0 2018 Transparency Report Deloitte Accountants B.V. Aspire with assurance Date published Sept 28, 2018 0 2018 Transparency Report | Regulatory context Regulatory context This Transparency Report has been prepared in accordance with Article 13 of the Regulation No 537/2014 of the European Parliament and of the Council of 16 April 2014 (The EU Audit Regulation). The EU Audit Regulation came into force on 17 June 2016 and requires publication of an annual Transparency Report by audit firms that perform statutory audits of public interest entities. It supersedes the provisions of the ‘Wet toezicht accountantsorganisaties (Wta)’. This Transparency Report relates to our principal activities in the Netherlands for the financial year ending May 31, 2018 unless otherwise stated. 1 2018 Transparency Report | Contents Contents Leadership message – Report from the Executive Board of Deloitte Accountants B.V. 2 Leadership message – Report from the supervisory board of Deloitte Coöperatief U.A. 5 Deloitte network 9 Developing leadership – Talent 14 What Deloitte Audit & Assurance brings to capital markets 19 External and internal audit quality monitoring 22 Independence, ethics, and additional disclosures 37 Appendices 42 Appendix A | EU EEA audit firms 43 Appendix B | Financial information 46 Appendix C | Public interest entities 47 Appendix D | Status of implementation of NBA Measures 51 2 2018 Transparency Report | Leadership message – Report from the Executive Board of Deloitte Accountants B.V. Leadership message – Report from the Executive Board of Deloitte Accountants B.V. For Deloitte making an impact that matters means • Our Quality, with significant investments in, for that we focus on delivering independent high example, (i) further bolstering root cause quality audits and are dedicated to pursuing analyses to properly understand and develop opportunities and addressing challenges to meet leading practices; (ii) the global Audit Quality the expectations of the public interest. Our Monitoring & Measurement programme which professionals strive to make an impact that matters facilitates continual quality improvement; and on clients, communities, and society-at-large. (iii) a quality control approach that we have developed with a dynamic intermediate form of Across Deloitte Accountants B.V. there is a broad monitoring and support; recognition of the important role that audits play in • Our Talent, investing in an enhanced talent contributing to market confidence and integrity. In model that includes a single global Audit line with our aspiration to be the undisputed leader Learning curriculum, while also setting up in professional services, our approach towards Audit communities where people can work across & Assurance is structured around: service lines for a varied working experiences, and introducing a renewed performance Quality – Continually anticipating and aligning with management system and practices for granting our stakeholders’ evolving expectations by rewards and recognition; providing broader and deeper assurance in • Our Clients, looking closely at our existing client accordance with relevant standards and guidelines; portfolio and new clients we accept. By making clear choices we believe we can better serve Talent – Being bold, team-spirited and pioneering our clients and their stakeholders and offer in defining the audit of the future; more challenging work with optimal working hours for our people; Growth – Driving the audit impact by continually • Our Service Delivery, investing in our Quality expanding our range of skills, experiences, and and Audit Transformation agenda, through insights; standardization (Deloitte Way Workflow), centralization (Regional Delivery) and Automation (Analytics, Robotics), thus Innovation – Driving positive, disruptive change to improving audit quality, efficiency and value. revolutionize what audit can achieve – and how. Thanks to the choices and investments we have Against the backdrop of our Purpose and Aspiration, made, our Audit & Assurance practice has shown and being committed to develop a high-quality steady progress in all strategic pillars and has audit practice, we have made clear choices on: improved both its quality and its financial results. As a result, we have been able to invest additional • Our Culture, with a culture programme in place amounts in audit quality and innovation, including that focuses on themes such as developing of analytics and robotic process automation. leadership and cooperation between and within teams. We have also launched initiatives to The 2017/2018 financial results were solid with further professionalize the way we work total revenues of our Audit & Assurance business together and specifically focusing on behaviour; rising by 3.1% to € 230.9 million. 2 2018 Transparency Report | Leadership message – Report from the Executive Board of Deloitte Accountants B.V. Innovation within the meaning of the Dutch Act on the We continue to monitor demands and the impact Supervision of Audit Firms. that market developments and regulatory requirements have on our Audit & Assurance Serving the public interest business and its professionals. We have The impact of our work extends beyond audit. consequently chosen to pivot towards appropriately Attesting that financial statements give a true and sized communities focused on developing talent for fair view in all material respects, and providing our people orientation, and on four distinct Service insight into the conduct, controls and tone at the Lines for our market orientation. top of an enterprise gives investors the confidence to make critical decisions. Society has vested this The public trust that we instill is not a static trust in Deloitte and we have the duty to live up to quantity. We therefore must look ahead to see how these expectations. Operating in the public interest conditions are emerging, while also continually means focusing on performing the statutory duty of innovating to shape the standards that will give auditing financial statements and issuing a trust and comfort to stakeholders in the future. statement on the reliability of financial and non- financial information. It also includes the duty to We make a concerted and continuous investment in consider issues such as fraud, corruption and developing breakthrough technologies, fresh discontinuity. As leadership we are aware that approaches and new, disruptive perspectives to recent incidents like Steinhoff can lead to a breach reshape our audit activities. Automation and of this trust. We are consequently firmly committed robotics that speed up and improve routine tasks, to continuing to invest in and improve our Quality analytics that yield deeper and more insightful Control Framework views into data, and artificial intelligence that enhances human discovery and problem-solving. Regulatory environment and developments Deloitte and its regulator - the Dutch authority for These investments include: the Financial Markets (AFM) - share a consistent view on the need to ensure high quality audits Spotlight - a web-based data analysis application serving the public interest. Furthermore, it is that reviews specific account balances based on important to foster trust between the regulator and data risks, such as homogenous revenue streams. an audit firm, and this trust is built on mutual respect and transparency. We have therefore had Icount - a web-based application that streamlines frequent interaction with the Dutch authority for the the inventory count process from start to finish, Financial Markets, both formal and informal over eliminating the need for pencil and paper. the past year. The formal meetings include quarterly meetings with the Board of Deloitte The Audit Incubator Board challenges our Accountants B.V. and an annual meeting with the professionals to spot opportunities to do things Supervisory Board and Management Board of smarter, different, and better. Coöperatief Deloitte U.A. In addition, we have had two meetings with our regulator in different North West Europe (NWE) composition with professionals and board members We see different forms of cooperation between NWE of Deloitte Accountants B.V. as part of the geographies in the area of quality: (i) training; (ii) intermediate stage, following the Dashboard 2016, consultations (iii) exchange of professionals and; on progress in our change process, about which our (iv) the monitoring of quality initiatives (AQMM). regulator concluded positively in 2017. Being part of a strong firm like NWE unites our efforts within the global network. During the year we also participated in a thematic review by the Dutch authority for the Financial Since June 1, 2017, the majority voting rights in Markets, focusing on audit quality, of the audit Deloitte Accountants B.V. have been indirectly partner’s role in our culture. Deloitte is also vested in Deloitte North West Europe LLP (Deloitte participating, together with other firms, in the NWE) which is registered as an audit firm with the Stuurgroep Publiek Belang (NBA) that is designed ICAEW, the UK audit regulator, in accordance with to restore society’s trust in the profession. The the relevant EU regulations. The CEO and the Audit NBA’s most recently published reports were on Lead of Deloitte NWE, David Sproul and Stephen (i) Root Cause Analysis; (ii) Audit Firm Governance, Griggs, have been identified as co-policy makers Ownership and Structures; (iii) Quality; (mede beleidsbepalers) of Deloitte Accountants B.V. (iv) Continuity,