Transparency Report Deloitte LLP and Deloitte Limited Transparency Report 2020
Total Page:16
File Type:pdf, Size:1020Kb
2020 Transparency Report Deloitte LLP and Deloitte Limited 2020 Transparency Report Regulatory context This Audit Transparency Report (Report) has been prepared Local audits in accordance with Article 13 of Regulation No 537/2014 of the Public sector bodies in the United Kingdom have differing audit European Parliament and of the Council of 16 April 2014 (the requirements and arrangements, depending upon the country EU Audit Regulation). The EU Audit Regulation came into force and the type of body. ‘Local audits’ (or ‘local public audits’) are on 17 June 2016 and requires the publication of an annual audits of English bodies conducted in accordance with the Local transparency report by audit firms that carry out statutory Audit and Accountability Act 2014. These local audits cover Local audits of public interest entities. It superceded the provisions Authorities, Clinical Commissioning Groups, and NHS Trusts (but of the Statutory Auditors (Transparency) Instrument 2008. not NHS Foundation Trusts). This Report also includes disclosures required by the Audit As we have issued audit reports in respect of major local audits2 Firm Governance Code Revised 2016 (the Code), which sets during the year ended 31 May 2020, we are also required to a benchmark for good governance and applies to UK firms comply with The Local Auditors (Transparency) Regulations auditing 20 or more listed companies. A reconciliation to the 2020. Appendix 10 includes a summary of the requirements of revised Code is provided in Appendix 9. The Local Auditors (Transparency) Regulations 2020 and where these requirements are addressed within this Report. Deloitte Limited, the Deloitte practice operating in Gibraltar that has been a subsidiary of Deloitte LLP1 since 1 June 2017, is also We are appointed auditors for three NHS Trusts and, in respect required to prepare an audit transparency report under Article of the year-ended 31 March 2019 (and so with audit reports 13 of the EU Audit Regulation. This Report relates to Deloitte LLP issued in the year ended 31 May 2020), for 36 local government and Deloitte Limited’s principal activities in the UK and Gibraltar bodies (including pension schemes). Our local government audit respectively for the year ended 31 May 2020, unless otherwise appointments were made by Public Sector Audit Appointments stated. Limited (PSAA) as an appointing person under the provisions of the Local Audit and Accountability Act 2014 and regulation 3 Deloitte LLP also has a subsidiary in Switzerland that prepares of the Local Audit (Appointing Person) Regulations 2015. PSAA’s its own transparency report. Consequently, Deloitte’s activities role includes contract management with Deloitte and other in Switzerland are not covered in this Report, unless otherwise audit firms for the delivery of consistent, quality and effective stated. audit services to relevant authorities. Our arrangements in respect of NHS Foundation Trusts (which are not required to be included in this Report under The Local Auditors (Transparency) Regulations 2020) are consistent with those for local audits. 1 Deloitte Limited is a subsidiary of Deloitte LLP (collectively, Deloitte or the firm), which is the United Kingdom affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee. DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms. 2 As defined in The Local Audit (Professional Qualifications and Major Local Audit) Regulations 2014. 2 2020 Transparency Report Contents Message from Richard Houston, Senior Partner and Chief Executive 04 The Deloitte Perspective 07 Report on the work of the Independent Non-Executives from Jim Coyle 10 Message from Stephen Griggs, UK Managing Partner 13 Our purpose and commitment: instilling trust and confidence 15 Message from Jack Kelly, former UK Audit & Assurance Head of Quality & Risk 16 Message from Alan Chaudhuri, UK Audit & Assurance Head of Quality & Risk 18 Delivering quality audits 19 Frequently asked questions on audit quality 24 Governance, legal structure and Deloitte network 42 Report on the work of the UK Oversight Board from Steve Williams, Chair 43 Deloitte UK: Governance and legal structure 48 NSE governance 53 Deloitte network 55 Conducting business with honesty, integrity and high standards of professional behaviour 56 Message from Feargus Mitchell, UK Ethics Partner 57 Conflicts of interest 61 Independence 62 Principal risks and uncertainties 66 Security, confidentiality and data protection 68 Appendices 70 Appendix 1: Executive Group and UK Oversight Board Members 71 Appendix 2: Financial information 79 Appendix 3: Public interest entities 80 Appendix 4: Audit quality monitoring, measurement and results 85 Appendix 5: Principal risks and mitigations 102 Appendix 6: Equity partner appraisal and pay 110 Appendix 7: Deloitte Gibraltar 111 Appendix 8: EU/EEA audit firms 114 Appendix 9: Audit Firm Governance Code