Transparency Report 2018

EY Latvia

Contents Message from the EY Baltics Managing Partner and the Assurance Leader ...... 3 About us ...... 5 Legal structure, ownership and governance ...... 5 Network arrangements ...... 6 Commitment to quality ...... 8 Infrastructure supporting quality ...... 8 Instilled professional values ...... 9 Internal quality control system ...... 10 Client acceptance and continuance ...... 11 Performance of audits ...... 12 Review and consultation ...... 13 Audit partner rotation ...... 14 Audit quality reviews ...... 14 External quality assurance review ...... 15 Compliance with legal requirements ...... 15 Independence practices...... 17 Continuing education of audit professionals ...... 19 Revenue and remuneration ...... 20 Financial information ...... 20 Partner remuneration ...... 20 Appendix 1 ...... 22 Appendix 2 ...... 23

More information about EY can be found at ey.com.

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Message from the EY Baltics Managing Partner and the Assurance Leader

Welcome to the 2018 Transparency Report of Ernst & Young Baltic SIA (EY Latvia). We believe that how we advance audit quality, manage risk and maintain our independence as auditors should be transparent to our stakeholders. We value regular dialogue, and this report is one of the ways in which we advise our stakeholders on what we are doing in each of these areas. Executing high-quality audits continues to be our top priority and is at the heart of our commitment to serve the public interest. It enables us to grow the global EY network successfully and responsibly, while achieving our purpose of building a better working world. Auditors play a vital role in the functioning of capital markets by promoting transparency and supporting investor confidence. Companies, regulators and other stakeholders count on us to deliver excellence in every engagement.

We are focused on investing in tools to improve what we do, creating the highest-performing teams, and building trust and confidence in the audits we perform. EY Latvia’s reputation is based on and grounded in providing high-quality professional audit services objectively and ethically to every company we audit. We continue to embrace the transparency objectives of the European Union’s 8th Company Law Directive and the Law on Audit Services of the Republic of Latvia, which require Latvia statutory auditors of public interest entities (PIEs) to publish annual transparency reports. The 2018 EY Latvia Transparency Report complies with the Directive and the Law on Audit Services of the Republic of Latvia, and covers the the financial year ended 30 June 2018. In this report, you can learn more about our internal quality control system: how we instill professional values, how we perform an audit, our review and consultation processes, our approach to audit quality reviews, and our independence practices. EY Latvia is focused on enhancing audit quality and upholding our independence, informed by several matters including external and internal inspection results. Continuous improvement of audit quality requires us to challenge approaches to audit execution, and we focus on this by evaluating all inspection findings and taking responsive actions. We encourage all our stakeholders — including our clients and their investors, audit committee members and regulators — to continue to engage with us on our strategy as well as any of the matters covered in this report.

Jonas Akelis, EY Baltic Managing Partner Diāna Krišjane, EY Baltic Assurance Leader

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EY’s purpose: building a better working world EY is committed to doing its part in building a better working world.

The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to stakeholders. In so doing, we play a critical role in building a better working world for our people, our clients and our communities.

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About us EY Latvia is part of the EMEIA Area, which comprises EYG member firms in 98 countries in Europe, the Legal structure, ownership and Middle East, India and Africa. Within the EMEIA Area, there were 11 Regions, and from 1 July 2018 the number governance has reduced to 10. In Latvia, Ernst & Young Baltic SIA is a Limited liability Ernst & Young (EMEIA) Limited (“EMEIA Limited”), an company organized in Riga and is a member firm of Ernst & English company limited by guarantee, is the principal Young Global Limited, a UK company limited by guarantee coordinating entity for the EYG member firms in the EMEIA (EYG). In this report, we refer to ourselves as Area. EMEIA Limited facilitates the coordination of these “EY Latvia,” “we,” “us” or “our.” EY refers collectively to firms and cooperation between them, but it does not the global organization of the member firms of EYG. control them. EMEIA Limited is a member firm of EYG, has EY Latvia is jointly owned by Ernst & Young Europe LLP (for no financial operations and does not provide any details see “Ernst & Young Europe” below) and Baltic professional services. Network OU, a limited liability company licensed to provide Each Region elects a Regional Partner Forum (RPF), whose audit services in Estonia. Ernst & Young Europe holds over representatives advice and act as a sounding board to 90% of the share capital of Baltic Network OU. The Regional leadership. The partner elected as Presiding remainder of Baltic Network OU’s share capital is held by 18 Partner of the RPF also serves as the Region’s EY Baltic partners. Details regarding the ownership of EY representative on the Global Governance Council Latvia are available in the public registry of the audit firms (see page 6). maintained by the Latvian Association of the Certified Auditors and can be found on its website: www.lzra.lv. EY Latvia has no branches or subsidiaries and its place of business is at Muitas St. 1A, LV-1010 Riga, Latvia. The governance bodies of EY Latvia are:

• The General Meeting – the supreme body;

• The Board of the Company – the collegial management body of the Company; the Board is elected by the General Meeting for an indefinite period and consists of 3 (three) members; the Board elects its chairman from among its members;

EYG member firms are grouped into four geographic Areas: Americas; Asia-Pacific; Europe, Middle East, India and Africa (EMEIA); and Japan. The Areas comprise a number of Regions, which consist of member firms or sections of those firms. Details of the formal/legal governing bodies of EY Latvia are available in the public registry of legal entities in Latvia and can be found on its website: www.ur.gov.lv

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In Europe, a holding entity, Ernst & Young Europe LLP (“EY Network arrangements Europe”), was formed in conjunction with EMEIA Limited. EY Europe is an English limited liability partnership, owned EY is a global leader in assurance, tax, transaction and by partners of the EYG member firms operating in Europe. advisory services. Worldwide, over 250,000 people in It is an audit firm registered with the Institute of Chartered member firms in more than 150 countries share a Accountants in England and Wales (ICAEW), but it does not commitment to building a better working world, united by carry out audits or provide any professional services. To the shared values and an unwavering commitment to quality, extent permitted by local legal and regulatory requirements, integrity and professional skepticism. In today’s global EY Europe has acquired or will acquire voting control of the market, the integrated EY approach is particularly EYG member firms operating in Europe. EY Europe is a important in the delivery of high-quality multinational member firm of both EYG and EMEIA Limited. audits, which can span nearly every country in the world. This integrated approach enables EY member firms to EY Europe acquired voting control of EY Latvia as of 30 develop and draw upon the range and depth of experience June 2009. required to perform such diverse and complex audits. EY Europe’s principal governing bodies are: EYG coordinates the member firms and promotes Europe Operating Executive cooperation among them. EYG does not provide services, but its objectives include the promotion of exceptional high- The Europe Operating Executive (EOE) operates as the quality client service by member firms worldwide. board of EY Europe. It has authority and accountability for strategy execution and management of EY Europe’s Each member firm is a legally distinct entity. Their operations. The EOE comprises: the Europe Managing obligations and responsibilities as members of EYG are Partner; the leaders for Accounts, Talent and Risk governed by the regulations of EYG and various other Management; the service line leaders for Assurance, agreements. Advisory, Transaction Advisory Services and Tax; and all The structure and principal bodies of the global European Regional Managing Partners. organization during the year ended 30 June 2018 are Europe Governance Sub-Committee described below. They reflect the principle that EY, as a global organization, has a common shared strategy. EY Europe has the Europe Governance Sub-Committee, which includes one representative from each Region in The Executive includes the Global Executive (GE), its Europe. It serves in an advisory role to the EOE on policies, committees and teams, and the leadership of the four strategies and other matters, and its approval is required Areas. At the same time, the network operates on a for a number of significant matters, such as the Regional level within the Areas. This operating model allows appointment of the Europe Managing Partner, approval of for greater stakeholder focus in the 27 Regions, permitting the financial reports of EY Europe and material member firms to build stronger relationships with clients transactions. and others in each country, and be more responsive to local needs.

