Transparency report 2015 v12 final signed - PwC … · PwC Introduction Transpare ncy report October 2015 3 Welcome to our 2015 Transparency Report. PwC is a firm steeped in history,

www.pwc.com.au

TransparencyReport

PwC AustraliaTransparency report

Year ended 30 June 2015

PwC

Contents

October 2015Transparency report2

Introduction 3

Legal structure & PwC Network 6

Governance 7

Internal Quality Control 8

External inspections 13

Independence proceduresand practices

14

Continuing professional education 16

Financial information &Remuneration

17

Audit clients 18

PwC

Introduction


Welcome to our 2015 Transparency Report.

PwC is a firm steeped in history, with more than 150 yearsexperience of building public trust and confidence in theassurance profession and the capital markets. But I think it isfair to say the pace of change in the past five years hasprobably outstripped the previous 145, not just in audit, butacross all industries, and has required us to innovate likenever before.

Despite these changes, I believe that what lies at the heart ofan audit remains the pursuit of quality and the gift ofconfidence. I am also of the view that innovation, includingtechnology, is leading to higher quality, and more valuableand relevant audits.

We want our transparency report to bring to life our auditactivities for the year, and our continued pursuit to providedeeper insights, enhanced quality and more confidence forour clients and the wider capital markets community.

We have achieved this through investing in:

• Our people - we attract and recruit the most talentedgraduates and professionals, and proactively build diverseteams to unlock different thinking and insights. Trainingis the number one reason our people recommend PwC as agreat place to work, and we constantly strive to innovateand evolve our offering. We are building a culture ofinnovation that empowers our people to identify problemsworth solving, explore a diversity of options and challengethe status quo.

• Our approach - with the intelligent use of data, ourapproach lets us understand our client's business in moredepth than every before. We have simplified, standardisedand automated parts of the audit process to the extent thatutilising selected systems, we can look at 100% of a client'sdata in real time.

• Our technology - we have released our trilogy of marketleading global audit technologies that is allowing us to re-engineer the audit from end to end, and means our peoplecan focus the majority of their time on analysis andinsights, rather than manual input.

We have started working with a number of clients on newaudit reports following the release of the internationalstandards in January 2015. This means that over the next fewyears our audit reports will become more informative anddiscursive, focusing on improving insight, transparency andreadability. We want to continue to experiment and work withstakeholders to shape the reports to ensure they are relevantand of value.

I am very proud of our people as they continue todemonstrate their absolute commitment to quality. We takeour role as Assurance professionals extremely seriously, andremain committed to continuing to build trust and confidencein the Capital Markets, and ultimately a more prosperousfuture for our great nation.

I trust you'll enjoy reading the report.

Peter van DongenManaging Partner, Assurance

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Governance InternalQualityControl

Externalinspections

Introduction Independenceprocedures

and practices

Continuingprofessional

education

Financialinformation &Remuneration

Auditclients

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Introduction (cont’d)


Statement on the effectiveness of PwC Australia’sinternal quality control system

PwC Australia’s management believes that the quality controlsystem described from page 8 onwards of this report complieswith applicable regulations and provides a reasonable basisfor believing that audits carried out by PwC Australiaconsistently meet the required quality standards.

PwC Australia was subject to a full scope Global PwC networkAssurance Quality Management Review for the Member Firmin March 2013. The review report issued on 25 August 2013concluded that PwC Australia’s quality control system for theAssurance practice has been suitably designed and compliedwith to provide PwC Australia with reasonable assurance ofperforming and reporting in conformity with applicableprofessional standards (including ISQC 1 Quality Control forFirms that Perform Audits and Reviews of Financial Reportsand Other Financial Information and Other AssuranceEngagements) and PwC Audit (including compliance withAustralian Auditing Standards ASAs) in all material respectswith the exception of certain issues which were notsignificant, but merited attention.

Subsequently, PwC Australia was subjected to two targetedGlobal PwC network Assurance Quality Management Reviewsof our quality control system during September 2014 andAugust 2015. It was concluded that the minor issues identifiedduring the 2013 full scope review were remediated with noother issues identified.

This Transparency Report is published in accordance with therelevant requirements of the Corporations Act 2001 (the Act)and Corporations Regulations 2001 (the Regulations) and inaccordance with Articles 40(1) and 45(5)(e) of the EuropeanUnion’s Directive on Statutory Audit 2006/43/EC (EUDirective), covering the financial year ending 30 June 2015.

As required by Article 40(2) of the EU Directive, thisTransparency Report is signed on behalf of PwC Australia.

Peter van DongenManaging Partner, Assurance

30 October 2015

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The PwC Audit


People

Data and technology can help to reveal insights, but it takes a person to see them – aninquisitive person with well-rounded business knowledge.

We recruit professionals who can deliver the highest quality outcomes in terms ofclient service and compliance. The attributes and capabilities mapped in our ‘Assurance DNA’help us recruit team members with the courage, resilience and talent to deliver the quality weexpect.

Approach

Our audit approach is intertwined with our people and our technology, and it’s designed togive us more time with our clients, understanding the things that matter to their business.That’s more time understanding their concerns, and more time focusing on the inherent riskswe see – not just what they are, but how they change over time and how they compare withpeer companies.

Technology

As technological change continues to accelerate, our clients want to trust their businessinformation with organisations that don’t simply keep up but actually lead the way. We’vemade a global commitment to offer leading audit technology and invested heavily in tools tomatch our approach –delivering greater quality and insight to our clients.

