EY UK

2023 Audit
Quality Report
 Covering letter — Hywel Ball, UK Chair 1

Contents EY UK 2023 Audit Quality Report: Summary

My vision for audit — Andrew Walton

2

Our UK Sustainable
Audit Quality programme — Adrian Roberts, UK
Quality Enablement Leader 7

Our audit quality strategy

Purpose-led culture 10

More effective coaching and support 12

Rebalancing work intensity 13

Greater standardisation and simplification 14

How this translates to a quality audit

for companies 15

Audit in the spotlight 16

UK audit quality governance 18

 Covering letter

Hywel Ball
UK Chair

Dear stakeholders, things like hybrid working, health and wellbeing, diversity,
equity and inclusion (DE&I), and sustainability. In this
As I write, UK companies — as well as individuals across context, I believe that audit firms’ emerging role as providers
society — are facing a macro environment the like of which of assurance on non-financial data — related to challenges
most have never previously experienced. From climate such as climate change — is an increasingly important aspect
change to the aftermath of the pandemic, from shifting of our people value proposition, helping to make a career in
consumer habits to an upcoming election cycle, and from audit more meaningful and attractive to young people with
conflicts across the globe to high inflation and interest rates, deeply-held values.
they are confronted by an array of interrelated global and
local risks with compounding effects. The shifts we are seeing in the talent landscape are reflected
by the increasing emphasis we place on the environmental
Regardless of the macro-economic forces at play, our and societal value we create through our work, and our
commitment to delivering high-quality audits is deeply held consistently strong focus on our purpose.
within EY and firmly embedded within our culture, driving
the actions we take. We are pleased with the progress we Our deliberations on structural separation
have made and the momentum we continue to build, and
we remain steadfastly committed to the ongoing journey of As part of a strategic network review, during FY23 EY Global
delivering audit quality. evaluated a proposal to separate certain advisory businesses
from a multi-disciplinary partnership focussed on audit and
The talent pipeline assurance. A key and consistent factor in the deliberations
was to ensure the audit focussed business always had the
One particular area that remains at the top of our agenda access to capital and specialist skillsets it needed.
is the need to build our future pipeline of audit talent. This
is an imperative that extends far beyond our own business, In my view, the new partnership would have been built
bringing implications for the profession as a whole and upon the culture and investment capital needed to provide
indeed the attractiveness of the entire UK economy. enhanced competition and choice in the market and
ultimately helped to improve audit quality.
In an increasingly competitive global environment, it’s vital
that the UK remains a vibrant place to do business. This It was decided not to proceed, but the considerable due
involves many elements, ranging from the need for strong diligence undertaken across the global EY network will
business investment, to robust and liquid capital markets, undoubtedly benefit us as we prepare for the future. EY
to regulatory consistency and certainty. But ultimately, the Global approached the idea of separation from a position
most important attribute determining the UK’s attractiveness of strength and to be in control of our own destiny — there
will be its ability to create, develop and maintain a highly- was no ‘burning platform’ for immediate change. But the big
skilled talent pool. questions driving our thinking remain and will need to be
answered in the future. We believe the answers will redefine
In my view, no area of the economy has a more pressing our market in the coming years.
need for talent than professional services. This sector — of
which the audit profession is a key part — underpins trust and Continued delivery, consistent quality
confidence in the financial system and the smooth functioning
of the capital markets. As the volume, complexity and scope I’d like to close by once again recognising the consistently
of assurance work continue to expand, and the need to serve strong performance and high quality achieved by our audit
the public interest remains at the forefront, the profession can teams in FY23, powering our continued delivery for the
only meet the growing demands placed on it if it has a strong entities we audit and in serving the public interest. It’s
and ongoing flow of talent. Without this, the profession will been a year of progress and investment on many fronts,
not have sufficient capacity to fulfil its role effectively or offer and I continue to be grateful to all of our people for their
companies real choice — putting trust in the financial system, dedication and commitment to delivering high-quality audits.
and the UK’s wider attractiveness, at risk.
Hywel Ball
To convince in-demand talent to choose a career in audit, we UK Chair and UK&I Managing Partner
need to offer them work that is rewarding across the board
— not only financially, but also intellectually and morally. This
includes responding to their changing expectations around

EY UK 2023 Audit Quality Report | 1

 EY UK 2023 Audit Quality Report: Summary
Our purpose
We are committed to consistently delivering high-quality audits that serve the public interest

of our people Cultural alignment index — Global investment in

believe as a result of our people technology focussed on three

97% 96% $1bn

delivering describing our culture core areas: user experience
quality audits in increasingly positive and collaboration; data
is a priority terms. See page 10 for access and analytics; and AI
for them. further details. and business intelligence.

Audit quality reviews

FRC reviews QAD reviews Internal reviews

Percentage of all audits inspected Percentage of all Percentage of audits
126 audits reviewed
graded ‘good’ or ‘limited in the 2023 cycle (of
audits inspected reviewed with no or
improvements’. graded ‘satisfactory’ or only minor findings. which 8 were public
‘generally acceptable’. sector engagements)
All audits FTSE 350
covering
Current
45% of our
year 80% 89% 100% 89% UK responsible
results individuals and 57%
of our public sector
PwC 82%, Deloitte 82%, PwC 91%, EY 89%, EY 100%, Deloitte 100%, engagement leads
EY 80%, KPMG 74% Deloitte 78%, KPMG 78% KPMG 91% PwC 90%

100%
90%
80%
Five-year
results 75% 82% 96% 70%
60%
50%
40%
30%
20%
Deloitte 81%, PwC EY 82%, PwC 80%, EY 96%, 10%
77%, EY 75%, Deloitte 81%, Deloitte 88%, 0%
KPMG 71% KPMG 76% KPMG 85%,PwC 86% 2019 2020 2021 2022 2023

Our people
responded
We have set out a clear vision of our audit
positively when
believe audit quality is a clear culture — and the audit quality culture
100% asked whether they
understand their 95% priority communicated by the assessment carried out in July 2023 has shown
a significant improvement in our overall cultural
EY leadership team.
role in protecting
alignment index.
the public interest.

of our people are of our people set aside We are committed to improving our consistency
encouraged and adequate time to coach across all our audits. Whilst this can be partly

88% supported by
audit engagement 86% team members prior to them
commencing any tasks to ensure
addressed through standardisation and simplification,
we also need to ensure continued effective coaching
partners to deliver they understand the purpose and support are available. As a result, these continue
quality audits. and expected outcome. to be two key focus areas in FY24.

It is important that we have the right resources in We increased the headcount of our UK audit business by
believe they have place to be able to consistently deliver high-quality over 550 people in FY23. However, we know there
sufficient time audits. In order for this to happen we need to be is more to be done and we are continuing to focus on
50% and resources to able to secure, train and retain the best talent. In improving how intensely our people work. Our focus
deliver quality addition, our people need to have the headspace to on rebalancing work intensity centres on looking
audits. think clearly and critically, empowering our teams at how we can balance workloads to ensure a more
to work at an appropriate intensity. equitable split of hours worked by our people.

2
 Key FY23 improvements

1
Continued roll-out of ‘Enhancing our Culture of Audit Quality’ roadshows, visiting a number of local offices across the UK to
consider the importance of a purpose—led culture and the positive impact on audit quality

2
Enhanced our quality enablement network with local representatives in all UK offices and London homes (see page 12 for
further details)

3
Developed technology-enabled support including online coaching through task-specific tutorials and our new
queries and consultation application

4
Released topic-specific methodologies for a number of areas of the audit, including revenue and group oversight
(see page 14 for further details)

5
Released good practice examples and standardised working papers for areas including impairment and specialists
(see page 14 for further details)

6 Enhanced the assessment and escalation process to ensure engagements have appropriately experienced teams

7 Finalisation, implementation and set-up of business-as-usual governance structure and team for International
Standard on Quality Management 1 (ISQM 1)

Global release of new Assurance technology capabilities, including next-generation data analytics that leverage
8 Microsoft Power BI, new AI capabilities integrated with EY Canvas to support risk assessment, and redefined audit
workflows for non-listed, non-complex entities.