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Global Governance Council • public policy The Global Governance Council (GGC) is the main oversight • Policies and guidance relating to member firms’ service body of EYG. It comprises one or more representatives from of international clients, business development, markets and branding each Region, other member firm partners as at-large representatives and up to six independent non-executives • EY’s development funds and investment priorities (INEs). The Regional representatives, who otherwise do not • EYG’s annual financial reports and budgets hold senior management roles, are elected by their RPFs for • GGC recommendations a three-year term, with provision for one successive The GE also has the power to mediate and adjudicate reappointment. The GGC advises EYG on policies, strategies disputes between member firms.

and the public interest aspects of its decision—making. The approval of the GGC is required for a number of significant matters that could affect EY. GE committees Established by the GE and bringing together representatives Independent Non-Executives from the four Areas, the GE committees are responsible for Up to six Independent Non-Executives (INEs) are appointed making recommendations to the GE. In addition to the from outside EY. The INEs are senior leaders from both the Global Audit Committee, there are committees for Global public and private sectors, and reflect diverse geographic Markets and Investments, Global Accounts, Emerging and professional backgrounds. They bring to the global Markets, Talent, Risk Management, Assurance, Advisory, organization, and the GGC, the significant benefit of their Tax, and Transaction Advisory Services. varied perspectives and depth of knowledge. The INEs also form a majority of the Public Interest Sub-Committee of the Global Practice Group GGC, which addresses public interest matters, including This group brings together the members of the GE, GE public interest aspects of decision-making, issues raised committees, Regional leaders and sector leaders. The under whistleblowing policies and procedures, perspectives Global Practice Group seeks to promote a common on stakeholder views and engagement in quality and risk understanding of EY’s strategic objectives and helps drive management discussions. The INEs are nominated by a consistency of execution across the organization. dedicated committee. EYG member firms Global Executive Under the regulations of EYG, member firms commit The Global Executive (GE) brings together EY’s leadership themselves to pursue EY’s objectives, such as the provision functions, services and geographies. It is chaired by the of high-quality service worldwide. To that end, the member Chairman and CEO of EYG, and includes its Global Managing firms undertake the implementation of global strategies and Partners of Client Service and Business Enablement; the plans, and work to maintain the prescribed scope of service Area Managing Partners; the global functional leadership capability. They are required to comply with common for Talent and Finance; the leaders of the global service standards, methodologies and policies, including those lines — Assurance, Advisory, Tax and Transaction Advisory regarding audit methodology, quality and risk management, Services; the Global Leader for Public Policy; and one EYG independence, knowledge sharing, human resources, and member firm partner on rotation. technology. The GE also includes the Chair of the Global Accounts Above all, EYG member firms commit to conducting their Committee and the Chair of the Emerging Markets professional practices in accordance with applicable Committee, as well as a representative from the Emerging professional and ethical standards, and all applicable Markets practices. requirements of law. This commitment to integrity and doing the right thing is underpinned by the EY Global Code The GE and the GGC approve nominations for the Chairman of Conduct and EY values (see page 10). and CEO of EYG, and ratify appointments of the Global Managing Partners. The GE also approves appointments of Besides adopting the regulations of EYG, member firms Global Vice Chairs. The GGC ratifies the appointments of enter into several other agreements covering aspects of any Global Vice Chair who serves as a member of the GE. their membership in the EY organization, such as the right and obligation to use the EY name, and the sharing The GE’s responsibilities include the promotion of global of knowledge. objectives and the development, approval, and, where relevant, implementation of: Member firms are subject to reviews that evaluate their adherence to EYG requirements and policies governing • Global strategies and plans issues such as independence, quality and risk management, • Common standards, methodologies and policies to be audit methodology, and human resources. Member firms promoted within member firms unable to meet the quality commitments and other EYG • People initiatives, including criteria and processes for membership requirements may be subject to separation admission, evaluation, development, reward and from the EY organization. retirement of partners • Quality improvement and protection programs • Proposals regarding regulatory matters and

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The Global PPD oversees development of the EY Global Commitment to quality Audit Methodology (EY GAM) and related technologies so that they are consistent with relevant professional Infrastructure supporting standards and regulatory requirements. The Global Professional Practice group also oversees the development quality of the guidance, training and monitoring programs and processes used by member firm professionals to execute Quality in our service lines audits consistently and effectively. The Global, Area and Vision 2020+, which sets out EY’s purpose, ambition and Region PPDs, together with other professionals who work strategy, calls for EYG member firms to provide exceptional with them in each member firm, are knowledgeable about client service worldwide. This is supported by an EY people, clients and processes, and they are readily unwavering commitment to quality and service that is accessible for consultation with audit engagement teams. professionally and globally consistent, and means service Additional resources often augment the Global Professional that is based on objectivity, professional skepticism, and Practice group, including networks of professionals adherence to EY and professional standards. focused on: EYG member firms and their service lines are accountable • Internal—control reporting and related aspects of the for delivering quality engagements. EY service lines EY audit methodology manage the overall process for quality reviews of completed • Accounting, auditing and risk issues for specific engagements and input for the quality of in-process industries and sectors engagements, which helps achieve compliance with • Event-specific issues involving areas of civil and professional standards and EY policies. political unrest; or sovereign debt and related accounting, auditing, reporting and disclosure Vision 2020+ has reinforced the ownership of quality implications by the service lines, including audit. It has also • General engagement issues and how to work effectively resulted in increased clarity around the role of risk with audit committees management in policies and practices that support and improve audit quality. Risk management The Global Vice Chair of Assurance coordinates member Responsibility for high-quality service and ownership of the firms’ compliance with EY policies and procedures for risks associated with quality is placed with the member assurance services. firms and their service lines. Among other things, the Global Risk Management Leader helps oversee the Professional Practice management of these risks by the member firms, as well as The Global Vice Chair of Professional Practice, referred to other risks across the organization as part of the broader as the Global Professional Practice Director (PPD), is Enterprise Risk Management framework. overseen by the Global Vice Chair of Assurance and works Member firm partners are appointed to lead risk to establish global audit quality control policies and management initiatives in both the service lines and procedures. Each of the Area PPDs is overseen by the member firms, supported by other staff and professionals. Global PPD and the related Area Assurance Leader. This The Global Risk Management Leader is responsible for helps provide greater assurance as to the objectivity of establishing globally consistent risk management execution audit quality and consultation processes. priorities and enterprise—wide risk management. The Global PPD also leads and oversees the Global These priorities cascade to member firms, and their Professional Practice group. This is a global network of execution is monitored through an Enterprise Risk technical subject matter specialists in accounting and Management program. auditing standards, who consult on accounting, auditing and financial reporting matters, and perform various practice monitoring and risk management activities.

