as strategy, business development and financial performance. Our audit technical team reports to the AAG. The AAG s responsibilities include: developing and maintaining the Group s audit methodology; oversight of the internal quality control review process; development of a standardised approach to training; risk management over high risk audit engagements. Audit Technical Team The Audit Technical Team is responsible for providing support to the AAG. It is also responsible for implementing initiatives relating to quality, education and technical support within our audit practice. This includes providing accounting support and interpretations, updates of our audit manuals and software, providing training to our audit staff and partners, and conducting our ongoing monitoring activities. The technical team also prepare thought leadership material in response to technical developments within the profession, and engaging with professional bodies, standard setters and others. Perth Risk Group ( PRG ) The Crowe Horwath Perth Risk Group is made up of representatives from each service line in the Perth firm, including the audit service line. The PRG s objectives mirror those of the Group at a local level. The PRG meets at least four times each year. 9

10 Our international affiliation with the Crowe Horwath International Network Crowe Horwath Australia is a member of the Crowe Horwath International network of firms ( Crowe Horwath International ). Crowe Horwath International is considered a network as defined under the Code of Ethics of the International Federation of Accountants (IFAC) and by virtue of its membership of the Forum of Firms. Legal Structure Crowe Horwath International is an international network of independently owned and managed accounting and advisory firms that may be licensed to use the Crowe Horwath or Horwath brand in connection with the provision of accounting, auditing, tax, advisory and other professional services to their clients. Crowe Horwath Australasia Ltd is a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. Forum of Firms Crowe Horwath International is a member of the Forum of Firms of the International Federation of Accountants. Members of the Forum are required to implement and monitor quality control standards that the Forum has prepared. We prepare an annual declaration that our members adhere to the Forum s standards. Governance Crowe Horwath International is run by a Board of Directors which appoints a Chief Executive Officer. The Board of Crowe Horwath International is primarily elected by member firms, and members serve for a period of two years after which they retire but may be re-elected. The Board of Directors is charged with overseeing the activities of the network, and has supervisory responsibility for the governance of Crowe Horwath International which includes ensuring there are appropriate quality assurance procedures in place in member firms. Crowe Horwath International is separated into three geographic regions: Europe Middle-East and Africa (EMEA), the Americas, and Asia-Pacific (of which Crowe Horwath Australia is a member). Each region has an appointed Regional Director who reports to the Board of Directors. When working together with other members of the network, Crowe Horwath Australia usually operates under a professional services agreement, however for audit work respective firms act on their own as principals. There are a number of committees chaired by partners in member firms in areas such as Audit and Accounting, International Tax, Corporate Finance and Risk & Valuation. Partners from Crowe Horwath Australia take an active part in these committees. In addition, they also participate in training and other events, both as attendees and as presenters. Crowe Horwath International has a system of audit quality monitoring in place and Crowe Horwath Australia is subject to a periodic audit quality assurance review. 10

11 Membership Crowe Horwath International has developed a minimum set of criteria against which both existing member firms and potential new applicants for membership are benchmarked. These criteria include: a culture focused on conduct of professional services in adherence to the highest standards of quality, and in accordance with national and international standards on ethics; appropriate technical qualifications, including membership of a recognized professional body; commitment to adopt and to continuously build awareness of a common global brand; member firms conducting assurance engagements must maintain a system of quality control in accordance with IFAC s International Standard on Quality Control (ISQC 1), and must adopt Crowe Horwath International Audit Methodology; and member firms should be recognised within professional circles in their country as a leader in the profession. Leadership is measured in terms of technical excellence, specialties, involvement of the partners in civic, professional and community activities, size, image and clientele. Crowe Howarth International presence Crowe Horwath International Statistics as of December 2014 Member Firms & Business Associates 205 Countries 125 Offices 726 Partners 3,544 Partners & Staff 31,040 Revenue USD $3.4B 11