People Approach Technology The PwCAudit

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Legal structure & PwC NetworkEU Article 40(1)(a)(b)Sub regulation 2M.4A.02(1) | Schedule 7A, 201 and 202


PricewaterhouseCoopers is an Australian partnershipgoverned by the laws of the Australian Capital Territorywhich operates throughout Australia (PwC Australia). PwCAustralia is owned by its partners.

PwC Australia operates in Australia through its offices inAdelaide, Brisbane, Canberra, Melbourne, Perth andSydney and regional offices in Newcastle and Townsville.PwC Australia is a member of the PwC network of firms.

“PwC” refers to the network of member firms ofPricewaterhouseCoopers International Limited (PwCIL)and/or one or more of its member firms, each of which is aseparate legal entity.

PwC member firms operate locally in countries around theworld. Being a member of the PwC network means firmscan use the PwC name and draw on certain resources,methodologies, knowledge and expertise within the PwCnetwork. Each member firm also agrees to abide by certaincommon policies and maintain the standards of the PwCnetwork. Each PwC member firm engages in qualitycontrol and compliance monitoring activities, covering theprovision of services, ethics and business conduct, and thecompliance with specific, strict standards for independencemonitoring and protection.

PwCIL is an English private company limited by guarantee.PwCIL does not practice accountancy, provide services toclients or do business with third parties. PwCIL acts as acoordinating entity for PwC member firms in the PwCnetwork. PwCIL develops and implements standards andpolicies and initiatives that create a common approach formember firms. PwCIL focuses on key areas like strategy,brand and risk and quality, including compliance withindependence processes.

A member firm of PwCIL cannot act as agent of PwCIL orany other member firm, and it is only liable for its own actsor omissions and not those of PwCIL or any other memberfirm. PwCIL has no right or ability to control any memberfirm’s exercise of professional judgment.

The governance bodies of PwCIL are:

which reports to the network Leadership Team, coordinatesthe service lines and the key functional areas (such as Risk &Quality, Human Capital, Operations, Brand &Communication) across the network.

PwC Australia’s Country Senior Partner is a member of theStrategy Council and maintains the firm’s relationships withthe Network Leadership Team.

which is responsible for the governance of PwCIL and for theoversight of the Network Leadership Team. The Board doesnot have an external role. Board members are elected bypartners from all PwC member firms around the world everyfour years.

which is responsible for setting the overall strategy for thePwC network and the standards to which the member firmsagree to adhere.

which is made up of the leaders of the largest member firmsof the network, agrees changes to the strategic direction ofthe network, in order to facilitate their consistentimplementation.

Global Board

Network Leadership team

Strategy Council

Network Executive Team

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GovernanceEU Article 40(1)(c)Sub regulation 2M.4A.02 (1) Schedule 7A, 203


The governance and leadership bodies and roles within PwC Australia are:

• the Board of Partners (known as the Governance Board)

• the Country Senior Partner (known as the CEO)

• the CEO’s Management Team (known as the Executive Board)

• the firm’s partners, by way of partner vote.

The Governance Board is responsible for governance andoversight of the firm, including having input into, supportingand monitoring strategy, supervising partner admissions andapproving major transactions or referring them for partnervote. It meets regularly.

The Governance Board consists of the firm’s CEO and afurther ten partners of the firm who are elected by partnervote. The Governance Board may appoint up to threeadditional members. At present, the Governance Board hasno additional appointed members.

Luke Sayers is the firm’s CEO. In this role he is responsiblefor providing leadership for partners and managing the firm,including setting its short and long term strategic direction.The CEO is responsible for appointments to the firm’sExecutive Board and other management positions. Underthe CEO’s leadership, the Executive Board and others inmanagement positions conduct the management andadministration of the firm.

The CEO is elected by the firm’s partners for a term of fouryears. If re-elected, the CEO may serve in that role for onefurther term of up to four years. Luke Sayers has been CEOsince April 2012.

Certain matters are reserved for partner vote, includingelection and removal of the CEO and members of theGovernance Board (other than additional appointedmembers), amendments to the firm’s partnershipagreement, termination of the partnership and approval ofmajor transactions referred to partner vote by theGovernance Board. The equity partners may vote on all suchmatters; fixed share partners are able to vote in somecircumstances.

Both 2014 and 2015

In an anonymous staff survey 91% strongly agreedwith ‘The leaders I work with are committed toproviding high quality services to external clients’

91%

Oversight:Governance Board

Partners

Management: CEOand Executive Board

Leadership in quality –continued strongcommitment to quality

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Internal Quality ControlEU Article 40(1) (d)Sub regulation 2M.4A.02 (1) Schedule 7A, 204


The following is a summary of the system of quality controlthat PwC Australia has adopted over its accounting andauditing practice.

Firms of the PwC network are members of, or otherwiseconnected to PricewaterhouseCoopers International Limited(PwCIL), an English private company limited by guarantee.Each member firm is a separate legal entity. Member firmsare obliged to abide by certain common audit and qualitycontrol standards and policies approved by PwCIL and toconduct risk and quality reviews. PwC Australia’s policies arebased on these common standards and policies, which aresupplemented to address local professional standards andregulatory requirements.