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Global confidentiality policy • Instilled professional values Protecting confidential information is ingrained in the • Internal quality control system everyday activities of EYG member firms. Respect for • Client acceptance and continuance intellectual capital and all other sensitive and restricted • Performance of audits information is required by the EY Global Code of Conduct, • Review and consultation which provides a clear set of principles to guide the • Audit partner rotation behaviors expected of all EY people. The Global • Audit quality reviews Confidentiality Policy further details this approach to protecting information and reflects the ever—increasing use • External quality—assurance reviews of restricted data. This policy provides added clarity for EY • Compliance with legal requirements people and forms the fundamental element of broader guidance that includes key policies on conflicts of interest, Instilled professional values personal data privacy and records retention. Other guidance includes: Sustainable Audit Quality • Social media guidance Quality is the foundation for exceptional client service. It is • Information—handling requirements what we pride ourselves on. It is integral to our work and • Knowledge—sharing protocols central to our responsibility to provide confidence to the capital markets. Delivering quality is at the heart of all we do and supports our purpose of building a better working Cybersecurity world for our people, our clients and our communities. This Managing the risk of major and complex cybersecurity is reflected in the Sustainable Audit Quality (SAQ) program, attacks is a part of doing business for all organizations. which is the highest priority for our Assurance practices. While no systems are immune from the threat of cyber— attacks, EY Latvia is vigilant in the steps taken to secure Each member firm that makes up our global structure is the environment of EYG member firms and to protect their committed to providing high-quality audits. In 2015, we clients’ data. The EY approach to cybersecurity is proactive launched the SAQ initiative throughout our Assurance and includes the implementation of technologies and practices. SAQ establishes a governance structure and is processes necessary to manage and minimize cybersecurity focused on continuously improving our audit process. risks globally. EY information security and data privacy programs, consistent with industry practices and applicable We use the word “sustainable” in SAQ to demonstrate that legal requirements, are designed to protect against this is not a one-off, short-term initiative, but an ongoing unauthorized disclosure of data. There is a dedicated team process of improvement. EY has had a common audit of internal and external cybersecurity specialists who methodology for some time; now we have a common actively monitor and defend EY systems. language and processes regarding audit quality. Beyond technical and process controls, all EY people are There are six components to SAQ: tone at the top, required to affirm in writing their understanding of the principles contained in the EY Global Code of Conduct and strengthening people capabilities, simplification, audit their commitment to abide by them and to participate in an technology and digital, enablement and quality support, annual security awareness learning activity. There are and accountability. SAQ is implemented by each member various policies outlining the due care that must be taken firm, and is coordinated and overseen globally. with technology and data, including but not limited to the Global Information Security Policy, and a global policy Audit quality and the key elements of SAQ are something around the Acceptable Use of Technology. EY every senior manager, manager and team member must cybersecurity policies and processes recognize the understand and be committed to implementing locally. SAQ importance of timely communication. EY people receive is essential to all our goals and ambitions, and each of regular and periodic communications reminding them of the Regional and Area leaders is held accountable for their responsibilities around these policies and general those goals. security awareness practice. We have made significant progress through SAQ. EY’s Components of the audit quality control program internal and external inspection findings globally are In the following sections, we describe the principal showing improvement, and we are producing greater components of the audit quality control program, which EY consistency in execution. We have deployed world—class Latvia follows: tools that enhance the quality and value of our audits. Our ability to deliver consistency is based in part on the use of EY Canvas, our online audit platform. It better supports audit execution, streamlines communications and enables us to provide a seamless audit.

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We recently launched the EY Canvas Client Portal, which • Acting with professional integrity adds to the leading—edge tools already offered to our • Maintaining our objectivity and independence auditors. In addition, we have deployed the 2018 Audit • Respecting intellectual capital Milestones Program globally, which establishes the use of Through our procedures to monitor compliance with Milestones on selected PIE audits as one important step to the EY Global Code of Conduct, and through frequent improving results and sustaining quality across communications, we strive to create an environment that engagements. encourages all personnel to act responsibly, including There is also a network of Quality Enablement Leaders reporting misconduct without fear of retaliation. (QELs) across the practice and an overall Global Audit Quality Committee. The EY Ethics Hotline provides our people, clients and others outside of the organization with a means to They help us in executing and reviewing root-cause analysis and understanding the impact our initiatives are having in confidentially report activity that may involve unethical or driving quality outcomes, better behaviors and a continuous improper behavior and that may be in violation of improvement mindset. This infrastructure demonstrates professional standards or otherwise inconsistent with the that audit quality is the single most important factor in our EY Global Code of Conduct. The hotline is operated by an decision—making and the key measure on which our external organization that provides confidential and, if professional reputation stands. desired, anonymous hotline reporting services worldwide. Tone at the top When a report comes into the EY Ethics Hotline, either by phone or internet, it receives prompt attention. Depending EY Latvia leadership is responsible for setting the right tone on the content of the report, appropriate individuals from at the top and demonstrating EY’s commitment to building a Risk Management, Talent, Legal or other functions are better working world through behavior and actions. While involved to address the report. The same procedures are the tone at the top is vital, our people also understand that followed for matters that are reported outside of the EY quality and professional responsibility start with them. Our Ethics Hotline. shared values, which inspire our people and guide them to do the right thing, and our commitment to quality are Our values: who we are embedded in who we are and in everything we do. People who demonstrate integrity, respect and teaming The EY approach to business ethics and integrity is People with energy, enthusiasm and the courage to lead contained in the EY Global Code of Conduct and other policies, and is embedded in the EY culture of consultation, training programs and internal communications. Senior People who build relationships based on doing the right thing management regularly reinforces the importance of performing quality work, complying with professional standards, adhering to our policies, leading by example and through various communications. Also, EY’s quality review Internal quality control system programs assess professional service as a key metric in Structure evaluating and rewarding all professionals. EY Latvia’s reputation for providing high-quality The EY culture strongly supports collaboration and places professional audit services independently, objectively and special emphasis on the importance of consultation in ethically is fundamental to our success as independent dealing with complex or subjective accounting, auditing, auditors. We continue to invest in initiatives to promote reporting, regulatory and independence matters. We believe enhanced objectivity, independence and professional it is important to determine that engagement teams and skepticism. These are fundamental attributes of a clients correctly follow consultation advice, and we high-quality audit. emphasize this when necessary. At EY Latvia our role as auditors is to provide assurance on The consistent stance of EY Latvia has been that no the fair presentation of the financial statements of the client is more important than our professional companies we audit. We bring together qualified teams to reputation — the reputation of EY Latvia and the provide our services, drawing on our broad experience reputation of each of our professionals. across industry sectors and services. We continually strive to improve our quality and risk management processes so that the quality of our service is at a consistently high level. Code of Conduct We promote a culture of integrity among our professionals. We recognize that in today’s environment — characterized The EY Global Code of Conduct provides a clear set of by continuing globalization and the rapid movement of principles that guide our actions and our business conduct, capital and the impact of technology changes — the quality and are to be followed by all EY personnel. The EY Global of our audit services has never been more important. As Code of Conduct is divided into five categories: part of EY Vision 2020+, we continue to invest heavily in developing and maintaining our audit methodology, tools • Working with one another and other resources needed to support quality service. • Working with clients and others