What comes next

• Resource interventions • Further improve our on-the-

ensuring the right teams at the job coaching
Mor
right time y ee • Embed our new queries and
sit ffe
• Increased focus on project en ct consultation application
nt

management including training

ive

• Increase awareness and usage

ki

co
or

• Allocation of equitable of tools and enablers

ach
gw

workloads • Enhance our quality control

ing
Rebalancin

Higher processes and support

and support

audit
quality

Pu
rpo
se-led culture
• Reinforcing the importance n • Enhance topic-specific
Gre tio
of our purpose-led culture, focussing ater standardisa methodologies with
on: Clear expectation setting; and s n standardised and simplified
implifi catio
confidence to challenge; and being audit approaches and example
sceptical good practice workpapers
• Continue to roll out updated • Launch of Centres of
‘Enhancing our Culture of Audit Excellence for areas with
Quality’ roadshows across UK offices common attributes
• Designated time provided each month
for training and personal development

3
 My vision for audit

“
Our strong ethical values and culture, orientated
around delivering high-quality audits, are central Andrew Walton
to everything we do. Head of UK Audit

Looking back on FY23, I would like to start In its Audit Quality Inspection and Stirling Water Seafield Finance plc, and an
by thanking our people once again for their Supervision report on EY UK, the FRC unnamed company.
dedication and commitment to delivering commented: “None of the EY UK audits we
From previous years the investigations
high-quality audits — a task made all the inspected were found to require significant
related to Thomas Cook Group plc (audits
harder by the challenging and fast-changing improvements. We are pleased that the firm
covering two financial years), NMC Health
economic and geopolitical environment has maintained its focus on, and continued
plc and London Capital and Finance plc have
during the year. It’s been a period when investment in, audit quality.”
not yet been concluded. We continually look
both our own firm, and also the companies
The other quality reviews of our audits for lessons to be learned from all of the
that we audit, have faced economic
published during the year were also very investigations and the FRC’s enforcement
headwinds on a scale not experienced for
positive. See page 7 for our detailed results. process, and will incorporate these into all
several decades.
of our audits going forward.
Whilst rising to these challenges during However, we know that audit quality is an
area where there is always more work to A particularly marked trend we have
the year, we have continued to develop
do — and it’s vital that we maintain this year’s noted in the past year, is increased press
our audit strategy in line with our stated
momentum and achieve similarly strong coverage relating to auditors delaying
purpose of protecting the public interest
results consistently into the future. The signing audit opinions. At EY UK, we
and taking personal pride in audit. In
examples of good practice identified by the have delayed the signing of a number of
support of this, our strategy is built to
FRC suggest that the building blocks of our opinions on listed company audits. We
deliver consistently high audit quality, give
strategy remain appropriate and effective. will continue to reinforce the message to
our people lifelong skills and experiences,
We have made good progress on the priority companies that we will not sign until we are
and grow our business purposefully. In the
workstreams outlined above during FY23, ready, regardless of any unhelpful press
past year, we have taken various steps to
and along with further enhancing our speculation or management reaction that
deliver on this strategy — and I will now
purpose-led culture, these remain focus areas we may receive as a result. Our culture and
elaborate on these.
for us in FY24. See page 10–14 for further support network enables our partners to
Delivering consistently high audit details. make the tough decisions required when
quality assessing whether we are ready to sign an
Whilst we have made solid progress towards audit opinion.
When we set our UK audit quality strategy realising the ambitions set out in our audit
for FY23, as part of our wider audit quality strategy, we recognise that we still More generally, we continue to embrace
strategy, our aim was to achieve high- have some issues to address around the the FRC’s approach to audit firm
quality more consistently across all of perceived quality of our audits, including supervision, and will keep working with
our audits. To realise this ambition, we from a number of investigations currently in the FRC and other stakeholders to ensure
prioritised three key areas: the pipeline. During the past year we’ve faced our audits deliver on their public interest
• Greater standardisation and reputational challenges to the EY brand in the role of building trust and confidence in
UK, and across the globe from developments business and the capital markets. We
simplification
including EY Oceania review into workplace have continued our close engagement
• More effective coaching and support culture, the backlog of public sector audit with the FRC Supervisory team and have
• Reduced work intensity opinions, and the FRC’s ongoing audit worked to address the points highlighted
Whilst it is too early to call victory on investigations (see page 16). in the feedback they shared with us in
consistency, we are very encouraged by our February 2023. The FRC identified a
Of the FRC’s audit investigations currently number of areas of good practice, including
improved results in this year’s cycle of FRC underway, seven relate to audits that were
inspections of our audits. The latest FRC the cultural roadshows hosted by our
completed by EY UK, compared to four senior leadership around the country and
inspection cycle saw us achieve our best audits at the same point last year. During
result in the past six years, positioning us the expanded provision of our internal
FY23, the FRC announced investigations quality support processes to a larger
towards the top of the pack in delivering into aspects of our audits of made.com plc,
high-quality audits. number of audits.