Compliance with International Standards on Auditing (ISA)requires PwC Australia to have a system of quality controlover its auditing practice. These controls are embedded aspart of PwC Australia’s day-to-day activities. The qualitycontrol system is in compliance with International Standardson Quality Control 1 (ISQC1), Quality Control for Firms thatPerform Audits and Reviews of Historical FinancialInformation, issued by the International Federation ofAccountants (IFAC).

The IFAC standards and requirements and, therefore, PwCAustralia’s quality control system, encompass the followingsix elements of quality control:

• Leadership Responsibilities for Quality within the Firm

• Ethical Requirements

• Acceptance and Continuance of Client Relationships andSpecific Engagements

• Human Resources

• Engagement Performance

• Monitoring.

PwC Australia’s management believe that the quality controlenvironment described in the pages that follow complies withapplicable regulations and provides a reasonable basis forbelieving that audits carried out by PwC Australia consistentlymeet the required quality standards.

He is excellent incommunicatingthe importanceof quality

You can see thatshe is focused onquality anddelivering thaton her audits

In his QRP rolehe raised areasof challenge,proposedalternativeviews andoptions

She emphasisedthe importanceand value ofquality

She ispersonallycommitted todeveloping staffof all levels

He demonstratesby doing notsaying andrewardingstrong quality

Leadership in Quality – Real feedback from ourstaff for our partners

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PwC Australia’s leadership is committed to audit quality and has established a firm culture embracing high standards inindependence and professional ethics. This leadership is embedded throughout the detailed policies endorsed by leadership,including ethical, human resources and engagement performance discussed below. It is also demonstrated by the dedication ofresources to quality. There is a partner responsible for risk management and quality control relative to PwC Australia’s clientservice operations who reports directly to the CEO. We have in place a solid leadership structure that reflects our commitment toquality in every facet of our business, as follows:

Internal Quality Control (cont’d)EU Article 40(1) (d)Sub regulation 2M.4A.02 (1) Schedule 7A, 204


Executive Board Member/Reputation,Regulation, Risk LeaderMary WaldronBring s together the teams responsible for protectingand enhancing the firm and its reputation.

CEOLuke Sayers

Assurance Risk and QualityCouncil ChairAndrew MillLeads identification and management ofstrategic risk across Assurance.

Risk and Quality ManagementValerie CliffordLeads the development and generation of arobust quality management system to promotepractice – wide quality.

Client and Issue Support LeaderWayne AndrewsProvides dedicated support for high riskclient issues.

Risk Management Partners NetworkExperienced partners that identify and manage the riskwithin our business units.

Assurance Quality Partner and Coaches NetworkExperienced partners and senior professionals that act as the first point of contact for auditengagements and audit teams, promote and share initiatives on audit quality and escalate issues.

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Executive Board Member/ AssuranceManaging PartnerPeter van Dongen

Leadership responsibilitiesfor Quality within the Firm

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Integrity and Objectivity: The reputation and success ofPwC Australia depends on the professionalism and integrity ofeach and every partner and employee. All PwC Australiapartners and staff are expected to uphold and comply with thestandards developed by the PwC global network and PwCAustralia. Upon hiring or admittance, all staff and partners ofPwC Australia are provided with a copy of the PwC Global Codeof Conduct. They are expected to live by the values expressedin the Code in the course of their professional careers.

Independence: PwC Australia has adopted the PwC Globalpolicies and related rules regarding independence andcompliance, complemented when necessary by more restrictivelocal professional and regulatory rules. PwC Australia strictlymonitors compliance with regulatory, professional, and PwCindependence requirements related to financial interests inand business and service relationships with clients.

PwC Australia has implemented a process to identifyacceptable clients based on the PwC global network’sproprietary decision support systems for audit clientacceptance and retention (called Acceptance andContinuance (A&C)). A&C facilitates a determination by theengagement team, business management and riskmanagement specialists of whether the risks related to anexisting client or a potential client are manageable, andwhether or not PwC should be associated with the particularclient and its management.

Human Resources: PwC Australia partners and staffregularly receive communication as to the firm’s vision,values and strategy.

Recruitment: PwC Australia aims to recruit only highquality staff that can operate as accounting and other expertsin support of audits and who share in PwC Australia’s strongsense of responsibility for auditing. Candidates areconsidered according to multiple criteria, including theiracademic achievement.

Professional Development: Training and development isan ongoing process. Training starts when a person is hiredand continues throughout his or her career. PwC Australia’speople participate in a variety of local and regional andinternational formal training courses and they will also betrained through on the job coaching and supervision.

Assignment of Engagement Teams: Each engagementpartner is responsible, in consultation with others asappropriate, for staffing engagements with partners and staffwho have the professional competence and experiencerequired in the circumstances. Further, each engagementpartner is ultimately responsible for determining the extentof direction, supervision and review of the work of morejunior staff to whom work is delegated.

20152014

86%74%

Assurance partners received feedback on theirleadership in quality from staff

Leadership in Quality –Increased feedback rate

Ethical requirementsAcceptance and Continuanceof Client Relationships andSpecific Engagements

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Consistent Global Methodology: PwC Australia uses aconsistent audit methodology and process for auditengagements. The methodology is enhanced as necessary torespond to the changing environment. All audit engagementpartners and staff receive ongoing training in thismethodology.