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While the market and stakeholders continue to demand Client acceptance and high-quality audits, they also demand increasingly efficient and effective delivery of audit services. In addition to the continuance investments mentioned, EY continues to seek ways to improve the effectiveness and efficiency of its audit EY policy methodology and processes, while improving audit quality. The EY Global Client Acceptance and Continuance Policy We work to understand where our audit quality may not be sets out principles for member firms to determine whether up to our own expectations and those of stakeholders, to accept a new client or a new engagement, or to continue including external audit firm regulators. We seek to learn with an existing client or engagement. These principles are from external and internal inspection activities and to fundamental to maintaining quality, managing risk, identify root causes of adverse quality occurrences to protecting our people and meeting regulatory enable us continually to improve audit quality, and we requirements. The objectives of the policy are to: believe that taking effective and appropriate actions to • Establish a rigorous process for evaluating risk and improve quality is important. making decisions to accept or continue clients or engagements Effectiveness of the quality control system • Meet applicable independence requirements EY has designed and implemented a comprehensive set of • Identify and deal appropriately with any conflicts global audit quality control policies and practices. These of interest policies and practices meet the requirements of the • Identify and decline clients or engagements that pose International Standards on Quality Control issued by the excessive risk International Auditing and Assurance Standards Board • Require consultation with designated professionals to (IAASB). EY Latvia has adopted these global policies and identify additional risk management procedures for procedures, and has supplemented them as necessary to specific high-risk factors comply with local laws and professional guidelines, and to • Comply with legal, regulatory and professional address specific business needs. requirements We also execute the EY Audit Quality Review (AQR) program In addition, the EY Global Conflicts of Interest Policy defines to evaluate whether our system of audit quality control has global standards for addressing categories of potential operated effectively so as to provide reasonable assurance conflicts of interest and a process for identifying them. It that EY Latvia and our people comply with applicable also includes provisions for managing potential conflicts of professional standards, internal policies and regulatory interest as quickly and efficiently as possible through the requirements. use of appropriate safeguards. Such safeguards range from obtaining a client’s consent for EYG member firms to act for The results of the AQR program and external inspections two or more clients to declining an engagement to avoid an are evaluated and communicated within EY Latvia to identified conflict. provide the basis for continual improvement in audit quality, consistent with the highest standards in the profession. The EY Global Conflicts of Interest Policy and associated guidance were updated in early 2015. The updates take into The GE is responsible for implementing quality account the increasing complexity of engagements and improvement. As such, it reviews the results of our internal client relationships, and the need for speed and accuracy in AQR program and external audit firm regulatory reviews, responding to clients. They also align with the latest as well as any key actions designed to address areas International Ethics Standards Board for Accountants for improvement. (IESBA) standards. The recent results of such monitoring, together with the recent feedback from independent external audit firm Putting policy into practice regulators, provide EY Latvia with a basis to conclude that We use the EY Process for Acceptance of Clients and our internal control systems are designed appropriately and Engagements (PACE), an intranet—based system, for are operating effectively. efficiently coordinating client and engagement acceptance and continuance activities in line with global, service line and member firm policies. PACE takes users through the acceptance and continuance requirements, and identifies the policies and references to professional standards needed to assess both business opportunities and associated risks.

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As part of this process, we carefully consider the risk Using an online tool, EY Atlas, an EY auditor is presented characteristics of a prospective client or engagement and with a version of EY GAM organized by topic and designed the results of several due diligence procedures. Before we to focus the audit strategy on the financial statement risks, take on a new engagement or client, we determine whether and the design and execution of the appropriate audit we can commit sufficient resources to deliver quality response to those risks. EY GAM consists of two key service, especially in highly technical areas, and if the components: requirements and guidance, and supporting services the client wants are appropriate for us to provide. forms and examples. The requirements and guidance reflect The approval process is rigorous, and no new audit both auditing standards and EY policies. The forms and engagement may be accepted without the approval of our examples include leading practice illustrations, and assist in PPD. performing and documenting audit procedures. In the EY annual client and engagement continuance EY GAM can be “profiled” or tailored to present the relevant process, we review our service and ability to continue to requirements and guidance, depending on the nature of the provide quality service, and confirm that clients share EY entity being audited. For example, there are profiles for Latvia’s commitment to quality and transparency in listed entities and for those considered non-complex financial reporting. The partner in charge of each audit, entities. Enhancements to the audit methodology are made together with our Assurance leadership, annually reviews regularly to address new standards, emerging auditing our relationship with the audit client to determine whether issues and matters, implementation experiences, and continuance is appropriate. external and internal inspection results. In 2017, EY GAM was updated to address the requirements of new section As a result of this review, certain audit engagements are 225 of the International Ethics Standards Board for identified as requiring additional oversight procedures Accountants Code of Ethics (IESBA Code), Responding to during the audit (close monitoring), and some audit clients Non-Compliance with Laws and Regulations and the are discontinued. As with the client acceptance process, our resulting conforming changes to the ISAs. In addition, Regional PPD is involved in the client continuance process updated guidance was issued on performing joint audits and and must agree with the continuance decisions. audits when the entity uses a service organization, along Decisions about acceptance or continuance of clients and with new policies relating to maintaining the audit engagements consider the engagement team’s assessment documentation in electronic form. EY GAM was also of whether the company’s management may pressure us to enhanced by adding guidance to address common questions accept inappropriate accounting, auditing and reporting from audit teams and issues arising from inspections. conclusions to undermine quality. Considerations and In addition, we monitor current and emerging conclusions on the integrity of management are essential developments, and issue timely audit planning and other to acceptance and continuance decisions. reminders. These reminders emphasize areas noted during inspections as well as other key topics of interest to our Performance of audits local audit regulator(s) and the International Forum of Independent Audit Regulators (IFIAR). As part of EY Vision 2020+, EY has invested significantly in improving audit methodologies and tools, with the goal of Technology performing the highest-quality audits in the profession. This Our audit engagement teams use technology to assist in investment reflects EY’s commitment to building trust and executing and documenting the work performed in confidence in the capital markets and in economies the accordance with EY GAM. world over. EY Canvas, our global audit platform, lies at the heart of the Audit methodology audit and enables us to provide a high-quality audit. EY EY GAM provides a global framework for delivering high- Canvas is built using HTML5, state-of-the-art technology for quality audit services through the consistent application of web applications. This allows us to provide data security and thought processes, judgments and procedures in all audit to evolve our software to respond to changes in the engagements, regardless of size. EY GAM also requires accounting profession and regulatory environment. The compliance with relevant ethical requirements, including predecessor audit support tool, GAMx, was decommissioned independence from the entity we audit. Making risk in 2018. assessments, reconsidering and modifying them as Through the use of profile questions, audit engagements in appropriate, and using these assessments to determine the EY Canvas are automatically configured with information nature, timing and extent of audit procedures are relevant to an entity’s listing requirements and industry. fundamental to EY GAM. The methodology also emphasizes This helps to keep our audit plans customized and up-to- applying appropriate professional skepticism in the date, and provides direct linkage to our audit guidance, execution of audit procedures. EY GAM is based on professional standards and documentation templates. EY International Standards on Auditing (ISAs) and is Canvas is built with a user interface that allows the team to supplemented in Latvia to comply with the local Latvia visualize risks and their relationship to the planned auditing standards and regulatory or statutory requirements.