4 | EY UK 2023 Audit Quality Report

We have also resolved the issue flagged public interest is of greater importance Purposeful growth and our
by the FRC around the reduced number than client service, and that the responsibility to the public interest
of independent non-executives (INEs) at consistent performance of high-quality
audits is in the public interest. Purposeful growth means being
certain points of the year. See the UK
thoughtful about the companies that
Quality Governance section on page 18. • Confidence to challenge — Taking action we want to work with whilst balancing
to equip our teams with the mindset our commitment to protecting the
During the year we have actively engaged
and capability to apply professional public interest.
with the Audit Committee Chairs’
scepticism and challenge, both within
Independent Forum (ACCIF) on a variety of In our opinion, taking the public interest
the audit team and with the companies
topics, including Project Spring. This project into account does not require a firm
we audit. For example, this year many
brought together a group of experienced to make decisions that put significant
of our people attended training on
audit committee chairs, representatives how to handle difficult conversations. strain on its capacity or pose risks to audit
from the six largest audit firms and The training was designed to develop quality. But we know that the decision
executives from the FRC, with the common the understanding of the importance not to accept an audit or to resign from
objective to enhance audit quality and of creating a safe environment where one can have far-reaching consequences
the wider understanding of the subject. constructive challenge can occur, for the company in question and its
Following three extensive workshops, and to develop skills that support in investors. With all of this in mind, we have
ACCIF published its final report on the providing appropriate challenge. three ‘golden rules’ that we apply with
project outcomes in July 2023, including companies to explain the decisions we make
• Rewarding and recognising audit
a series of key learnings and actions for around accepting or continuing an audit
quality — At partner level, this
ACCIF, auditors and the FRC. We took the engagement. These are:
involves the Remuneration Committee
opportunity to engage separately with overseeing the application of the • Companies committing to hold
ACCIF and promote the project outcomes. fundamental principles for setting themselves to the highest standards of
A video interview with the ACCIF Chair of partner pay, including ensuring that governance and control
Project Spring was shared across the audit audit quality is the main driver of
practice, and teams are being encouraged • Always treating our people
reward and that audit partners are not
to engage with the audit committees and professionally and with the respect
remunerated for sales of non-audit
management of the companies they audit
they deserve
services to the entities that we audit.
on the outputs, to support conversations For our other colleagues, our focus has • Paying us fairly for the scope of work
about enhancing audit quality on their been on reinforcing the link between and the risk we take on
engagements. audit quality and our variable pay
Where companies fall short on any of these
scheme.
As I mentioned in these pages last year, three criteria, we provide feedback to
operational separation can act as a further In July, we ran our annual audit quality their board and agree an improvement
lever for enhancing audit quality, and in culture assessment. A really positive plan. These principles have served
May 2023 we received the FRC’s Annual outcome this year — one that we’re both to improve companies’ controls
Operational Separation Assessment. We delighted to see — was that our cultural and also to provide our people with the
are pleased that across the six categories alignment index, at 96%, showed a 10% backing of the firm in delivering difficult
of principles for operational separation, increase over the prior year. However, messages.
the FRC has graded us as either already we are not being complacent about this
Purposeful growth also applies to our
improvement, and will continue to seek
in full compliance or as having made approach to tendering for new work.
ways to maintain this strong result.
good progress towards full compliance as Tendering is an increasingly challenging
required by the end of FY24. Further actions aimed at strengthening area both for companies and audit
our culture have included our continued firms. Capacity constraints in the
Strengthening our firmwide ethics investment in the wider aspects of ethics, profession — especially in the context
and our culture of quality and our code of conduct and the commitment of partners accredited to sign audit
challenge we make to our people. This year the firm opinions — mean we cannot take part
put all its partners across the UK through in all tenders. Tellingly, the number of
Our strong ethical values and culture, an externally-facilitated ethical training accredited responsible individuals (RIs)
orientated around delivering high-quality programme named ‘Barrels not apples’. registered in the UK to sign audit reports
audits, are central to everything we do. As I Having attended this programme myself, I across all firms has remained largely
noted above, one of the key foundations of can attest personally to its power in creating flat since 2017, yet the time taken to
our audit quality strategy is our purpose-led awareness of the kinds of issues that could
culture of quality. In FY23 we’ve applied a deliver the same audit has increased by
potentially derail us ethically, and of how we approximately one-third during that time.
three-fold focus to our efforts to strengthen can encourage conversations around positive
this culture: Looking forward, a number of factors mean
behaviour. The programme has been so capacity in the profession is expected to
• Protecting the public interest — successful at partner level that it’s now being remain tight.
Reinforcing the messages that the rolled out to all staff across EY UK.

EY UK 2023 Audit Quality Report | 5

One of these factors is that the wave of grateful for all the hard work our audit fairly. Finally, a further lever available to
mandatory audit tenders has continued for teams have put in this year. us is differentiating ourselves around skills
the FTSE 350. Through to the end of 2027 development and career experiences.
we expect there to be around 175 tender But delivering high-quality audits demands
processes, with approximately 158 of these more than hard work. It’s also critical that We are developing a programme of
being mandatory firm tender processes our people have the headspace to think activities including secondments both
and only 17 mandatory firm rotations. clearly and critically. To provide this, we internally and externally to broaden our
It’s interesting to note that in the case of need to empower our teams to work at an skills base, which we hope will ultimately
mandatory firm tender processes over the appropriate intensity — which is why this enhance audit quality and make EY a more
past three years (since January 2021), is one of the key workstreams of our audit attractive place to work.
60% of FTSE350 tenders have resulted in a quality strategy.
That said, I believe that making the audit
change of auditor. A further factor likely to I’m pleased to say that during FY23 we’ve profession a more appealing career choice
help maintain the squeeze on audit firms’ recruited extra experienced auditors, is a goal that cannot be achieved by EY UK
capacity is that, outside of the listed audit graduates and apprentices into our audit acting alone. Whilst we will play a critical
market, the Department for Business and business. Combined with higher retention, role, success will require engagement
Trade has been consulting on proposals this has helped us to rebalance our with a wider group of stakeholders. Given
to widen the definition of a public interest individual work intensity, with an additional this need, we will continue to work with
entity (PIE) to all companies with annual our peers, companies, regulators and
558 auditors compared to the prior year.
turnover of more than £750m and more government to support the move towards a
This said, there’s more to do in this regard,
than 750 employees. The introduction of
and we will continue to focus on improving more attractive profession.
Mandatory Shared Audits (MSAs) might also
how intensely our people work. We are also
put further pressure on capacity, should
investing in a pilot looking into how we can
they be introduced in the future. One of our
deliver our audits more efficiently whilst
Conclusion
actions in responses to such challenges is to
also enhancing audit quality, including I’m exceptionally proud of what we
make concerted investments in expanding
through use of AI to support and augment have achieved in FY23. We have made
our capacity — including increasing our
our human auditors. good progress with our UK audit
number of responsible individuals, audit
quality strategy and, as evidenced by
partners registered to sign audit reports, by Alongside these initiatives to manage work our improved results in the FRC’s FY23
14% during FY23. intensity, it’s also vital that we continue inspection cycle, that investment is
In terms of being paid fairly for the scope to train our people. Aside from core audit paying off. That being said, we can’t
and risk we take on, during the past year, skills, our audit team members also need rest on our laurels. And as we continue
we received a letter from the 100 Group — to be well versed in some emerging areas to grow our business purposefully and
an organisation that provides a collective that are becoming increasingly important invest in our people and culture, we
voice for the CFOs of most companies in in their work. We provide this enhanced are well-placed to protect the public
the FTSE 100 — outlining their concern understanding in several ways, including interest through our audits, whilst also
with rising audit fees at the Big Four firms. offering our people a range of EY ‘Badges’ helping to make the profession more
Hywel and I met with representatives of in topics such as AI, cybersecurity and attractive to the young talent who
the 100 Group to discuss what it takes analytics, and providing targeted sessions represent its future.
to deliver a high-quality audit. We had a covering assurance on environmental
constructive conversation about the factors and sustainability matters. We are also
that had caused fees to rise, together considering introducing more bespoke Andrew Walton
with the mitigating actions we were taking ‘academies’ on technology and sustainability Head of UK Audit
to limit the increases, such as the use of next year.
offshore delivery centres, data analysis
Whilst these efforts are already bearing
and technology. However, we were clear
fruit, the fact remains that attracting the
that audit fees can be expected to continue
right talent, with the right experience,
to rise, given the scale of corporate
continues to be an industry-wide
governance and audit reforms being
challenge — one to which EY UK is not
proposed, and the increasing regulatory
oversight and scrutiny of audits and immune. There are a number of levers we
auditors, and — as Hywel has discussed, the can pull to make the profession attractive
need to secure a strong and ongoing flow of and to upskill our people.
talent. One of the most powerful of these levers
is expanding the diversity of our audit
Our people and their importance to workforce and teams, as reflected by our
audit quality diversity targets and progress towards
Above all, our ability to deliver high-quality them showcased in our third annual Impact
audits is underpinned by our success in Report. We also continue to review our
securing, training, and retaining the best total reward and recognition package to
talent. With this in mind, I’m sincerely ensure that our people are remunerated

6 | EY UK 2023 Audit Quality Report

 Our UK Sustainable
Audit Quality programme

“
We are committed to consistently delivering high-quality audits that
serve the public interest. A purpose-led culture is fundamental in helping Adrian Roberts
us achieve this, along with more effective coaching and support, greater UK Quality
standardisation and simplification, and rebalancing work intensity. Enablement Leader

