2020 BDO AUDIT QUALITY REPORT CONTINUING TO BUILD TRUST Events of 2020 have forever changed our society and global economy. A Message Capital markets continue to be significantly impacted by the pandemic and resulting economic downturn. The extreme measures taken by governments, markets, industries and corporations to protect and preserve human life during a global pandemic have had significant impact. A further driver of transformation has been the rising demand for to Our meaningful social and ethical change to achieve real equality. Throughout this truly momentous time in our history, we have witnessed a growing need for resilience and underlying Stakeholders trust—within our firm, among our clients and within the broader ecosystem in which we all operate. The agility to respond and adapt to change has been a distinguishing factor within the capital markets. This, combined with timely information and communication, has for many months been the lifeblood that has allowed our firm and the companies we serve to navigate the impacts of crisis and make informed decisions about near-term and longer-term next steps. For BDO USA, LLP1, our core values and reliance on a strong system of quality management have strategically and tactically allowed our over 8,0002 professionals to aptly respond in real-time to unanticipated stressors posed by significant changes in regulations, physical working conditions and pressing needs of our clients. At the same time, these values and underlying quality controls have allowed our professionals to remain focused on our alignment with professional standards and innovations for the audit of the future. As both organizations and individuals continue on the road to recovery—economically, financially, culturally and personally—trust in the financial reporting on the health of organizations has taken on greater significance. Uncertainty, along with increasingly complex judgment in forecasting and analyzing corporate risk and liquidity, underscore the need for continued high-quality audits. We take our auditor responsibilities and the reliance that is placed on them by our stakeholders very seriously. WE BELIEVE AUDIT QUALITY INCLUDES... effective, efficient, highly valued and skilled professionals technology-enabled that relied upon by performed doing evaluative, and technically are intended users of by insightful and compliant audits financial statements impactful work. 1 BDO USA, LLP is the U.S. member firm of BDO International Limited, a U.K. Company limited by guarantee, and forms part of the international BDO network of independent member firms. Throughout the report, we refer to the U.S. member firm as “BDO” or “we” or “our.” 2 Note: Metrics included in this report are based on data as of April 30, 2020 unless otherwise indicated. 2020 BDO AUDIT QUALITY REPORT / CONTINUING TO BUILD TRUST 2 In our 2019 report, we publicly defined our view of audit quality. We have aligned that view with investments and The Resilience Agenda: activities in our delivery of independent audits to emphasize ethical behavior and excellence from our people, quality in engagement execution and precision in our monitoring activities. BDO’s Recovery Framework In 2020, we have taken the time to reflect upon the global events impacting our firm’s culture and audit work. We Given the vast economic and business are proud to share our continued efforts in excellence in service, expansion of technology, honed methodologies and impacts from the global pandemic, BDO enhancements in monitoring and quality management. developed a four-stage recovery framework Even in a time of great uncertainty, our audit quality framework3 and seven underlying commitments position us to to help organizations plan with precision even acutely address emerging complexities of our clients’ businesses, ensure compliance with rapidly evolving regulatory amidst uncertainty. rules and requirements and satisfy the expectations of all of our stakeholders for the delivery of high-quality audits and This framework also guides our approach to exceptional client experience. resilience and continuity of service. We are We invite you to learn more from this report about our resilience and the trust it fosters as we continue to focus on proud of how our professionals and clients high-quality audits. are persevering to complete audits on time in unprecedented circumstances. BDO’s prior investments in technology and continuing commitment to technical insight, quality management and oversight are being tested WAYNE BERSON throughout the pandemic response and have Chief Executive Officer proven strong, agile and secure. This has given clients continued confidence in their audits in a volatile climate allowing them to focus on moving their business more quickly and effectively through the recovery process. BILL EISIG National Assurance Managing Partner and Practice Leader CHRISTOPHER TOWER National Assurance Managing Partner, Audit Quality & Professional Practice 3 BDO’s audit quality framework referenced in this report aligns with the Center for Audit Quality’s (CAQ) Audit Quality Disclosure Framework developed by the audit profession and released in 2019. 