Transparency Report 2018: EY Latvia 12 response and work performed in key areas. It also enables a more complex engagements, consideration is given to linkage for our group audit teams to communicate inter- whether specialized or additional expertise is needed to office risks and instructions so that the primary audit team supplement or enhance the audit engagement team. can direct execution and monitor performance of the In many situations, internal specialists are assigned as part group audit. of the audit engagement team to assist in performing audit EY Canvas includes a Client Portal to assist teams in procedures and obtaining appropriate audit evidence. These communicating with clients and streamlining their client professionals are used in situations requiring special skills requests. Mobile applications are integrated with EY Canvas or knowledge, such as information systems, asset valuation to help our people in their audit work; for example, in and actuarial analysis. monitoring the status of the audit, capturing audit evidence securely and performing inventory observations. Review and consultation Audit engagement teams use other software applications, forms and templates during various phases of an audit to Reviews of audit work assist in executing procedures, making and documenting EY policies describe the requirements for timely and direct audit conclusions, and performing analysis. senior professional participation, as well as the level of At EY, we are making data analysis integral to our audits. review required for the work performed. Supervisory Our use of data and analysis is not about additive members of an audit engagement team perform a detailed procedures or visualizations. It is about taking large review of the audit documentation for accuracy and populations of company data, and applying our globally completeness. Senior audit executives and engagement consistent technology (EY Helix) and methodology (EY partners perform a second-level review to determine GAM) to audit that data. adequacy of the audit work as a whole, and the related accounting and financial statement presentation. A tax EY Helix is a library of data analyzers for use in audits. professional reviews the significant tax and other relevant These data analyzers are transforming the audit through working papers. For listed and certain other companies, an the analysis of larger populations of audit-relevant data, engagement quality reviewer (described below) reviews identifying unseen patterns and trends in that data, and important areas of accounting, financial reporting and audit helping to direct our audit efforts. The use of data analytics execution, as well as the financial statements of the also allows us to obtain better perspectives, richer insights company we audit and our auditor’s report. and a deeper understanding of transactions and areas of risk. The nature, timing and extent of the reviews of audit work depend on many factors, including: EY is deploying data analyzers to analyze the business • The risk, materiality, subjectivity and complexity of the operating cycles of the companies that we audit, supported subject matter by analytics-based audit programs to aid the application of these data analyzers. • The ability and experience of the audit team members preparing the audit documentation Using the EY Helix library of data analyzers, our • The level of the reviewer’s direct participation in the engagement teams can enhance their audit risk audit work assessment, enabling the audit of higher-risk transactions, • The extent of consultation employed and assisting our people in asking better questions about Our policies also describe the roles and responsibilities of audit findings and evaluating the outcomes. each audit engagement team member for managing, EY Atlas is a global technology platform that enables our directing and supervising the audit, as well as the auditors to access the latest accounting and auditing requirements for documenting their work and conclusions. content, including external standards, EY interpretations and thought leadership. Consultation requirements EY consultation policies are built upon a culture of Formation of audit engagement teams collaboration, whereby audit professionals are encouraged EY Latvia policies require an annual review of partner to share perspectives on complex accounting, auditing and assignments by our Assurance leadership and PPD to make reporting issues. Consultation requirements and related sure that the professionals leading listed-company audits policies are designed to involve the right resources so that possess the appropriate competencies (i.e., the knowledge, audit teams reach appropriate conclusions. skills and abilities) to fulfill their engagement responsibilities, and are in compliance with applicable Consultation is built into the decision-making process; auditor rotation regulations. it is not just a process to provide advice. The assignment of professionals to an audit engagement is also made under the direction of our Assurance leadership. For complex and sensitive matters, we have a formal Factors considered when assigning people to audit teams process requiring consultation outside of the audit include engagement size and complexity, specialized engagement team with other personnel who have more industry knowledge and experience, timing of work, experience or specialized knowledge, primarily Professional continuity, and opportunities for on-the-job training. For Practice and Independence personnel. In the interests of