Comprehensive Policies and Procedures: Tocomplement the Global policies and procedures, PwCAustralia has comprehensive policies and proceduresgoverning our local accounting and auditing practice that areregularly updated to reflect new professional developmentsand operating environment, and to address emerging issues,as well as the needs and concerns of the practice. Thesepolicies cover not only professional and regulatory standards,but also reflect the guidance that PwC provides to itsprofessionals about how best to implement them. They areavailable in electronic files and databases, are regularlyupdated or supplemented for current developments and areaccessible remotely at any time.

Consultation Culture: Consultation is a key element toquality control. PwC Australia has formal protocols settingout the circumstances under which consultation ismandatory. PwC Australia is supported by a Capital MarketsAccounting Consulting Services Group and a Risk & QualityGroup that will track new developments in accounting andauditing respectively and provide updates to the appropriateprofessional staff.

PwC Australia’s consultative culture means that ourengagement teams will regularly consult with experts andothers beyond those that are formally required including riskassurance, valuation, actuarial and other specialists.

PwC Australia is responsible for monitoring the effectivenessof its Assurance quality control systems which includescarrying out, or arranging to be carried out on its behalf,independent reviews both at the leadership and managementlevel of the Assurance practice’s systems and procedures(known as Quality Management Review – QMR) and at theindividual engagement level (known as EngagementCompliance Reviews) collectively referred to as the “QualityReview” process. The Independent Quality ManagementReviews are undertaken at least every three years andupdated during the intervening period and EngagementCompliance Reviews are undertaken so that significant risk-based engagements are reviewed at least twice every six years.All assurance partners must have at least one of theirengagements reviewed every five years. The Quality Reviewprocess also involves testing of the effectiveness of PwCAustralia’s quality controls in other functional areas such ashiring, training, promotion and independence. AdditionallyPwC Australia also performs “Real Time Reviews” and“Completion Reviews” to supplement the Global independentreview program.

Quality monitoring is an integral part of the PwC Australia’scontinuous improvement program. PwC Australia constantlyevaluates inputs from formal programs described above and avariety of informal sources in an ongoing effort to improvepolicies, procedures and the consistency of the quality ofwork.

Instances of failure to meet performance standards aretreated seriously. The partner responsible is counselled toimprove performance. Appropriate steps are taken to fullyencourage improvement including, where appropriate, theimposition of financial penalties or limitation of signingauthority.

Engagement performance Monitoring

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The PwC audit is underpinned by a deep understanding of our client’s businessand its inherent risks. We use knowledge gained from our previous experience todevelop and improve our approach. We embrace the digital age and deploytechnological advances appropriately in a considered way.



The PwC Audit approach - six steps to achieving a quality audit

1. Client acceptanceand independence

2. Deep businessunderstanding

3. Relevant risks

4. Intelligentscoping

5. Robust testing

6. Meaningfulconclusions andvalue reporting

We have robust processes and systems to help our team fully understandthe risks associated with current and potential clients and enable us torespond quickly and accurately to meet our independence obligations.

We build our understanding of our client’s business by drawing on ourbusiness analysis framework methodology and our firm’s deep industryexpertise and business experience.

We train our people in risk assessment skills and emphasis the criticalimportance of exercising curiosity and professional scepticism in order toidentify risks that will have a material impact on financial reporting.

We determine the scope of our audit work based on a comprehensiveassessment of the company’s risks, size, complexity and structure, and ourjudgement of what is material. Our tailored scoping efforts are supportedby established audit technology, tools and processes.

We use bespoke data interrogation technology in addition to traditionalaudit testing techniques so we are able to provide our clients with insightsand benchmarking data while executing high quality audits.

We provide clients with an audit opinion and final reports that are wellconsidered and supported by robust audit evidence. They are constructedusing the best industry expertise from our global network and drawing onrelevant thought leadership.

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External inspectionsEU Article 40(1)(e)Sub regulation 2M.4A.02 (1) Schedule 7A, 206


PwC Australia partners are eligible to undertake statutory auditwork by virtue of authorisation by Australian Securities &Investment Commission (ASIC) as Registered Company Auditors(RCA). As part of its monitoring responsibilities, ASICundertakes an inspection of the quality of PwC Australia’s workas statutory auditors on a ‘rolling basis’ throughout the year.

ASIC prepares a private and confidential report describing theinspection process, observations and findings and suggestedremedial actions. The firm’s responses to the observations andfindings are included in the final report. The last report wasissued in January 2015.

Every 18 months ASIC also publishes the results of all audit firmsinspected, from very small through to the large firms, in a publicreport. This report does not identify the names of firms or theirclients. This report aims to better inform interested stakeholdersof the key observations and findings from their inspectionprogram. The latest public report was issued in June 2014,relating to its 2013-2014 Inspection Program. A copy is availableon ASIC’s website www.asic.gov.au

PwC Australia is also subject to review by CPA Australia and byThe Institute of Chartered Accountants in Australia (ICAA)which changed its trading name to Chartered AccountantsAustralia and New Zealand (CA ANZ) following its amalgamationwith the New Zealand Institute of Chartered Accountants(NZICA).

The CA ANZ and CPA Australia have a reciprocal arrangementregarding quality reviews. While the review programs areoperated separately by the individual bodies, a review by onebody is fully recognised by the other body.

The CA ANZ /CPA review program is a quality assurance processto monitor whether members have the quality control policiesand procedures in place to comply with professional standardsand legal requirements.