Our UK SAQ programme primary objective must be and remains to • Our internal quality reviews have
do more to achieve high-quality in every graded 85% of the audits reviewed as
I am excited to take up the role of UK audit — and this will continue to be our focus having no or only minor findings.
Quality Enablement Leader and to lead for FY24 and beyond.
our UK Sustainable Audit Quality (SAQ) Audit quality is not defined in
In our most recent inspection results: professional standards, and no single
programme. Our FY24 audit quality
strategy, which is discussed in more detail • The FRC graded 80% of our audits metric can be viewed as a definitive
inspected as requiring no or limited measure of audit quality. This is why
in the following pages, is specific, focussed
improvements (89% for audits of FTSE we take the outcomes from all reviews,
and robust. I look forward to working with
350 companies). along with other indicators (including
our leaders to deliver on our commitments.
the monitoring and annual evaluation
We are focussed on serving the public • The QAD graded 100% of our audits
conclusions of our System of Quality
interest and will continue to build on the inspected as satisfactory or generally
Management), into account when assessing
progress made in the past year, during acceptable.
audit quality.
which having a strong culture of quality has
• Our internal quality reviews rated 89%
been a key priority. Delivering sustainable, consistently high-
of our audits as having no or only
I would like to take this opportunity to thank quality audits is our priority — and our drive
minor findings.
my predecessor, Michael-John Albert, for to achieve this is captured in our audit
his hard work over the past four years. Over the past five years: quality purpose.
Under Michael-John’s leadership we have • The FRC has graded an average of
made good progress towards delivering 75% of all our audits as requiring Our audit quality ambition
consistent high-quality audits, evidenced
no or limited improvements (82% for
by our improved FRC inspection results this We are committed to consistently
audits of FTSE 350 companies).
year and consistently high ICAEW Quality delivering high-quality audits that
Assurance Department (QAD) results. • The ICAEW Quality Assurance serve the public interest.
Department (QAD) has graded an
A number of good practice examples have
been identified through both the external average of 96% of our audits as Our refreshed audit quality strategy
and our internal inspections. However, our satisfactory or generally acceptable. emphasises the importance of a purpose-led
culture and is fundamental to delivering on
EY five-year trend for audits rated as requiring no more than limited improvements our audit quality purpose.

We are also committed to continuous

100% improvement and in 2022, it was
announced that $1bn would be invested
80%
globally in technology to support audit
60% quality, of which the early developments
40% are materialising. This investment is being
20% supplemented by extensive and regular
training and coaching of our teams, both
0% 2018/19 2019/20 2020/21 2021/22 2022/23 in audit and for the various specialists
FRC QAD Internal AQR that support the core team.

EY UK 2023 Audit Quality Report | 7

Findings from all reviews are assessed through our root cause analysis programme. This considers the nature and severity of the findings
driving any rating when determining the right actions to take in response.

Our global SAQ programme creates the framework under which we identify specific initiatives to implement these actions. The programme
is structured into six core pillars.

Global SAQ pillars

1 2 3 4 5 6
Tone at Exceptional Audit technology Simplification Enablement and
Accountability
the top talent and digital and innovation quality support
The internal Specific initiatives The systems How the EY Digital How we are How EY teams
and external that support and processes Audit is evolving in this simplifying and are being helped
messages sent EY auditors in in place to help transformative age to standardising the to manage their
by EY leadership, devoting time to EY people take set the standard for approach used by responsibility to
including audit perform quality the digital-first way EY auditors and
responsibility for provide high audit
partners, that work, including of approaching audit, embracing emerging
carrying out high- quality
establish and recruitment, combining leading- technologies to
quality work at all
encourage a retention, edge digital tools, improve the quality,
times, including
commitment to learning and stakeholder focus and a consistency and
quality, setting a workload their reward and commitment efficiency of the
clear tone at the top management recognition to quality audit

Since the start of our SAQ programme, • Annual audit trust awards to The development and implementation of our
we have implemented a wide variety of celebrate outstanding contributions strategy has been subject to ongoing review
initiatives, many of which continue to to our quality-led culture from across and challenge by our independent Audit Non-
support the delivery of high-quality audits our UK audit business at all levels, Executives (ANEs) and internal audit reviews.
today. These initiatives include: as well as from specialists who support In FY23 we focussed on three priority areas:
• Audit Quality governance refreshed with audits
• More effective coaching and support
the Audit Quality Executive Committee • ‘Culture of Audit Quality’ roadshows • Reduced work intensity
and Audit Board established (refer to across the UK, communicating our
page 18) desired audit culture and our audit • Greater standardisation and
quality strategy simplification
• Annual Audit Quality Summit and
• Introduction of a new technology- The other audit quality initiatives in FY23
National Academies
were:
enabled ‘one-stop-shop’ that is easily
• Global investment in technology
accessible and supports teams in finding • Audit culture with a focus on
improving our teams’ connectivity, professional scepticism
the right answers, information and good
introducing increased automation, and
practice examples • Preparing for ISQM 1
leveraging leading data analytics tools
supported by enhancements to our • Implementation of ISQM 1, which We designed the strategy to be adaptable, so
audit methodology became effective from 15 December as circumstances changed we could prioritise
2022, and completion of the transition areas that have the greatest impact on
• Key behaviours which drive high-quality
from our Internal Quality Control System audit quality. We successfully implemented
audits identified and embedded in our
to our System of Quality Management a wide range of actions during FY23 with
approach to all audits
Our first evaluation was conducted on the key actions detailed on page 3. We
• Use of audit quality indicators, including regularly monitor the effectiveness of
30 June 2023.
a global milestones programme the strategy to ensure that it continues
to improve and monitor project to assist in delivering against our audit
management of our audits Our audit quality strategy quality purpose. We have seen improved
To deliver against our audit quality purpose, inspection results in the current year and
• Significant investment made in
our strategy is built on a thorough review of no adverse regulatory findings on areas
additional support for audit teams
those specific factors that most successfully where standardised enablement material was
through ‘hot file’ reviews, coaching
deliver high-quality audits. used. However, various data points including
packs, enhanced risk review processes
our root cause analysis indicate the need
and best practice documentation It is clear there is no one action that
for greater consistency (particularly in the
• Greater linkage between audit can ensure audit quality. It requires a use of standardised enablement materials,
quality and reward for audit partners carefully considered series of actions across documentation and coaching) and the
and our people our business that impact our audits on a continuance of the audit quality initiatives
daily basis. related to the priority areas.

8 | EY UK 2023 Audit Quality Report

Audit quality initiatives FY24

Purpose-led culture More effective coaching and support

A purpose-led culture is fundamental to our audits − this leads to More effective coaching throughout the audit leads
the right teaming, the support and confidence to constructively to greater consistency and supports better project
challenge and being professionally sceptical at all times management

Greater standardisation and simplification Rebalancing work intensity

More standardisation increases efficiency and Rebalancing workloads will ensure a more equitable split of
leads to more consistent documentation hours across our people giving more time to think, which should
lead to greater consistency and sharing of best practice