Transparency Report 2018: EY Latvia 13 objectivity and professional skepticism, our policies require Audit partner rotation members of Professional Practice, Independence and certain others to withdraw from a consultation if they EY supports mandatory audit partner rotation to help currently serve, or have recently served, the client to which reinforce auditor independence. EY Latvia complies with the the consultation relates. In this circumstance, other audit partner rotation requirements of the code of the appropriate individuals would be assigned. IESBA, Regulation (EU) 537/2014 of the European Parliament and of the Counsel of 16 April 2014 (EU EY policies also require that we document all consultations, 537/2014) and the Law on Audit Services of the Republic including written concurrence from the person or persons of Latvia, as well as the U.S. Securities and Exchange consulted, in order to demonstrate their understanding of Commission (SEC), where required. EY Latvia supports the matter and its resolution. audit partner rotation because it provides a fresh Engagement quality reviews perspective and promotes independence from company management, while retaining expertise and knowledge of Engagement quality reviews are performed by audit the business. Audit partner rotation, combined with partners in compliance with professional standards for independence requirements, enhanced systems of internal audits of all listed companies and those considered close quality controls and independent audit oversight, helps monitoring. Engagement quality reviewers are experienced strengthen independence and objectivity, and are important professionals with significant subject matter knowledge. safeguards of audit quality. They are independent of the engagement team and able to provide objective evaluation of significant accounting, For PIEs where rotation of the audit partner is not auditing and reporting matters. In no circumstances may mandated by local independence regulation or is less the responsibility of the engagement quality reviewer be restrictive than the IESBA or EU 537/2014 requirements, delegated to another individual. the EY Global Independence Policy requires the lead engagement partner and the engagement quality reviewer The engagement quality review spans the entire to be rotated after seven years. For a new PIE (including a engagement cycle, including planning, risk assessment, newly listed company) client, the lead engagement partner audit strategy and execution. Policies and procedures for and the engagement quality reviewer may remain in place the performance and documentation of engagement quality for an additional two years before rotating off the team, if reviews provide specific guidelines on the nature, timing they have served the client for six or more years prior to the and extent of the procedures to be performed, and the listing. Following rotation, the partner may not resume the required documentation evidencing their completion. Our lead or engagement quality review role until at least two PPD approves all engagement quality review assignments. years have elapsed. Audit engagement team resolution process for We employ tools to track partner rotation that enable differences of professional opinion effective monitoring of compliance with requirements. EY has a collaborative culture that encourages and expects We have also implemented a process for partner rotation people to speak up, without fear of reprisal, if a difference planning and decision-making that involves consultation of professional opinion arises or if they are uncomfortable with, and approvals by, our Professional Practice and about a matter relating to a client engagement. Policies Independence professionals. and procedures are designed to empower members of an audit engagement team to raise any disagreements relating Audit quality reviews to significant accounting, auditing or reporting matters. The EY Global AQR program is the cornerstone of the EY These policies are made clear to people as they join EY, and process to monitor audit quality. EY Latvia executes the we continue to promote a culture that reinforces a person’s Global AQR program, reports results and develops responsibility and authority to make their own views heard, responsive actions plans. The primary goal of the program and seek out the views of others. is to determine whether systems of quality controls, Differences of professional opinion that arise during an including those of EY Latvia, are appropriately designed and audit are generally resolved at the audit engagement team followed in the execution of audit engagements to provide level. However, if any person involved in the discussion of an reasonable assurance of compliance with policies and issue is not satisfied with the decision, they refer it to the procedures, professional standards, and regulatory next level of authority until agreement is reached or a final requirements. The Global AQR program complies with decision is made. guidelines in the International Standard on Quality Control No. 1 (ISQC No. 1), as amended, and is supplemented Furthermore, if the engagement quality reviewer makes where necessary to comply with Latvia professional recommendations that the engagement partner does not standards and regulatory requirements. It also aids EY accept or the matter is not resolved to the reviewer’s Latvia’s continual efforts to identify areas where we satisfaction, the auditor’s report is not issued until the can improve our performance or enhance our policies matter is resolved. EY policies require documentation of and procedures. disagreements and their resolution.

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Executed annually, the program is coordinated and External quality assurance monitored by representatives of the Global PPD network, with oversight by Global Assurance leadership. review

The engagements reviewed each year are selected on a risk- EY Latvia’s audit practices and our registered statutory based approach, emphasizing audit engagements that are auditors are subject to period (every three years) inspection large, complex or of significant public interest. The Global by the Auditor Quality Control Committee of the Latvian AQR program includes detailed risk-focused file reviews Association of Certified Auditors under the oversight of the covering a large sample of listed and non-listed audit Ministry of Finance of the Republic of Latvia. In addition engagements to measure compliance with internal policies audit practice as auditor of PIEs will be subject to periodic and procedures, EY GAM requirements, and relevant local inspections by Ministry of Finance of the Republic of Latvia. professional standards and regulatory requirements. It also As part of its inspections, the Latvian Association of includes reviews of a sample of non-audit engagements. Certified Auditors evaluates quality control systems and These measure compliance with the relevant professional reviews selected engagements. standards and internal policies and procedures that should be applied in executing non-audit services. In addition, The last quality assurance inspection by Latvian Association practice-level reviews are performed to assess compliance of Certified Auditors took place in September 2016. The with quality control policies and procedures in the final report on the inspection was issued on 22 September functional areas set out in ISQC No. 1. The Global AQR 2016. program complements external practice monitoring and We respect and benefit from the Latvian Association of inspection activities, such as inspection programs executed Certified Auditors inspection process. We thoroughly by audit regulators and external peer reviews. evaluate points raised during the inspection in order to AQR reviewers and team leaders are selected for their skills identify areas where we can improve audit quality. Together and professional competence in accounting and auditing, as with the AQR process, external inspections aid us in making well as their industry specialization; they often work in the our audits and related control processes of the highest Global AQR program for a number of years and are highly quality in the interests of our clients’ investors and other skilled in the execution of the program. Team leaders and stakeholders. reviewers are assigned to inspections outside of their home Information on the above-mentioned regulator can be found location and are independent of the audit teams reviewed. at www.lzra.lv and www.fm.gov.lv. The results of the Global AQR program, external practice monitoring and inspection activities are evaluated and Compliance with legal communicated to improve quality. Any quality improvement plans describe the follow-up actions to be requirements taken, the people responsible, the timetable and deadlines, and sign-off on completed actions. Measures to resolve The EY Global Code of Conduct provides a clear set of audit quality matters noted from the Global AQR program, standards that guide our actions and business conduct. regulatory inspections and peer reviews are addressed by EY Latvia complies with applicable laws and regulations, Assurance leadership and our PPD. The actions are and EY’s values underpin our commitment to doing the right monitored by our PPD and Assurance leadership. These thing. This important commitment is supported by a programs provide important practice monitoring feedback number of policies and procedures, explained in the for our continuing quality improvement efforts. paragraphs below.

Anti-bribery The EY Global Anti-bribery Policy provides EY people with direction around certain unethical and illegal activities. It emphasizes the obligation to comply with anti-bribery laws and provides greater definition of what constitutes bribery. It also identifies reporting responsibilities when bribery is discovered. In recognition of the growing global impact of bribery and corruption, efforts have been increased to embed anti-bribery measures across EY.

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Insider trading Data privacy The EY Global Insider Trading Policy reaffirms the obligation The EY Global Personal Data Privacy Policy sets out the of our people not to trade in securities with insider principles to be applied to the use and protection of information, provides detail on what constitutes insider personal data, including that relating to current, past and information and identifies with whom our people should prospective personnel, clients, suppliers, and business consult if they have questions regarding their associates. This policy is consistent with applicable laws and responsibilities. regulations concerning data protection and privacy for maintaining and processing personal data. Furthermore, we Trade sanctions have a policy to address our specific Latvia data privacy It is important that we are aware of the ever—changing requirements and business needs. situation with respect to international trade sanctions. EY Document retention monitors sanctions issued in multiple geographies and provides guidance to EY people on impacted activities. EY Latvia’s record retention policy applies to all engagements and personnel. This policy addresses document preservation whenever any person becomes aware of any actual or reasonably anticipated claim, litigation, investigation, subpoena or other government proceeding involving us or one of our clients that may relate to our work. It also addresses Latvia legal requirements applicable to the creation and maintenance of working papers relevant to the work performed.