In December 2011 the ICAA conducted a survey of assurancepartners and staff across 5 largest firms and in December 2012they reviewed the firm’s annual quality improvement plan. Adetailed report was received in May 2012 on the firm’s results inthe survey in comparison to each of the other 4 firms on a nonames basis. A publication on the consolidated survey resultshas been publically available. PwC Australia has not been subjectto Chartered Accountants Australia and New Zealand /ICAA/CPA review since then as at the date of this report.

In addition to the above Australian external reviews, ASICalso performed a joint inspection of PwC with the US PublicCompany Accounting Oversight Board (PCAOB). The lastjoint inspection was performed in October 2013. The PCAOBreport which is dated 31 October 2014 is publicly available ontheir website. ASIC also performed a joint inspection with theCanadian Public Accounting Board (CPAB) in March 2012.The CPAB issued a report on the firm with no findings.

All findings from the reviews are communicated to the auditpractice and remedial actions are defined by the Firm in theannual Audit Quality Improvement Plan. Theimplementation of the remedial actions isbeing monitored.

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Independence procedures and practicesEU Article 40(1)(g)Sub regulation 2M.4A.02 (1) Schedule 7A, 208


Organisation

PwC Australia has a designated partner (known as the “PartnerResponsible for Independence” or “PRI”) with appropriateseniority and standing, who is responsible for providingappropriate support and processes such that partners and staffare knowledgeable about independence matters and that theytake the actions required of them by applicable rules andregulations and by the firm’s independence policies andsupporting guidance. The partner is supported by a team ofindependence specialists.

Policies and guidance

The PwC Network Independence Policy, which is based on theInternational Ethics Standards Board for Accountants(IESBA) Code of Ethics for Professional Accountants, containsminimum standards with which PwC member firms haveagreed to comply, including processes that are to be followedto maintain independence from clients, when necessary.

The independence requirements of the United StatesSecurities and Exchange Commission and those of the PublicAccounting Oversight Board of the United States are, incertain instances, more restrictive than the applicableAustralian requirements. Given the reach of theserequirements and their impact on PwC Network Firms, PwCAustralia’s independence policy identifies key areas wherethese requirements are more restrictive.

PwC Australia supplements the PwC Network IndependencePolicy as required by Australian regulations.

The firm’s independence policy covers, among others, thefollowing areas:

• personal and firm independence, including policies andguidance on the holding of financial interests, financialproducts and other financial arrangements, such as bankaccounts, loans, credit cards, insurance etc by partners,staff and the firm

• non-audit services and fee arrangements. The policy issupported by Statements of Permitted Services (SOPS),which provide practical guidance on the application of thepolicy in respect of non-audit services to assurance clients

• business relationships, including policies and guidance onjoint business relationships (such as joint ventures andjoint marketing and sponsorship arrangements) and onpurchasing of goods and services acquired in the normalcourse of business

• arrangements with retired partners.

Training and confirmations

PwC Australia provides all partners and practice staff withannual or on-going training in independence matters.Training typically focuses on milestones relevant to a changein position or role, changes in policy or external regulationand other relevant matters.

Partners and staff receive computer-based training on PwCAustralia’s independence policy and related topics.Additionally, face-to-face training is delivered to members ofthe practice on an as-needed basis. PwC Australia requires allpartners and staff, upon joining and at least annuallythereafter, to confirm their compliance with all aspects ofPwC Australia’s independence policy, including their ownpersonal independence.

In addition all partners confirm that all non-audit servicesand business relationships for which they are responsiblecomply with policy and that PwC Australia’s processes havebeen followed in accepting these engagements andrelationships.

These confirmations serve two primary purposes: to identifyany threats to independence that may have arisen; and toprovide a periodic reminder of PwC Australia’s independencepolicy and procedures. These annual confirmations aresupplemented by engagement level confirmations from auditteam members for PwC Australia’s audit clients.

In accordance with PwC global network requirements, PwCAustralia has disciplinary mechanisms to promotecompliance with independence policies and processes and toreport and address any violations of the independencerequirements. A partner or staff member may be subject to afine or other disciplinary action for a violation of theindependence policy.

Disciplinary policy

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Independence procedures and practices (cont’d)EU Article 40(1)(g)Sub regulation 2M.4A.02 (1) Schedule 7A, 208


• A database that facilitates review and approval of jointbusiness relationships entered into by PwC Australia.These relationships are reviewed periodically to ensuretheir ongoing permissibility

• A database that manages and records the personalindependence confirmations required to be completed byaudit team members. This MyIndependence databasegenerates automated reminders to audit team membersto renew the audit confirmations on a yearly basis

• Directorship Approval database which facilitatesindependence clearance for external directorships andother appointments.

Independence systems

Internal reviews ofindependence proceduresand practices

Our independence procedures and practices are subject tointernal review on an ongoing basis. This is achieved througha monitoring and testing programme, which includes thefollowing:

1. Network and Quality Management Review Program toconfirm compliance with the firm’s quality controls andprocesses (last review was performed in March 2013)

2. Annual assessment of PwC Australia’s adherence with thePricewaterhouseCoopers network’s independence riskmanagement standard (last assessment was performed in2014)

3. Testing of independence controls and processes for thepurposes of ISQC1 compliance (last testing was performedin 2015)

4. Personal independence compliance testing of a randomselection of partners and certain staff performed on anongoing basis throughout each year

5. Review of joint business relationships for ongoingpermissibility (last testing was performed in 2015).

In addition, policies and guidance are reviewed and revisedwhen changes arise such as updates to laws and regulations,when PwC Network policies and guidance change or as aresult of the above reviews and of our monitoring and testingprogram.