We have refreshed our audit quality Although culture was already addressed in objectives are being met. The process is
strategy for FY24, focussing on the our FY23 audit quality strategy, it has been now business-as-usual for FY24 and as part
following key areas: given greater prominence in FY24. This of the refresh of our audit quality strategy
• Purpose-led culture change is in recognition of the fundamental for FY24, we considered the population of
role culture plays in the delivery of high- our ISQM 1 controls and concluded that
• More effective coaching and support
quality audits, and the contribution of every these appropriately address all areas across
• Rebalancing work intensity individual to our purpose-led culture. our SAQ pillars. The annual evaluation
• Greater standardisation and conclusion for EY UK as of 30 June 2023
ISQM 1 came into effect from 15
simplification is that the System of Quality Management
December 2022 and includes a more
provides reasonable assurance that
We will maintain our focus on standardisation robust requirement for governance,
the objectives of the system of quality
and simplification and coaching. We have leadership, and culture, with extensive
management are being achieved. Further
reframed ‘reducing work intensity’ as monitoring to identify deficiencies and
details can be found in our EY UK 2023
‘rebalancing work intensity,’ a concept take corrective action where necessary.
Transparency Report.
that better reflects the purpose of the The focus is on quality objectives, and
workstream — with the focus being on reaching a conclusion (through extensive For further details on the FY24 initiatives
balancing workloads to ensure a more evaluation work) on whether the system see pages 10 to 14.
equitable split of hours worked by our of quality management provides the firm
people. with reasonable assurance that the quality

Other strategic actions

Other ‘tactical’ actions included in the FY24 audit quality strategy include:

Workstream/area FY24 Actions

• Appointment of subject matter experts within audit to continue to drive climate quality initiatives

Climate • Continued review and update of climate methodologies and guidance

• Issuing of good practice examples

• Creation of IFRS 17 methodology and guidance

IFRS 17 Insurance contracts
• Upfront coaching of teams through our enhanced quality control processes and support

• Focussed coaching available to teams in relation to ‘hot topics’

Economic environment
• Creation and distribution of macro economic risk review and accounting considerations analysis

EY UK 2023 Audit Quality Report | 9

Purpose-led culture
Overview What next?
A purpose-led culture is fundamental to our audits − this In FY24, we will continue to drive the importance of a purpose-
leads to the right teaming, the support and confidence to led culture and reinforce why this is fundamental to the quality
constructively challenge, and being professionally sceptical at of our audits. Specifically we will focus on:
all times. In addition to the six Global SAQ pillars, as set out on • Completion of the Audit Quality Culture survey in July.
page 8, the fundamental elements underpinning the culture of Our 2023 survey showed that our cultural alignment index
our audit business are: had risen to 96%, a 10% increase year-on-year. This means
• The essential attributes of our audit business (right that our people are continuing to describe our culture in
resources, right first time and right reward); and increasingly positive terms including: attention to detail;
coaching/mentoring; scepticism; and continuous learning.
• Our people, focussed on a common purpose — serving the That said, we know there is more work to do in helping
public interest people feel more confident to challenge the hierarchy
What we have achieved so far within EY. This has been — and will continue to be — a focus
of the Culture of Audit Quality roadshows.
During FY23, we:
• Reinforcing a cultural mindset in the form of what it means
• Completed our 2022 ‘Enhancing our Culture of Audit to be an audit professional. This includes setting clear
Quality’ roadshows across the UK. These focussed on role expectations, and continuing to drive the messaging
the continued drive of a cultural mindset shift to embed on the importance of professional scepticism and having
further challenge and professional scepticism into our the confidence to challenge both internally and with the
work. A specific session was run earlier this year for our management of the companies we audit.
offshore delivery centre. • Delivering the 2023 Culture of Audit Quality roadshows
• Developed onboarding training for all staff in the in hybrid sessions across a number of regional offices and
London homes. Going forward, we plan to visit all regional
form of a video emphasising the importance of culture,
offices and London homes on a rotational basis every two
professional scepticism and challenge, all of which
years. We will also hold an annual virtual wrap-up session for
underpin audit quality.
anyone who has not had a local event or are unable to make
• Launched ‘Better me’ which is dedicated time regularly their local event. Specific virtual abridged sessions will be
set aside for all of our auditors across every grade to focus held for our offshore deliver centre and our specialists.
on training and personal development.
• Continuing the development of a framework for, and
allocating a mentor to, each of our newly-promoted audit
partners.

-le
urpose d cultu
P re
s Ri
ce
r

gh
ou

tr
res

We are independent
ewa
Right

sceptical thinkers with

rds

the confidence and agility

to constructively challenge.
We are recognised for
doing the right thing

Pr Rig
ot ht fi rst time d
ec
ting t an
s
tak t ere t
ing he public int audi
person in
al pride

10 | EY UK 2023 Audit Quality Report

Purpose-led culture
Right resources Retention of the best talent requires investment in and
development of our people, together with recognition and
One of the fundamental elements underpinning the culture of
reward of the right behaviours to keep our people engaged and
our audit business, as noted on page 10, is ‘right resources’.
make sure we have continuity of skills and experience.
Resource allocation is a key focus for the rebalancing work
intensity priority area, with further analysis planned across
Diversity, equity and inclusiveness (DE&I)
our highest-risk engagements to ensure that the teams have
appropriate resources, realigning resource where required. See We have a long-standing commitment to diversity, equity
page 13 for further details. and inclusiveness (DE&I). This commitment to building
high-performing, diverse, equitable and inclusive teams is
Improve staff attraction, recruitment and retention especially important in audit, where diverse perspectives
drive professional scepticism and critical thinking. Greater
A vital part of this is ensuring that we attract and retain a
diversity and equity, combined with an inclusive culture, lead
diverse range of people who share our values and commitment
to better decision-making, stimulate innovation and increase
to serving the public interest and who take a personal pride in
organisational agility. In the March 2023 employee listening
audit.
survey, 82% of auditors said the EY organisation provides a
Our reputation as a great place to work enhances our ability to work environment where they feel free to be themselves, an
attract talented people. increase of 3% compared to the March 2022 survey.

In 2022, we became one of the founding partners of the

EY was ranked top 10 in the 2023 LinkedIn Top socio-economic diversity taskforce, Progress Together. This
Companies list, published by LinkedIn in April 2023. independent body focuses on boosting socio-economic diversity
in UK financial and professional services.
In recruiting candidates, we consider not only technical skills, Our first Neuro-Diverse Centre of Excellence (CoE) in the UK was
but also attributes such as integrity, curiosity, ethics and the launched in Manchester in January 2022. It is designed to fuel
ability to collaborate in high-performing teams. We continue to innovation in technology, bring a new dimension of creativity,
recruit high-calibre individuals and have recruited more that and drive greater diversity and inclusion in the UK workplace.
1,600 experienced auditors, graduates and apprentices over
the past year, building a pipeline of talent for the future. This Under our differential focus on race and gender, we have a
includes talent with dedicated technology skills to support the target of 40% female and 20% ethnic minority (of which 15% will
growing importance of technology in audit. be Black) partners by July 2025. Please refer to our separate
Impact report for further information on DE&I.

How will we measure success? Risks to manage

We will consider the measures of success for this initiative The main risk to achieving success within this focus area
to be: is if our culture is not conducive to high-quality audits
• Sustained high Audit Quality Culture survey results. and teams are not applying the appropriate level of
challenge and professional scepticism.
• Better understanding of our purpose-led culture
We will address this risk through continued promotion
focussed on stakeholder and public interest and being
of the importance of a purpose-led culture and the fact
confident to constructively challenge. Tracked though that each individual’s contribution is important. This will
feedback from the Culture of Audit Quality roadshows be done through various methods including our Culture
and feedback from teams. of Audit Quality roadshows, quarterly webcasts and
• New partners feeling better supported — tracked onboarding material.
through feedback from mentors and mentees.

