Quality is at the foundation of everything the EY organization does.
The execution of high-quality audits by EY teams underpins the financial and nonfinancial information issued by companies that EY audits. This high-quality information instills trust in these entities, which, in turn, drives confidence in the capital markets and best serves the public interest.
Investors are not the only stakeholders who depend on high-quality auditing and financial reporting. Employees, retirees, suppliers and lenders, among others, rely on high-quality audits to make important decisions. These decisions involve who to work for, whether vendors will be paid on time and the safety of investments. In a dynamic world and ever-changing business landscape, the EY organization must continuously evolve to deliver high-quality audits and respond to the new, emerging risks.
The EY organization is committed to continuous improvement and providing an environment in which auditors can thrive. This includes recruiting, developing and retaining talented people and nurturing their careers, embracing innovation, encouraging simplification, and critically evaluating the work of audit teams to identify areas for improvement. The aim is to exceed regulatory benchmarks and produce audits of high quality.
The EY organization has put in place processes and policies to identify, understand and mitigate risks to audit quality, and to drive continuous improvement in the audit. These include robust global independence policies, practices and systems, mandatory audit partner rotation to help reinforce auditor independence, and rigorous risk assessments before EY member firms accept initial audit engagements, and then again annually before each audit engagement period.
The EY organization puts its focus on audit quality into action through a set of audit quality indicators (AQIs) that help leaders monitor the execution of strategy and quality priorities, in-depth assessments of the root causes that underlie an audit’s positive or negative inspection outcome, and responsive plans to remediate findings.
EY teams also monitor in-progress audits to identify areas that require additional attention before they are completed. Tools and processes used to help achieve this include the Milestones project management program, facilitated through dashboards in the global audit platform (EY Canvas), the use of the EY Canvas Client Portal to more effectively to help manage the exchange of audit support documentation received from clients, and coaching to help EY teams navigate critical accounting estimates, judgments and execution challenges.
This focus on quality and continuous improvement is reflected in the results of external inspections of EY audit engagements. The International Forum of Independent Audit Regulators (IFIAR) issued the first reduction challenge following their 2015 survey: the EY rate in that survey was 43%. With a continued focus on quality, the EY organization achieved the first IFIAR 25% reduction in inspections findings reported in the 2019 IFIAR survey, and the EY deficiency rate for the last released IFIAR survey (2021) was 20%, as compared with the 30% aggregate rate for the six largest firms.
The International Forum of Independent Audit Regulators (IFIAR) issued the first reduction challenge following their 2015 survey: the EY rate in that survey was 43%. With a continued focus on quality, the EY organization achieved the first IFIAR 25% reduction in inspections findings reported in the 2019 IFIAR survey, and the EY deficiency rate for the last released IFIAR survey (2021) was 20%, as compared with the 30% aggregate rate for the six largest firms.
Inspection findings provide valuable information about how the organization can continuously improve. EY teams actively track inspection-related activity across the more than 150 external regulators (IFIAR and non-IFIAR members) that inspect audit engagements across more than 150 countries. This activity informs the EY Quality Enablement Leaders (QEL) network of key audit quality trends, which in turn helps enable it to quickly respond to and remediate deficiencies.
The new International Standard on Quality Management 1 (ISQM 1) will play an important role in furthering quality. Through its implementation, the organization is capitalizing on the opportunity to drive consistency and improve audit quality. The global connectivity of the EY organization puts it in position of strength as it builds on policies and procedures already in place to enhance its system of quality management, including consistent policies, frameworks, technologies and enablement for implementing the standard within EY member firms.