The results of PwC Australia’s monitoring and testing arereported to the PwC leadership team.

As a member of the PricewaterhouseCoopers global network, thefirm has access to a number of global systems that assist PwCmember firms and their personnel in complying withindependence policies and procedures. These systems include:

• The Central Entity Service (CES) which containsinformation about corporate entities including public interestaudit clients and SEC restricted clients and their relatedentities. CES enables the independence status of clients of thePwC firms to be determined before entering into a new non-audit engagement or business relationship. This system alsoprovides data for GPS (see next point)

• The Global Portfolio System (GPS) which facilitated thepre-clearance of publicly traded securities by all partners,directors and practice managers before acquisition andrecords their subsequent purchases and disposals during theyear ended 30 June 2015 and up until 31 August 2015. Wherea security became restricted due to the inclusion of an auditor assurance engagement in CES, this system facilitatedcommunication to those holding securities in this clientincluding to sell the security if required. From 31 August2015, the GPS system has been replaced by another globalsystem Checkpoint, that enables and facilitates thecompliance previously facilitated by GPS.

• Authorisation for Services (AFS) which is a globalsystem that facilitates communication between a non-auditservices engagement leader and the audit engagement leader,documenting the potential independence threats of theservice and proposed safeguards, and acts as a record of theaudit partner’s conclusion on the acceptability of the service.

PwC Australia also has a number of territory-specific systemsthat include:

• A rotation tracking system which monitors compliance withPwC Australia’s audit rotation policies for engagementleaders and other key audit partners involved in an audit

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Continuing professional educationEU Article 40(1)(h)Sub regulation 2M.4A.02 (1) Schedule 7A, 209


PwC Australia maintains up-to-date reference materials thatare accessible by all assurance practice partners and staff.These cover audit policy, procedure and methodology, andinclude access to local and international accounting, auditingand ethical standards. To support and keep staff and partners’knowledge up to date, partners and staff receive regularcommunications on technical and regulatory topics as theyarise. Support is available to partners and staff on auditing,accounting and regulatory requirements, including access tosubject matter experts in specialist industries.

PwC Australia’s internal training curriculum provides a broadrange of technical solutions as well as business and personalskills program. There are also specialised training programsavailable for those with clients in specialist industries.Through their participation in the internal objective settingand related performance appraisal processes, engagementleaders assess their on-going personal development needs andidentify any necessary development activities, including inrelation to quality.

The PwC Code of Conduct sets expectations of behaviour andvalues. Mandatory ethics and business conduct trainingcovers the Code of Conduct as well as ethical, accounting,auditing and other regulatory matters.

PwC Australia also monitors compliance with ContinuingProfessional Development requirements, including thecompletion of mandatory training programs, so that PwCAustralia’s services are delivered by individuals who have theright experience and – where required – are qualified underrelevant legislative and other applicable requirements.

20%Exposure

& exchange

70%Experience

10%Education

G

cc

PwC’s Learning and development model:

PwC

Legal structure&

PwC Network


Externalinspections


and practices


education


Auditclients

Financial informationEU Article 40(1)(i)Sub regulation 2M.4A.02 (1) Schedule 7A, 210


PwC Australia’s revenue for the year ended 30 June 2015 wasas follows:

Revenue relating to audits of financial statements conductedby PwC Australia was A$ 364 million (2014: A$354 million);revenue for non-audit services provided to audit clientstotalled A$ 194 million (2014: A$ 189 million); revenue fornon-audit services provided to non-audit clients was A$1,173million (2014: A$1,030 million). PwC Australia total revenuefor the financial year ending 30 June 2015 was A$1,731 million(2014: A$1,573 million).

The significance to PwC Australia of the audit fees from theclient that had transferable securities listed on the regulatedmarkets in Luxembourg is less than 0.6% of the firm’s totalrevenue.

Audit partners are not permitted to be insentivised, evaluatedor remunerated for the selling of non-audit services to theiraudit clients.

The final allocation and distribution of profit to individualPartners is made by Management, once theirperformance has been assessed. The Governance Boardapproves the process and oversees its application.

Each Partner’s remuneration reflects their performance andhow well they have performed against anindividually- tailored balanced scorecard of objectives, basedon role and responsibilities. There is transparency among thePartners over the total income allocated to each individual.

RemunerationEU Article 40(1)(j)Sub regulation 2M.4A.02 (1) Schedule 7A, 211

2015

Total(PwC total

revenue for thefinancial year)

AUD $1,731million

1,173 m

364 m

194 m

Revenue relating to audits of financial statements

Revenue for non-audit services provided to audit clients

Revenue for non-audit services provided to non-audit clients

2014

Total(PwC total

revenue for thefinancial year)

AUD $1,573million

1,030 m

354 m

189 m

PwC

Legal structure&

PwC Network


Externalinspections


and practices


education


Auditclients

Audit clients

Audit clients specified in s332 of the Act


Listed companies and listed registered schemes

1300 Smiles Limited1 Page Limited (formerly: Intermet Resources Limited)Adacel Technologies LimitedAdelaide Brighton LimitedAffinity Education Group LimitedAlkane Resources LimitedAllegra Orthopaedics Limited (formerly: Advanced Surgical