EY UK 2023 Audit Quality Report | 11

More effective coaching and support
Overview • Increase awareness and effective use of tools and enablers
through various methods including promotion of our
As noted earlier in this report, our focus is on improved
consistency in our audits. A lot of this consistency can be
Conduct Portal (one-stop-shop), the Culture of Audit
addressed through the standardisation and simplification Quality roadshows and quarterly webcasts.
of workpapers and forms. However, our root cause analysis • Continue to utilise our quality enablement network to
identified that a number of our internal and external inspection assist in the local execution of the audit quality strategy.
findings were linked to inconsistency in the quality of coaching
• Enhance AQST through greater upfront and ongoing
received, highlighting the need to continue to improve our
coaching and the support offered to teams. facilitated coaching of audit teams and the development of
topic-specific subject matter experts.
This focus area oversees the coaching initiatives and embedding
of the support solutions that have been developed. 82% of our people felt they receive sufficient training and
development to enable them to deliver quality audits.
What we have achieved so far
During FY23, we have:
How will we measure success?
• Enhanced our quality enablement network with
We will consider the measures of success for this initiative
dedicated local audit quality representatives in each office
to be:
and London home. Dedicated time is carved out in their
portfolios to provide support to their local offices. • Audit teams having better access to online resources
• Development of technology enabled support options and getting it right first time. To be tracked through a
through our ‘one-stop-shop’ and new queries and reduction in non-complex questions (e.g., questions on
consultation application (EY Compass). These support where to find information).
teams by allowing easier access to find the right answers, • Reduction of time spent reworking our workpapers
information and good practice examples. In addition to this, — tracked though feedback from teams and internal
we have released a number of task-specific tutorial videos
quality reviewers. Our priority is right first time.
enabling on-demand coaching covering a number of topics.
• Expanded our audit quality support team (AQST)
through the recruitment of additional resources enabling
an increase in the number of AQST reviews. This includes
PLOT
AQST light reviews which offer experienced AQST member
mindset
support to assist individual teams with specific areas of
their audit rather than a full file review.

What next? Quality

Enhanced
In FY24, we will focus on refreshing and embedding the enablement
AQST
coaching initiatives so as to lead to greater consistency. network
On the job
Specifically we will: coaching
Self-help
EY
• Improve our on-the-job coaching through various methods Resources —
Compass
as can be seen in the ‘on-the-job coaching’ icon. Our key Conduct
app
focus will be on the enhancement of Purpose-Led Outcome Portal and
Thinking (PLOT) throughout the audit and coaching Sharepoint
support, including skills sessions, on building confidence. Task-specific
tutorial videos
• Embed our new queries and consultation application, EY
Compass.

Risks to manage
There are a number of risks and barriers to achieving success within this focus area, which include:
• Lack of resource to deploy and execute coaching and support initiatives
Allocation of work is currently underway with utilisation of people in the business in order to share the workload across a
larger group.
• Our people not allocated adequate time for coaching
We will promote the importance of on-the-job coaching (e.g., use of PLOT) and various support options available to
improve consistency, get things right first time, and better support project management.

12 | EY UK 2023 Audit Quality Report

Rebalancing work intensity
Overview that individuals have a portfolio that’s fit for purpose. This
will mean that our people will have built in lower-intensity
The outcome of our root cause analysis, feedback from our
periods between busy times allowing them to ‘recharge’.
teams and development and analysis of our index tracker
Our aim is to allow our people to be energised, ready and
indicates that there is an inequitable split of hours across our
able to challenge and therefore consistently perform high-
people. Rebalancing workloads will ensure that the hours our
quality audits.
people work are divided between them in a more equitable way.
It should also allow our people more time to think which should • Resource allocation
lead to greater consistency. We will design a toolkit to promote local interventions
with local cluster/business unit leaders being responsible
What we have achieved so far for certifying the completion of resource interventions. In
During FY23, we have: addition to this, we will perform a further analysis across
• Developed a new index to track the work intensity of our highest-risk engagements to ensure that the teams
our people. This index means that our progress is now have appropriate resources, realigning resource where
quantifiable. required.

• Started conversations with teams across the business • Training and skills
to understand what work intensity means, and what the There are many tools and enablers currently available
barriers to a sustainable workload might be. for our people to use. As mentioned on page 10, we
have made these easier for our people to locate and will
• Performed a deep-dive across our highest risk promote the use of our ‘one-stop-shop’.
engagements, realigning resource to ensure appropriate
team experience and additional support. We will continue with our ‘Lifehack’ series sharing top tips
for managing workloads.
• Launched our ‘Lifehack’ series, sharing top tips for
managing workloads. In addition to this, we will consider the feedback from the
• Project management training being delivered at our project management training currently being rolled out and
annual in-person Summer Academies for each office and develop further training. We will also develop and roll out
London home. a framework for a focussed project management role on
larger audits.
What next?
In FY24, we will continue to focus on working towards our
ambition of an equitable split of work across the business such
that everyone works a reasonable level of total hours across
the year.
Resource
Specifically we will focus on: Workload
allocation
• Target operating model (TOM) and desired culture.
As noted above, we have developed a new index that
means we can quantify and track the work intensity of our
people. We will use this to analyse the split of hours across
our people as we work towards equitable workloads. In TOM and Training and
addition to this, we will develop guidance and a toolkit to desired skills
assist in providing clarity on the expected experience of an culture
audit professional.
• Workload
We will undertake a detailed review of our people’s
portfolios which will include the phasing of work to ensure

How will we measure success? Risks to manage

We consider the measures of success for this The key risk/barrier to achieving success within this focus
initiative to be: area is:
• Reduction in the number of people working excessive • Local leadership and engagement teams do not
hours above their standard contracted hours (whilst prioritise time to support the actions to rebalance
allowing for a normal level of overtime) work intensity
• Engagements with the right resources at the right We will provide a toolkit to promote local interventions
time tracked through feedback from teams, quality and communicate the importance of the strategy and
representatives and quality control reviews actions.

EY UK 2023 Audit Quality Report | 13

Greater standardisation and simplification
Overview Specifically our short-term focus is to:
Our root cause analysis on inspection findings highlighted • Develop and release standardised frameworks and work
examples of good practice in relation to clear documentation programmes for a number of areas, including pensions,
on various areas. However, it also indicated that there is deferred tax, leases, journal entry testing and risk
a continued need for improved consistency in our audits. assessment.
Promoting the standardisation of best-practice tools and
• Further release of good practice documentation and
approaches to our work is an important response to this need.
standardised working for areas including Independence,
Standardisation enables a simplified but more effective audit, climate and fraud.
allowing team members to be clearer on the task requirements • Adoption of EY Global standardised work papers when
and senior auditors to focus on challenging the judgements available (topics currently being developed by Global and
involved in the audit and ensuring we have the right quality considered for adoption in the UK include cash, property
evidence. plant and equipment, and accruals).
This initiative continues to build upon the high-quality outcomes • Exploration and launch of CoEs where work can be
across many of our audits, and leverages best practice from performed centrally and consistently. This will include a
these to develop standard work programmes and templates that pension assets CoE.
will drive greater consistency.

What we have achieved so far How will we measure success?

During FY23, we issued the following: We consider the measures of success for this
• Topic-specific methodologies for a number of areas that initiative to be:
have common characteristics, including a work programme
• Reduced duplication of audit effort through the
for revenue on construction contracts, group oversight
simplified processes, documentation and enablers —
work enabler, and hedging framework.
tracked through feedback from teams.
• Good practice documentation and standardised wording
for areas including impairment and our use of specialist • Clear, concise and consistent documentation — tracked
work papers, where standardised information can be used through feedback from our internal review and quality
by a number of audit teams. control processes.

What next? • Feedback from our external inspections through their

identification of good practice and absence of findings
In FY24, we will release more standardised work programmes
in areas where best practice has been developed.
and best-practice documentation. We will also launch Centres of
Excellence (CoEs) for areas with common attributes.