2020 BDO AUDIT QUALITY REPORT / CONTINUING TO BUILD TRUST 3 SUSTAINING AUDIT QUALITY 2020 BDO Audit Assurance professionals believe they are 96% personally responsible for audit quality Quality Highlights OUR AUDIT PRACTICE CLIENT-FACING STAFFING LEVERAGE RATIOS Assurance remains the greatest 1 to 8.3 1 to 1.9 1 to 2.8 46% percentage of firm revenues Partner to Staff Partner to Manager Manager to Staff Public company audit revenues as a percentage of Assurance 30% Annual percentage of partners retained practice revenues 98% Engagement leaders below partner who choose ~9 out of 10 to remain with BDO OUR ASSURANCE PRACTICE COMPOSITION Partners & 19% Directors Senior Managers our Assurance Assurance 21% & Managers 55% practice 46% professionals composed of women and as a percentage of BDO’s client Black, Indigenous and Other serving professionals 31% Seniors People of Color 29% Staff 2020 BDO AUDIT QUALITY REPORT / CONTINUING TO BUILD TRUST 4 TECHNICAL AND SUBJECT MATTER SUPPORT Partner / 63 hours 1 to 23 240,000+ Directors / 63 hours Ratio of National Assurance professionals National Assurance hours to Assurance Practice professionals contributed to enhancing Senior Manager / 57 hours audit quality Manager / 59 hours 1 to 7 ANNUAL AVERAGE Senior / 53 hours Ratio of Audit Quality Network professionals NUMBER OF CPE HOURS Staff / 66 hours to Assurance professionals EARNED BY LEVEL: INNOVATING OUR AUDITS AND PROFESSIONAL ENGAGEMENT 100% 100,000+ 250+ 33% 15% New client engagements that Clients worldwide who use the Opportunities for continuing Percentage of our National Percentage of experienced BDO leverage our Next Gen Global BDO Global Portal education provided to those Assurance leaders who actively professionals serving as directors Audit Process Tool charged with governance and contribute to audit quality or officers of charitable and financial reporting initiatives of significant nonprofit organizations professional organizations MONITORING OUR QUALITY Number of Percentage of current Aggregate 136 engagements 93% inspection cycle private 9 out of 10 current internally inspected in FY20 company inspections conforming year inspection cycle inspections (private without a material defect and public) considered conforming 2020 BDO AUDIT QUALITY REPORT / CONTINUING TO BUILD TRUST 5 Audit Quality Commitment and Indicators Governing the Tone of Our Culture and Leadership OUR SEVEN UNDERLYING COMMITMENTS Leveraging the Audit Quality Disclosure Framework 3 Assume individual and collective responsibility for every audit Addressing need for resilience 3 Lead in field: Make appropriate judgments in real time and support 10-11, Living our Core Values our people in pursuit of audit quality 22 Pursue continuing education—our own and our clients: Explain, Ensuring national resources in support of our Assurance Practice 12-15 guide and explore with curiosity what we need to achieve Achieving positive trends in Assurance Audit Quality and 16-18 Operational Excellence Survey Know and apply professional standards and all firm guidance effectively in delivering our work Fully deploying our Professional Judgment Framework 17 Approach with the mindset of an evaluator: Seek out facts, Achieving positive trends in firmwide Pulse Survey 19 consider applicable literature, evaluate alternatives and present Forward investing by our Board in technology and technical persuasive judgments 20 specialization to enhance audit quality Seek and implement change and not become attached to the Aligning audit quality with strategic priorities of the Board 20 status quo or old orthodoxies: Transform what we do every day, in every way Cultivating diversity, inclusion and equality 21-23 Involve others—when required and when not: Collaborate and Being recognized as a top destination for talent 23 strengthen judgment, find and seek the right answers and be better professionals Leading in and leveraging our global network 24 2020 BDO AUDIT QUALITY REPORT / CONTINUING TO BUILD TRUST 6 Developing and Managing High Caliber People and Teams Enhancing recruitment of Assurance professionals 38-39 Promoting Ethics and Independence Supporting and holding professionals accountable to goals and 38 performance metrics Promoting ethical actions 26 Focusing on retaining exceptional talent 38-39 Advancing independence priorities and education 26-27 Maintaining staff levels