Design & Manufacture Limited)Alliance Aviation Services LimitedAltium LimitedAlumina Limitedamaysim Australia Limited (listed on 15 July 2015)AMCIL LimitedAmcor LimitedAPN News & Media LimitedAPN Outdoor Group LimitedArdent Leisure GroupArena REITArgo Investments LimitedAristocrat Leisure LimitedAsaleo Care LimitedAspen Group LimitedASX LimitedAtCor Medical Holdings LimitedAurizon Holdings LimitedAusdrill LimitedAusenco Services Pty LimitedAustraland Assets Trust (delisted on 3 November 2014)Australand Group (delisted on 3 November 2014)Australian Foundation Investment Company LimitedAxxis Technology Group Ltd (formerly: Anittel Group Limited)Beacon Lighting Group LimitedBega Cheese LimitedBellamy’s Australia LimitedBillabong International LimitedBrambles LimitedBT Investment Management LimitedBurson Group LimitedCarbon Minerals LimitedCarsales.com LimitedCedar Woods Properties LimitedCentral Petroleum LimitedCeramic Fuel Cells Limited (in administration)CFS Retail Property Trust (changed name to Novion Limited,

lost pre 30 June 2015 audit, delisted on12 June 2015)

Charter Hall GroupCharter Hall Retail REITCollins Foods LimitedColonial Holding Company Limited

Commonwealth Bank of AustraliaComputershare LimitedCorporate Travel Management LimitedCover-More Group LimitedDart Energy (delisted on 21 October 2014)DEXUS Property GroupDjerriwarrh Investments LimitedDrillsearch Energy LimitedEnergy Resources of Australia LimitedEnsogo Limited (formerly: iBuy Group Limited)Envestra Limited (delisted on 17 October 2014)ERM Power LimitedEvolution Mining LimitedFiducian Portfolio Services LimitedFinders Resources Limited (lost pre 30 June 2015 audit)FlexiGroup LimitedFocus Minerals LimitedFolkestone Education Trust (formerly: Australian Education

Trust)Folkestone LimitedFolkestone Social Infrastructure Fund (formerly: Australian

Social Infrastructure Fund)Fortescue Metals Group LimitedFuture Generations Investment Company Limited (formerly:

Australian Infrastructure Fund, lost pre 30 June 2015audit)

Galaxy Resources LimitedGalileo Japan TrustGas2Grid LimitedGeneral Property Trust (formerly: GPT Group)Genetic Technologies LimitedGlobe International LimitedGlobe Metals & Mining LimitedGrainCorp LimitedGrange Resources LimitedGreencross LimitedHastings High Yield FundHelloworld LimitedHorizon Oil LimitedHughes Drilling LimitedHuon Aquaculture Group LimitedHutchison Telecommunications (Australia) LimitedIluka Resources LimitedIndo Mines LimitedInfigen EnergyInvesta Office FundInvoCare LimitedIron Road LimitedIshine International Resources LimitedKangaroo Resources LimitedKaroon Gas Australia LimitedKingsgate Consolidated Limited

As required by s332A(1) of the Corporations Act 2001 and Sub regulation 2M.4A.02 (1) Schedule 7A, 207,below is a list of clients for which PwC Australia conducted an audit in the year ended 30 June 2015:

PwC

Legal structure&

PwC Network


Externalinspections


and practices


education


Auditclients

Audit clients (cont’d)


Listed companies and listed registered schemes(cont’d)

Lachlan Star Limited (in administration)Lifehealthcare Group LimitedLion Selection GroupLogiCamms LimitedMacquarie Atlas Roads GroupMacquarie GroupMacquarie Telecom Group LimitedMalachite Resources LimitedMantra Group LimitedMarengo Mining Limited (delisted on 16 January 2015)Maverick Drilling & Exploration LimitedMcPherson’s LimitedMedibank Private LimitedMesoblast LimitedMincor Resources NLMirrabooka Investments LimitedMirvac Industrial Trust (delisted on 08 December 2014)Mirvac Limited (formerly Mirvac Group)Mitula Group Limited (listed from 1 July 2015)Myer Holdings LimitedMYOB Finance Australia Limited (delisted on 14 July 2015)MYOB Group LimitedNextDC LimitedNIB Holdings LimitedNiuminco Group LimitedNovion Limited (formerly CFS Retail Property Fund,lost pre 30 June 2015 audit , delisted on 12 June 2015)Nuplex Industries LimitedOceanaGold CorporationOrora LimitedOrotonGroup LimitedOzForex Group LimitedPanAust Limited (delisted on 12 June 2015)Patties Foods LimitedPharmaxis LimitedPhosphagenics LimitedPioneed Credit LimitedPlatinum Asset Management Limited (Listed Investment

Manager)Platinum Capital Limited (Listed Investment Company)Prana BiotechnologyPrima BioMed LimitedPryme Energy LimitedQBE Insurance Group LimitedQube Holdings LimitedRecall Holdings LimitedRedbank Energy Limited (trading suspended)RedFlow LimitedRFM PoultryRHG Limited (delisted on 14 January 2014)Ricegrowers Limited