Risks to manage
There are a number of risks and barriers to achieving success within this focus area, which include:
• Lack of resource to develop enablement (see page 12)
• Professional practice department (PPD) capacity
We will agree timetables in advance with our PPD group which is required to review the standardised forms, workpapers
and enablers prior to release.
• Failure of business to use tools and enablers
The launch of our Conduct Portal, supported by our Audit Quality Sharepoint — a ‘one-stop-shop’ that helps our teams
to easily access the relevant tools and enablers. In addition to this, the recent launch of our queries and consultation
application, EY Compass, helps teams to navigate common questions.
• Duplication of effort due to lack of awareness
We have regular interactions with the Global innovation teams and our quality enablement network representatives
across all locations to share and reinforce key messages with audit teams locally, helping them to share good practice
and reduce the risk of duplication of effort.

14 | EY UK 2023 Audit Quality Report

 How this translates to a quality audit for
companies

On the previous pages, we have set out our key focus areas, actions and risks for FY24. We now look at how these translate into a
quality audit for companies. With our audit quality focus areas, overall strategy, System of Quality Management, and the Three Lines
of Defence (see page 19 for details) in mind, we have considered this from the point of view of our stakeholders. To illustrate, we
have considered the perspectives of an Audit Committee Chair and specifically outlined the questions we believe they would consider.

Do you
have the How has
right team the audit
for my team adequately
r rev i ews
audit? Regul a addressed the
aud i t / i nte rna l fi
le r risks?
What are the e r na l evi
n t i a l R e p o r t i ng G ew
I a n c s
competencies F in a n d
r ou
d Q C R A Q ST p
required in the a n E ( FR
audit team? PD You
r audit team Are the audit

G)
P

procedures
appropriate
for the size and
Consistently complexity of the
assignment?
What is the delivering
optimum team high-quality audits
structure and that serve the public
capacity? Is the audit
interest
reporting
timely,
comprehensive
and
How has the transparent?
audit been
properly planned
and phased?
How has Is there a formal
the audit planned and
team exercised agreed escalation
professional framework?
scepticism?

The questions above are all addressed by our audit quality strategy focus areas, specifically:
• Resourcing interventions as described • Additional support in the form of our through the release of specific
on page 13, which include: AQST and engagement quality control methodologies, standardised
review (See page 12 for further details). enablers and working papers,
• Appropriate intervals of intensity
• Providing training and tools to equip and good-practice examples.
built into portfolios allowing our
our people so that they understand See page 14 for details.
people to be focussed, and able to
think clearly and effectively whilst what it means to be an audit • Providing teams with project
working on engagements. This will professional and are better able to management training and
result in risks being addressed in the build a greater knowledge of the encouraging the use of existing
most efficient way and consistent industries they work in. See page project management tools to ensure
high-quality audits. 10 and 14 for further details. audits are properly planned and
• Providing teams with the tools to executed, with any challenges and
• Ensuring that we have appropriate
clearly and concisely document the issues raised as early as possible in
teams with the relevant experience
work done and challenges made the audit process. See page 13 for
for each audit.
details.

EY UK 2023 Audit Quality Report | 15

 Audit in the spotlight

In recent years there have been various reputational challenges faced by EY globally, along with the wider profession. In the section below,
we have set out seven notable issues and the steps we’re taking to address them.

Workplace culture
In July 2023, EY Oceania released the findings of an independent the insights and recommendations from a UK perspective. Whilst
and comprehensive review into its workplace culture. The we are in the process of determining specific actions relating to
independent review was a deep examination of workplace culture, this analysis, we already have a number of UK-specific initiatives in
work practices and psychological health and safety in EY Oceania’s place that we have been working on. These include:
two largest Member firms, Australia and New Zealand. A copy of
• Culture of Audit Quality roadshows — promoting the
the report can be found here.
importance of having the confidence to internally challenge.
The report included a number of key findings and overall, the vast (See page 10)
majority of people felt safe in EY Oceania workplaces. However,
there were instances identified where negative experiences have
• Increasing accountability for staff by setting clear role
had a significant impact on individuals, teams and the firm. The expectations. (See page 10)
report includes 27 recommendations to help EY Oceania make • Undertaking a detailed review of our people’s portfolios, which
meaningful improvements to work place culture and positively is an important part of our rebalancing work intensity priority
promote the wellbeing of its people. area. This includes a review of phasing of work to help our
Our latest UK People Pulse survey results indicate that the majority people to be focussed and able to think clearly and effectively.
of our people feel included and supported by the people they (See page 13)
interact with each day and that they feel free to be themselves. • Various DE&I initiatives including: being one of the founding
However, we recognise there is more to be done and learnt from to
partners of the socio-economic diversity taskforce, Progress
ensure our people have an exceptional experience at EY.
Together; and opening our first Neuro-Diverse Centre of
We have reviewed the report and have analysed and considered Excellence in Manchester. (See page 11)

Public sector audits

Since 2017/18 there has been a deterioration in the timeliness Up, Housing and Communities Committee inquiry into Financial
of local audit in England, with delays compounding during the Reporting and Audit in Local Authorities.
COVID-19 pandemic, leading to a persistent and significant
backlog of audit opinions. We have continued to invest in our He outlined that work was ongoing to address this area and develop
public sector audit team to support the long-term sustainability of a sustainable solution to the timeliness challenges which the local
public audit, through enhanced recruitment campaigns. We have audit sector in England has faced in recent years. Further work is
successfully recruited at all levels, expanding the team, including being completed with the aim of implementing agreed changes
new Key Audit Partners. We continually review our portfolio of by the end of 2023. As auditor to a significant proportion of the
appointments to ensure that we remain appropriately resourced local audit market, EY UK is working with the government, along
to deliver high-quality public audit. On 17 July 2023, Lee Rowley, with other stakeholders, to support the development of more
MP, Parliamentary Under-Secretary of State for Local Government detailed proposals to address the backlog and develop a sustainable
and Building Safety, gave evidence to the UK Parliament’s Levelling solution.

Ongoing FRC audit investigations

We currently have seven open investigations, with year ends ensure our audits serve the public interest and build trust and
ranging from 2017 to 2021, in relation to audits we have confidence in business and the capital markets. Delivering the high-
undertaken. Three of the seven relate to investigations announced quality audits expected of us is our priority, and we are investing
since the publication of our 2022 UK Audit Quality report. an additional $1bn globally in our audit and technology processes.
Our refreshed audit quality strategy emphasises the importance we
We are committed to working with the FRC to understand and place on of a strong audit culture and professional scepticism.
respond to any findings that may arise from their investigations
which are directed to ourselves and those of other firms. More Further details on our open investigations can be found in the
generally, we embrace the FRC’s approach to audit firm supervision, Transparency Report.
and will keep working with the FRC and other stakeholders to

16 | EY UK 2023 Audit Quality Report

 Climate-related risks and impacts on financial statements
Climate change continues to present risks to the companies we to widen beyond financial performance. As part of our contribution
audit. It is one of a range of business risks that we consider as part to the debate about the future of audit, we have included the audit
of our audits. of the impact of climate change as a workstream in our audit quality
strategy.
A wider range of stakeholders, including customers, employees,
suppliers, governments and civil society are scrutinising corporate We welcome all opportunities for engagement with the investor
behaviour, alert to any gap between what companies claim and community on this important topic.
what they are actually doing. This increases the expectations placed
on auditors and the demand for assurance on metrics is continuing Please refer to page 9 for the FY23 focus of this workstream.