12 Our Internal Quality Control Structure Audit quality is integral to the work we do, and supports our objective of delivering a high quality and seamless service to our clients. Our values are built around this objective, and based on a strong tone at the top from our key leadership team. The key elements of our internal control system for audit quality are: the firm s leadership, which promotes a culture that recognises audit quality; operation within a professional and regulated environment and compliance with professional ethical requirements; risk management policies that are used for the acceptance and continuance of audit clients; the firm s provision of adequate resources and policies to address issues such as recruitment, performance evaluation, capabilities, competence, career development, promotion and compensation; the provision of tools, training and guidance to ensure audit engagements are performed in accordance with professional standards and regulatory and legal requirements, and that audit reports issued are appropriate; and a system of quality control to monitor the effectiveness of our procedures. Our People Our people demonstrate both high standards of technical competency and commitment to the firm s values and ethical standards. We annually survey all staff and include a question relating directly to ethical standards to ensure we are tracking performance on this measure. In order to ensure that these standards are met, we provide our staff with comprehensive training and development opportunities, including: a structured national audit training programme which is designed to provide all team members with both technical and soft-skills training appropriate to their level of experience; local office-based or web-based courses focusing on topical subjects or specific areas of expertise; an Audit Alert process to ensure that staff are kept informed of technical and regulatory developments; and participation at Crowe Horwath International conferences and events. Graduate recruits are expected to study for professional qualifications with either the Institute of Chartered Accountants in Australia, or CPA Australia. Successful completion of professional exams is taken into account in making decisions about promotion and remuneration. All Audit and assurance staff are expected to complete at least 120 hours of continuing professional education over a three year cycle, with a minimum of 20 hours in each year. Client Acceptance and Continuance Our client acceptance and continuance process is instrumental in ensuring that we only take on engagements where we have the competence and capacity to deliver the standard of work which our clients expect, and that we can comply with our ethical and independence obligations. It also ensures that we accept only clients who share our values of integrity and ethical behaviour. 12

13 Our client acceptance process includes risk assessment process, which considers the client s risk profile, the nature of its operations, its ownership structure, and the background of its directors and key management. It also considers independence-related matters, including financial interests and any non-audit services provided. Certain clients may be considered to have an increased level of risk, either because they are Public Interest Entities, or because specific non-standard risks are identified during the acceptance process. Examples of such risks may include complex transactions, or material operations within emerging markets. Crowe Horwath Australia maintains a High Risk Register of all such clients. The High Risk Register is overseen by the Audit & Assurance Group (AAG), and all clients on the register are subject to an Engagement Quality Control Review. Our Audit Process As a member of the Crowe Horwath network we apply Crowe Horwath International s Audit Methodology. This provides us with a consistent, high-quality approach across the global network. It ensures compliance with International Standards on Auditing (ISAs), and with other relevant professional and ethical requirements. Our audit methodology adopts a risk-based approach, which relies on developing an in-depth understanding of the entity under audit, its risks, and the controls in place to manage those risks. This allows us to develop a tailored response to each issue identified, and to ensure that all material risks of misstatement are appropriately mitigated. Our understanding of the business and audit risks of our clients is developed through various procedures, including: extensive communication and discussion with management and those charged with governance throughout the year; assessing risk for each financial statement component and assertion; use of data analytics and ratio analysis to drill down into client s data and ensure our testing approach is targeted effectively; an approach that analyses our clients processes and controls against each risk identified, allowing us to focus on key risk areas and also to identify opportunities for our clients to improve their internal control; and use of computer-assisted audit techniques, and assessment of our client s information technology environment to ensure that the benefits and risks of increased automation within financial reporting systems is incorporated into our audit process. Our audit work programmes include compulsory schedules dedicated to ethical and independence requirements to ensure that these areas are considered at set stages on all audit engagements. Our audit software is supplemented by our audit manual, which is based on Crowe Horwath International s global audit manual. Supplementary material is then provided by our local technical team to ensure that specific Australian legal and regulatory requirements are addressed. All audit staff and partners have access to a full library of technical reference materials on accounting and audit matters. 13

14 Review and Consultation Our audit and assurance policies include detailed requirements in respect of the timely review of audit work performed. The nature, timing and extent of review depend on the level of audit risk and complexity associated with the client that is under review, and the experience of the engagement team member. The firm has in place a set of policies which indicates when an Engagement Quality Control Review (EQCR) by a second partner is required. There are schedules in the firm s audit work programs covering the responsibilities and conclusions of the engagement quality control review partner. Our review policies go beyond the requirements of law and professional regulation, and are a key element of our system of internal quality control. EQCR s are involved throughout the entire audit process and their role is not limited to a review immediately prior to completion of the engagement. All EQCRs are performed by audit partners, and we do not permit reviewers to delegate the performance of this responsibility to any other member of staff. All partners and other team members are encouraged to consult with peers and subject matter experts on complex or contentious issues. Our Accounting & Audit technical team contains experienced professionals who are able to support the engagement team by offering specialized knowledge and advice on accounting, auditing, ethical or regulatory matters. We have a consultation requirement in place for modified audit opinions. Engagement teams also have access to specialist resources when required. Specialists may be used in complex areas such as information technology, valuation, or taxation. We also have access to a global set of specialist skills through our membership of the Crowe Horwath International network. Monitoring We have an annual peer review process which allows us to gain assurance that our quality control systems are operating effectively. This is a key component of our overall audit quality, and allows us to drive a culture of continuous improvement in audit quality. The audit peer review process is overseen by the AAG, and is conducted using carefully defined procedures by a small group of experienced reviewers. 14