and EU Audit Regulation disclosure requirements 116 Appendix 10: Local Audit disclosure requirements 127 Glossary 131 2020 Transparency Report Message from Richard Houston, Senior Partner and Chief Executive This report is important to me, my fellow partners and all our colleagues; it provides us with a clear way to communicate what we are proud of, but also what we need to focus on in the future. Welcome to our FY20 Audit Transparency Report – my second as Black Lives Matter – our commitments and plan Senior Partner and CEO of Deloitte in the UK and of Deloitte North In response to the killing of George Floyd and subsequent Black and South Europe (NSE). Last year, I ended my message to you Lives Matter demonstrations, we published our Black Action Plan, with a call for feedback. This year I’d like to start with this request, based on five key commitments that align to our global shared not least because we have evolved the report in line with what we values of inclusion and taking care of each other. This plan, which have read and heard from stakeholders. Has it worked? Are we forms a key facet of our People & Purpose strategy led by Dimple being sufficiently transparent? Is it easier to digest, more engaging Agarwal, was brought together by colleagues from across the firm, to read, clearer and more concise? Please do let me know. including our People & Purpose leaders, our Ethnicity Council and our Multicultural Network. It reflects the feedback and experiences I recall last year referring to “economic and regulatory shared by our black colleagues, and I truly believe it will help challenges” ahead. Audit reform has rightly continued address the systemic issues and evolve our culture for the better. in 2020, and the year also brought events we would not have foreseen twelve months ago: from the economic It is diversity that makes our firm, our project delivery and our and social consequences of a global pandemic to the just relationships richer and more powerful. Different experiences, anger over racial inequality in the UK and globally. perspectives and voices make us stronger. During a webinar I held in July for all our people in the UK I made clear our leadership’s COVID-19 – leading in a crisis commitment to equality and inclusion, and that we have a zero In March, as the lockdown measures came into force, we tolerance policy towards racism or any form of discrimination. transitioned over 20,000 of our people to remote working and began supporting public and private sector organisations with the national response to COVID-19 (our Annual Report has some great Richard Houston examples). We had to adapt new ways of working, including with Senior Partner & CEO those entities we audit, as our UK Managing Partner and outgoing “Audit reform has rightly Head of Audit & Assurance Stephen Griggs explains. continued in 2020, and the In April, we had to take the difficult decision to ask partners year also brought events we and staff to make some financial sacrifices to help us meet our would not have foreseen twelve priorities of protecting jobs and the long-term financial stability of our firm. I have been incredibly proud of the actions of our months ago: from the economic people throughout this pandemic. They have responded by and social consequences of finding new ways to connect and support each other, giving a global pandemic to the just up time and money to ensure charities and social enterprises can support those most in need, and enabling our clients - anger over racial inequality who employ thousands of people and deliver critical national in the UK and globally.” projects - to continue to operate in the most difficult of times. 4 2020 Transparency Report Audit in the spotlight This year saw the conclusion of the Financial Reporting Council Audit reform is essential to evolve the audit product and enhance (FRC) investigation into Deloitte UK’s financial reporting work for trust in audit and we are embracing this, as Stephen Griggs Autonomy between 2009-2011. I was disappointed in the ruling and sets out. There should be no doubt audit remains a critical that aspects of our audit work were found to fall below professional part of our firm. It is a fundamental component of our multi- standards expected. As Stephen and Jim make clear, since the audit disciplinary model (MDM), strategy, approach and ethos - and of Autonomy over a decade ago we have significantly evolved our remains an important part of the capital market ecosystem. audit practices, investing in firm-wide controls, technology and processes. This investment will continue and remains a priority for Recognising the market challenge around transparency of our our firm. structure and oversight, we have a firm-wide team working to get us ready for operational separation, with the guiding principle being that audit remains a core part of our MDM, but is financially and operationally independent and focused on delivering high quality audit work in support of the public interest.