Rio Tinto Limited (Listed)Rural Funds GroupRussell Investment Funds as follows:Russell Australia Value ETFRussell Australian Government Bond ETFRussell Australian Responsible Investment ETFRussell Australian Select Corporate Bond ETFRussell Australian Semi-Government Bond ETFRussell High Dividend Australian Shares ETFSalmat LimitedSeek LimitedSelect Harvests LimitedService Stream LimitedSFG Australia Limited (delisted on 21 August 2014)Signature Metals Limited (delisted on 01 May 2015)Silex Systems LimitedSimavita LimitedSino Gas & Energy Holdings LimitedSmartgroup Corporation LimitedSonic Healthcare LimitedSouthern Cross Media Group LimitedState Street SPDR Funds as follows:SPDR 200 FundSPDR 50 FundSPDR Dow Jones Global Real Estate FundSPDR MSCI Australia Select High Dividend Yield FundSPDR S&P Emerging Markets FundSPDR S&P Global Dividend FundSPDR S&P World Ex Australia (Hedged) FundSPDR S&P World Ex Australia FundSPDR S&P/ASX 200 Financials ex A-REITS FundSPDR S&P/ASX 200 Listed Property FundSPDR S&P/ASX 200 Resources FundSPDR S&P/ASX Australian Bond FundSPDR S&P/ASX Australian Government Bond FundSPDR S&P/ASX Small Ordinaries FundSpeedcast International LimitedStarpharma Holdings LimitedStockland Corporation LimitedStraits Resources LimitedSubZero Group LimitedSugar Terminals LimitedSuper Retail Group LimitedTandou Limited (trading suspended on 29 June 2015)Tatts Group LimitedTempleton Global Growth Fund LimitedTen Network Holdings LimitedThe Citadel Group LimitedThe Reject Shop LimitedTiger Resources LimitedTransurban Limited (formerly: Transurban Holdings

Limited)Tyrian Diagnostics LimitedU & D Coal Limited (removed from ASX board in May 2015)

PwC

Legal structure&

PwC Network


Externalinspections


and practices


education


Auditclients

Audit clients (cont’d)


Listed companies and listed registered schemes(cont’d)

Universal Biosensors IncVanguard Investment Australia Limited – Listed EFTs as

follows:Vanguard Australian Fixed Interest IndexVanguard Australian Government Bond Index ETFVanguard Australian Property Securities Index ETFVanguard Australian Shares High Yield ETFVanguard Australian Shares IndexVanguard FTSE Emerging Markets SharesVanguard MSCI Australian Large Companies IndexVanguard MSCI Australian Small Companies IndexVanguard MSCI Index International SeriesVanguard MSCI Index International Series (Hedged)Virtus Health LimitedVita Group LimitedVocation LimitedWestpac Banking CorporationWestpac TPS Trust (Listed debt)Westside Corporation Limited (delisted on

18 September 2014)White Energy Company LimitedWilson HTM Investment Group Limited

Authorised Deposit Taking Institutions (ADI)within the meaning of the Banking Act 1959Australian Settlements LimitedCommonwealth Bank of AustraliaGreater Building Society LtdHunter United Employee’s Credit Union LimitedMacquarie Bank LimitedMacquarie Group LimitedPayPal Australia Pty LimitedPolice & Nurses Limited (trading as P&N Bank)SGE Mutual Limited (trading as G&C Mutual Bank)The Capricornian LtdWestpac Banking Corporation

Life and General Insurers Regulated by APRA asdefined in paragraph (c) or (e) of the definition insubsection 3(2) of the Australian PrudentialRegulation Authority Act 1998ACE Australia Holdings Pty LimitedACE Insurance LimitedAchmea Schadeverzekeringen N.V.AIA Australia LimitedAIG Australia LimitedAvant Insurance LimitedAXA Corporate Solutions AssuranceColonial Mutual Life Assurance Society Limited (The)

Combined Life Insurance Company of Australia LtdCommonwealth Insurance LimitedEquitas Trust FundLawCover Insurance Pty LimitedLloyd’s Trust FundsMacquarie Life LimitedMGIC Australia Pty LimitedMGICA Pty LimitedNorth Insurances Pty LtdProgressive Direct Insurance CompanyQBE Insurance (Australia) LimitedQBE Insurance (International) LimitedQBE Insurance Group LimitedQBE Lenders Mortgage Insurance LimitedQBE Life (Australia) LimitedSirius International Insurance CorporationSt George Life LimitedSwiss Re International SESwiss Re Life & Health Australia LimitedSwiss Reinsurance Company LtdTokio Marine & Nichido Fire Insurance Co. LtdTT Club Mutual Insurance LimitedWestpac General Insurance LimitedWestpac Lenders Mortgage Insurance LimitedWestpac Life Insurance Services LimitedXL Insurance Company LimitedYoui Holdings Pty LtdYoui Pty LtdZurich Australia LimitedZurich Australian Insurance LimitedZurich Financial Services Australia Limited

EU Audit clientsEU Article 40(1)(f)

During the period covered by this report, PwCAustralia signed audit reports for the following clientthat had transferable securities listed on regulatedmarkets in

Luxembourg: Macquarie Bank Limited.

www.pwc.com.au

© 2015 PricewaterhouseCoopers. All rights reserved.PwC refers to the Australian member firm, and may sometimes refer to the PwC network.Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

Documents

Transparency report 2015 v12 final signed - PwC … · PwC Introduction Transpare ncy report October 2015 3 Welcome to our 2015 Transparency Report. PwC is a firm steeped in history,