15 Our Independence and Ethics Crowe Horwath Australia has developed policies and process in order to ensure compliance with the independence standards applicable to each engagement undertaken. These standards include those issued by the Accounting Professional and Ethical Standards Board (APES) in Australia, and the International Ethical Standards Board for Accountants (IESBA). Crowe Horwath Australia maintains a comprehensive Risk Management Manual which is available to all Principals/Partners and staff via our intranet. This manual includes guidance on financial interests in audit clients, business relationships, fee arrangements, rotation requirements, and the provision of non-audit services to audit clients. A listing of restricted clients in which Principals/Partners and staff may be restricted from holding financial interests is also maintained on the firm s intranet. Prior to acceptance of any new client, conflict checks are carried out within the firm and the Crowe Horwath International network as necessary. Our procedures require any partner or member of staff to notify the firm immediately should any matters touching upon independence or ethical requirements arise. In addition, each partner and member of staff completes annually a set of compliance statements, including an Independence declaration, a fit and proper form, and a statement of confidentiality. Compliance with our independence procedures is reviewed internally each year as part of our quality reviews. External Regulation and review Crowe Horwath Australia is subject to oversight and periodic inspection by the Australian Securities and Investments Commission (ASIC). We may also be subject to inspection by other regulators. ASIC As part of its oversight of the audit profession within Australia, ASIC undertakes periodic inspections of auditors in Australia which include Crowe Horwath Australia. We welcome an ongoing dialogue with ASIC and believe that an effective and independent regulator is an important part of Australia s financial reporting framework. Further details of ASIC s audit inspection programme, together with its publicly issued reports, can be found on ASIC s website at Other Regulators As a member of the Crowe Horwath International network, we are subject to periodic inspection by Crowe Horwath International. The most recent inspection occurred in September Both the Group and individual Principals/Partners within Crowe Horwath Australia may be subject to review by professional bodies such as the ICAA or CPA Australia, in accordance with their standard inspection program for professional practitioners. 15

16 Financial Information Year ended 30 June 2015 $ Revenue relating to the audits of financial statements 2.4m Revenue for other service lines 13.1m Total Revenue - Perth 15.5m Partner Remuneration While our Partners are members of the Crowe Horwath Perth audit partnership, they are remunerated as employees of Crowe Horwath Australia. Partners remuneration includes the following elements: base salary; and short term incentives (STI s). Our Partners base salary is determined in consultation with the Managing Director on an annual basis. STI s are performance-based remuneration, which is calculated based on various financial and non-financial measures. For audit and assurance Partners, audit quality is one of the benchmarks used in measuring performance. No element of Partner, or audit staff remuneration is directly related to the provision of non-audit services to audit clients. 16

17 Internal Quality Control Effectiveness Statement Crowe Horwath Perth s internal quality control system supporting the audit service line is designed to provide reasonable assurance that audit engagements performed by Crowe Horwath Perth comply with applicable legal, regulatory and professional requirements. The results of our quality review programme, and other internal monitoring, in conjunction with the policies, set out in this report, provide reasonable assurance that our internal quality control system supporting the audit service line was operating effectively for the year ended 30 June Sean McGurk Head of Audit & Assurance, Crowe Horwath Perth Mervyn Kitay Chief Executive, Crowe Horwath Perth 17

18 Our Public Interest Entity Client List Listed clients as at 30 June 2015 of Crowe Horwath Perth Accent Resources Blackgold International Holdings Ltd Carnarvon Petroleum NL Carnegie Wave Energy Limited Dragon Mountain Gold Limited Encounter Resources Limited Energia Minerals Limited Oncosil Limited Pacific Energy Ltd Western Areas NL xtv Networks Limited 18

19 Contact Us Perth Office Level 5, 45 St Georges Terrace Perth Western Australia 6000 Australia Tel Fax Corporate Office Level 23, 600 Bourke Street, Melbourne, Victoria 3000 Australia Tel Fax About Crowe Horwath International Crowe Horwath is ranked among the top 10 global accounting networks with more than 150 independent accounting and advisory services in over 100 countries around the world. The member firms of Crowe Horwath International are committed to building lasting relationships with clients, focusing on understanding the client's perspective, the client's needs and the goals of the client. The results are innovative business solutions in audit, tax, risk and advisory designed for the unique needs of the client, solutions that improve performance, enhance shareholder value and build client competitiveness. Each firm is well-established as a leader in its national business community and is staffed by nationals, thereby providing a knowledge of local laws and customs which is important to clients undertaking new ventures or expanding into other countries. Through our highly integrated global network of member firms with broad technical expertise and deep local market knowledge, Crowe Horwath provides consistent quality and impeccable service to diverse clientele throughout the world. Version 001 Dated : 28 June 2015