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relating to affiliates of listed audit clients and is updated by Independence practices client—serving engagement teams. The entity data includes notations that indicate the independence rules that apply to EY Global Independence policies require EY Latvia and our each entity, helping our people determine the type of people to comply with the independence standards services that can be provided or other interests or applicable to specific engagements, including, for example, relationships that can be entered into. the Code of Ethics of the IESBA and the Law on Audit Services of the Republic of Latvia. Global Monitoring System (GMS) We consider and evaluate independence from several The GMS is another important global tool that assists in perspectives, including our financial relationships and those identifying proscribed securities and other impermissible of our people; employment relationships; business financial interests. Professionals ranked as manager and relationships; the permissibility of non-audit services we above are required to enter details about all securities they provide to audit clients; applicable firm and partner rotation hold, or those held by their immediate family, into the GMS. requirements; fee arrangements; audit committee pre- When a proscribed security is entered or if a security they approval, where applicable; and partner remuneration hold becomes proscribed, professionals receive a notice, and compensation. and are required to dispose of the security. Identified exceptions are reported through the Global Independence Failure to comply with applicable professional Incident Reporting System (GIIRS) for regulatory matters. independence requirements will factor into decisions relating to a person’s promotion and compensation, GMS also facilitates annual and quarterly confirmation of and may lead to other disciplinary measures, including compliance with independence policies, as described below. separation from EY Latvia. Independence compliance

EY Latvia has implemented EY’s global applications, tools EY has established a number of processes and programs and processes to support us, our professionals and other aimed at monitoring the compliance with independence employees in complying with independence policies. requirements of EY member firms and their people. These include the following activities, programs and processes. EY Global Independence Policy Independence confirmations The EY Global Independence Policy contains the Annually, EY Latvia is included in an Area-wide process to independence requirements for member firms, confirm compliance with the EY Global Independence Policy professionals and other personnel. It is a robust policy and process requirements, and to report identified predicated on the IESBA Code of Ethics and supplemented exceptions, if any. by more stringent requirements where prescribed by a given regulator. The policy also contains guidance to help All EY professionals, and certain others, based on their role people apply the independence rules. The EY Global or function, are required to confirm compliance with Independence Policy is readily accessible and easily independence policies and procedures at least once a year. searchable on the EY intranet. All partners are required to confirm compliance quarterly.

Global Independence System (GIS) Independence compliance reviews The GIS is an intranet—based tool that helps EY EY conducts internal procedures to assess member firm professionals identify the listed entities from which compliance with independence matters. These reviews independence is required and the independence restrictions include aspects of compliance related to non-audit services, that apply. Most often, these are listed audit clients and business relationships with the companies we audit and their affiliates, but they can be other types of attest or financial relationships of member firms. assurance clients too. The tool includes family—tree data

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Personal independence compliance testing Service Offering Reference Tool (SORT) Each year, the EY Global Independence team establishes a We assess and monitor our portfolio of services on an program for testing compliance with personal independence ongoing basis to confirm that they are permitted by law and confirmation requirements and with reporting of professional standards, and to make sure that we have the information into GMS. For the 2017 testing cycle, right methodologies, procedures and processes in place as EY Latvia tested 1 person. new service offerings are developed. We restrict services from being provided that could present undue Non-audit services independence or other risks. SORT provides EY people with We monitor compliance with professional standards information about EY service offerings. It includes guidance governing the provision of non-audit services to audit around which services can be delivered to audit and non- clients through a variety of mechanisms. These include the audit clients, as well as independence and other risk use of tools, such as PACE (see page 11) and Service management issues. Offering Reference Tool (see below), and training and Business Relationship Evaluation Tool (BRET) required procedures completed during the performance of audits and internal inspection processes. We also have a The BRET process helps to support compliance with process in place for the review and approval of certain non- independence requirements. Our people are required to use audit services in advance of accepting the engagement. BRET in many circumstances to identify, evaluate and obtain advance approval of a potential business relationship Global independence learning with an audit client. EY develops and deploys a variety of independence learning programs. All professionals and certain other personnel Audit committees and oversight of independence are required to participate in annual independence learning We recognize the important role audit committees and to help maintain our independence from the companies similar corporate governance bodies undertake in the we audit. oversight of auditor independence. Empowered and independent audit committees perform a vital role on behalf The goal is to help EY people understand their of shareholders in protecting independence and preventing responsibility and to enable each of them, and their conflicts of interest. We are committed to robust and member firms, to be free from interests that might be regular communication with audit committees or those regarded as incompatible with objectivity, integrity and charged with governance. Through EY quality review impartiality in serving an audit client. programs, we monitor and test compliance with EY standards for audit committee communications, as well as The annual independence learning program covers the pre-approval of non-audit services, where applicable. independence requirements focusing on recent changes to policy, as well as recurring themes and topics of importance. Timely completion of annual independence learning is required and is monitored closely. In addition to the annual learning program, independence awareness is promoted through a number of events and materials, including new-hire programs, milestone programs and core service line curricula.

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Continuing education of Knowledge and internal communications In addition to professional development and performance audit professionals management, we understand the importance of providing client engagement teams with up-to-date information to Professional development help them perform their professional responsibilities. EY makes significant investments in knowledge and The EY career development framework, EYU, provides our communication networks to enable the rapid dissemination people with opportunities for the right experiences, learning of information to help people collaborate and share best and coaching to help them grow and achieve their potential. practices. Examples include: The learning component of EYU is based on an extensive • EY Atlas, which includes local and international and globally consistent learning curriculum that helps all EY accounting and auditing standards, as well as people develop the right technical and personal leadership interpretive guidance; replacement for Global skills, wherever they are located around the world. The EY Accounting and Auditing Information Tool (GAAIT) audit core curriculum, The Audit Academy, combines since the fiscal year 2017 interactive classroom-based simulations and “on-demand” • Publications such as International GAAP, IFRS e-learning modules with relevant reinforcement and developments and illustrative financial statements application support. This high impact and award-winning • Global Accounting and Auditing News, a weekly update learning is supplemented by learning programs that are covering assurance and independence policies, developed in response to changes in accounting and developments from standard setters and regulators, as reporting standards, independence and professional well as internal commentary thereon standards, and emerging practice issues. • Practice alerts and webcasts covering a range of global and country-specific matters designed for continuous Where an EYG member firm audits and reviews improvement in member firms’ Assurance practices International Financial Reporting Standards (IFRS) financial statements, relevant team members undertake learning to Performance management become IFRS-accredited. LEAD, our new, forward-looking approach to people’s EY Latvia requires our audit professionals to obtain at least career, development and performance sees an enhanced 20 hours of continuing professional education each year focus on continuous feedback resulting in better and at least 120 hours over a three-year period. Of these conversations built around 90-day cycles. Feedback is hours, 40% (16 hours each year and 48 hours over a three- aggregated and used as an input to compensation and year period) must cover technical subjects related to reward programs. accounting and auditing. LEAD is designed to support the growth and development of In addition to formal learning, professional development our people at all stages of their career at EY. An individual’s occurs through coaching and experiences our professionals personal dashboard provides an easy to interpret snap-shot receive on-the-job. Coaching helps to transform knowledge of their performance against the Leadership at EY and experience into practices. dimensions, and assess performance against peers. Experienced professionals are expected to coach and LEAD retains components that were also included in our develop less-experienced personnel to create a continual previous Performance Management and Development learning environment. We also manage the assignment of Process approach. Those were providing our people with our people to particular engagements in a systematic way clear work expectations and the opportunity to self-assess that helps provide them exposure to a range of experiences their performance. During the course of the year, every as part of their own development. professional, in conjunction with their counselor, identifies opportunities for further development.

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Revenue and Partner remuneration remuneration Quality is at the center of the EY strategy and is a key component of EY performance management systems. EY Latvia partners and other professionals are evaluated and Financial information compensated on the basis of criteria that include specific quality and risk management indicators, covering both Revenue represents combined, not consolidated, revenues actions and results. and includes expenses billed to clients and revenues related to billings to other EYG member firms. Revenue amounts LEAD for partners, principals, executive directors and disclosed in this report include revenues from both audit directors (PPEDDs) applies to all partners in EYG member and non-audit clients. firms around the world. LEAD for PPEDDs reinforces the global business agenda by continuing to link performance to Revenue is presented in accordance the Law on Audit wider goals and values. The process includes goal setting, Services of the Republic of Latvia and included for: ongoing feedback, personal development planning and 1. Revenues from the statutory audit of annual and performance review, and is tied to partners’ recognition and consolidated financial statements of PIEs, and entities reward. Documenting partners’ goals and performance is belonging to a group of undertakings whose parent the cornerstone of the evaluation process. A partner’s goals undertaking is a PIE are required to reflect various global priorities, one of which 2. Revenues from the statutory audit of annual and is quality. consolidated financial statements of other entities 3. Revenues from permitted non-audit services to entities EY prohibits evaluating and compensating lead audit that are audited by the statutory auditor or the engagement partners and other key audit partners on an audit firm engagement based on the sale of non-Assurance services to 4. Revenues from non-audit services to other entities their audit clients. This reinforces to our partners their professional obligation to maintain our independence and Financial information for the period ended 30 June objectivity. For audits conducted in accordance with the 2018 expressed in EUR requirements of Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014, EY

prohibits evaluating and compensating any partner or Service Revenue Percent professional involved in, or able to influence the carrying out of, an engagement based on the sale of non-Assurance Statutory audits and services to their audit clients. This reinforces that directly related services 1 243,546 10% professionals are obligated to maintain independence and for PIEs objectivity. Other audit services and Specific quality and risk performance measures have been directly related services 2 144,447 18% for non-PIEs developed to account for: • Providing technical excellence Non-audit services 2 237,600 18 % provided to audit clients • Living the EY values as demonstrated by behaviors and attitude Non-audit services 6 591,981 54 % • Demonstrating knowledge of, and leadership in, quality provided to other entities and risk management Total revenue 12 217,574 100% • Complying with policies and procedures • Complying with laws, regulations and professional duties • Contributing to protecting and enhancing the EY brand

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The EY partner compensation philosophy calls for meaningfully differentiated rewards based on a partner’s We operate under a system that requires quality to level of performance, as measured within the context of be a significant consideration in a partner’s overall year-end rating. LEAD. Partners are assessed by their firms annually on their performance in delivering quality, exceptional client service and people engagement alongside financial and To recognize different market values for different skills and market metrics. roles, and to attract and retain high-performing individuals, the following factors are also considered when we determine our partners’ total reward: • Experience • Role and responsibility • Long-term potential Instances of non-compliance with quality standards result in remedial actions, which may include compensation adjustment, additional training, additional supervision or reassignment. A pattern of non-compliance or particularly serious non-compliance may result in actions that include separation from EY Latvia.

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Appendix 1

EY Latvia PIE audit clients

In the fiscal year that ended on 30 June 2018, EY Latvia performed audits of the following PIEs: Olainfarm AS Latvenergo AS

HansaMatrix AS

Elko Grupa AS mogo AS Attīstības finanšu institūcija Altum AS Luminor Bank AS Luminor Asset Management IPAS Luminor Pensions Latvia IPAS Luminor Latvijas atklatais pensiju fonds AS Reģionālā Investīciju Banka AS

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Appendix 2

As of 30 June 2018, the following EYG member firms are approved to carry out statutory audits in an EU or EEA member state

Member State Statutory auditor or audit firm Austria Ernst & Young Wirtschaftspruefungsgesellschaft mbH Belgium Ernst & Young Assurance Services BCVBA Ernst & Young Bedrijfsrevisoren B.C.V.B.A Bulgaria Ernst & Young Audit OOD Croatia Ernst & Young d.o.o. Cyprus Ernst & Young Cyprus Limited Ernst & Young Ernst & Young CEA (South) Services Ltd Ernst & Young CEA (South) Holdings Plc Czech Republic Ernst & Young Audit, s.r.o. Denmark Ernst & Young Godkendt Revisionspartnerselskab EY Grønland Statsautoriseret Revisionspartnerselskab Estonia Ernst & Young Baltic AS Baltic Network OU Finland Ernst & Young Oy Julkispalvelut EY Oy France Artois Auditex Barbier Frinault & Associes Conseil Audit & Synthese Ernst & Young Atlantique Ernst & Young Audit Ernst & Young et Autres Picarle et Associes Germany Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Ernst & Young Heilbronner Treuhand GmbH Wirtschaftsprüfungsgesellschaft EY Revision und Treuhand GmbH Wirtschaftsprüfungsgesellschaft Schitag Schwäbische Treuhand GmbH Wirtschaftsprüfungsgesellschaft Gibraltar EY Limited

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Member State Statutory auditor or audit firm Greece Ernst & Young (Hellas) Certified Auditors Accountants SA Hungary Ernst & Young Könyvvizsgáló Korlátolt Felelõsségû Társaság Iceland Ernst & Young ehf Ireland Ernst & Young Chartered Accountants Italy EY S.p.A Latvia Ernst & Young Baltic SIA Liechtenstein Ernst & Young AG, Basel Ernst & Young AG, Vaduz Lithuania UAB Ernst & Young Baltic Luxembourg Compagnie de Revision S.A. Ernst & Young Luxembourg S.A. Ernst & Young S.A. Malta Ernst & Young Malta Limited Netherlands Ernst & Young Accountants LLP Norway Ernst & Young AS Poland Ernst & Young Audyt Polska sp. z o.o. Ernst & Young Audyt Polska Spółka z ograniczoną odpowiedzialnością Finance spółka komandytowa Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością Doradztwo Podatkowe spółka komandytowa Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k. Ernst & Young Usługi Finansowe Audyt sp. z o.o. Portugal Ernst & Young Audit & Associados - SROC, S.A. Romania Ernst & Young Assurance Services S.r.l. Ernst & Young Support Services SRL Slovakia Ernst & Young Slovakia, spol. s r.o. Slovenia Ernst & Young d.o.o. Spain ATD Auditores Sector Público, S.L.U Ernst & Young, S.L. Sweden Ernst & Young AB United Kingdom Ernst & Young LLP Ernst & Young Europe LLP

Total turnover of these EYG member firms resulting from statutory audits of annual and consolidated financial statements was approximately Euros 2.6 billion.

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EY | Assurance | Tax | Transactions | Advisory

About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

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