Personal independence
Whilst not in relation to EY UK, the Public Company Accounting these remedial measures have contributed to progress in improving
Oversight Board (PCAOB) determined, in 2023, that EY Spain and compliance in this area, EY agrees with the PCAOB that we have
EY Sweden have unsatisfactorily addressed criticisms expressed more work to do. We remain squarely focussed on the continued
in the 2019 PCAOB inspection reports of their quality controls strengthening and enhancement of our quality controls. The
over compliance with the firm’s independence policies, for the Financial Report Council performed testing in relation to financial
reporting of personal financial relationships by managerial rank independence of individuals as part of their 2022/23 inspection
employees. We take our independence obligations very seriously. cycle, specifically their review of our firm-wide procedures. This
Following these inspections reports, EY has implemented and resulted in the identification of some good practice examples in the
communicated to its employees changes and enhancements in area of personal independence, which were reported in our annual
policies, processes, consequences, communications, and training public report published in July 2023.
to increase compliance with the reporting requirements. Although

Exam answer sharing

There have been no further public announcements on this matter Sharing answers on any assessment or exam is a violation of
since the issues described in our 2022 UK Audit Quality report. We our Code of Conduct and is not tolerated at EY. The firm’s response
continue to place integrity and ethics at the forefront of everything to this unacceptable past behaviour has been swift, thorough,
we do. and robust.

We have continued to take steps to reinforce our culture of Globally, we continue to build awareness and prevention in
compliance, ethics, and integrity in the past. We will continue countries around the world to set the standard for ethical
to take extensive actions, including disciplinary steps, training, behaviour in our industry. Please refer to our Transparency
monitoring, and communications that will further strengthen our Report for additional information on our ethics and
commitment in the future. whistleblowing policies.

Wirecard
Since the publication our 2022 UK Audit Report, the German procedures regarding fraud, leveraging data and the power of
regulator (APAS) has concluded its investigation into EY Germany advanced technology.
and Wirecard. We await its final and formal conclusions.
In the UK, all FTSE 350 engagements continue to leverage, where
As noted in our prior year report, both EY Germany and EY globally appropriate, our Forensic and Integrity Services (FIS) practice
have taken action and are committed to continuous improvement expertise to support our teams in assessing fraud risk and other
in audit quality, implementing innovations in our risk and audit indications of management bias.

EY UK 2023 Audit Quality Report | 17

 UK audit quality governance
There are several global roles and functions revised structure has strengthened our (UKCC). The purpose of the UKCC is to
that have direct accountability for creating, oversight of audit quality. manage the operations of the firm with
implementing, improving and monitoring respect to matters that have, or may have,
activities related to audit quality control. We It builds on our culture of challenge through a UK country-specific impact, including
have embedded and built upon these global various levels of review, including from our legal, regulatory, and reputational matters
roles to develop a clear structure for the independent Audit Non-Executives (ANEs), and financial resilience. The UKCC reports
oversight and monitoring of audit quality in who bring a range of diverse experiences to directly into the EY UK Board.
the UK. the Audit Board they sit on. Further details
on each of these bodies can be found on the
In readiness for operational separation next page.
reform, changes to our firm’s governance
structure were implemented which have In addition to the bodies included on the
been in place since 1 July 2021. The diagram below is the UK Country Committee

Accountable Public
Executive EY UK Board Interest
Committee Board (PIB)

Audit Board

Audit Audit Quality

Remuneration Executive
committee Committee (AQE)

18 | EY UK 2023 Audit Quality Report

EY UK Board Audit Board and Audit Accountable Executive
The EY UK Board is the ultimate Remuneration committee Committee
governance body of EY UK and is
The Audit Board and Audit Remuneration The Accountable Executive Committee is
responsible for promoting and protecting
Committee were established in order to responsible for ensuring the FRC’s principles
the interests of the firm and the general fulfil the Financial Reporting Council’s and outcomes for operational separation are
and operational management of the firm as requirements on the operational separation. delivered, embedded and monitored.
a whole, including overseeing compliance The role of the Audit Board is to provide
with all applicable professional regulatory independent oversight of the firm’s pursuit The Accountable Executive Committee
and legal requirements. of audit quality improvement by ensuring is chaired by Hywel Ball, UK&I Regional
that people in the EY UK Audit Practice Managing Partner and LLP Board Chair.
The composition of the Board is made
are focussed above all on the delivery of Other members include the UK FS Managing
up of seven roles-based appointments,
high-quality audits in the public interest, Partner and the UK Chief Operating Officer.
three representatives of the UK&I and
having regard to the need to ensure that
FS Partner Fora which are comprised of
elected individuals, and up to two co- opted
audit remains an attractive and reputable Audit Quality Executive
profession and to increase deserved
members. There were no co-opted EY UK
confidence in audit. Committee
Board members in FY23.
The Audit Board is comprised of Audit Non- The AQE oversees all matters relating to
audit quality. It is chaired by the UK Quality
Public Interest Board (PIB) Executives and three EY executives. Three
Enablement Leader (QEL) and meets
of the four Audit Non-Executives (ANEs) are
The remit of the PIB is to enhance the also firm-wide INEs. In January 2023, David monthly. Other members include the UK
firm’s performance in meeting the purpose Thorburn, the Chair of the Audit Board, Head of Audit, FS Head of Audit, Audit
of the Audit Firm Governance Code resigned with immediate effect in order to Compliance Principal, Audit Monitoring
(AFGC), which has the following principal take on a role on the Transaction Committee Officer and the QELs for the UK&I and FS
objectives: to promote audit quality; for the proposed structural separation of the audit businesses. In addition, specialist
to help the firm secure its reputation firm. Philip Tew took over as interim chair. oversight committees have also been put
more broadly, including that of its non- Following the decision not to proceed with in place to monitor specialist resourcing,
audit business; and to reduce the risk the structural separation, David Thorburn training and communication as part of
of firm failure. In connection with the was re-appointed as both an INE and ANE in operational separation.
AFGC’s purpose, the PIB is responsible May 2023, with Philip Tew continuing to act
for the independent oversight of the as interim UKAB Chair. On 18 September UK Quality Enablement Leaders
firm’s policies and procedures in relation 2023, Ruth Anderson and Carl Hughes were The UK QELs lead the audit quality
to financial resilience, governance and both appointed to the roles of INE and ANE, programme in the UK. To reflect specific
leadership, values and culture, and risk with Ruth Anderson taking over from Philip skills and experience, we have separate
management and resilience. Review of Tew as Chair. Mirdul Hedge resigned on the QELs for financial services and non-financial
same day. The EY executives on the Audit services audit functions. UK QELs are
the people strategy and people policies
Board are the UK Head of Audit, UK FS Head representatives in the regional and global
and procedures, to help ensure the public
of Audit and the Audit Compliance Principal. QEL networks.
interest is protected, is a standing item on
the PIB’s agenda. In addition, EY has also established an
Audit Remuneration Committee as a sub- Professional Practice Directorate
The Public Interest Board is formed Committee (ABRemCo) of the Audit Board. PPD is a global network of technical
of Independent Non-Executives (INEs) The Audit Remuneration Committee is subject-matter specialists in accounting
including the chair, Tonia Lovell and three comprised solely of ANEs and its role is to and auditing standards, who consult on
role-based members consisting of the UK oversee the remuneration of audit partners. accounting, auditing and financial reporting
Country Managing Partner, FS Managing Following his reappointment David Thorburn matters. They also perform various practice
Partner and the head of UK risk. did not re-join the ABRemCo. monitoring and risk management activities.

Our Three Lines of Defence

Our Three Lines of Defence are made up of:

Audit teams and auditors Independent review and consultation Internal audit
• The first line of defence is • Experienced risk management • Professionals deliver the annual
comprised of our front-line staff professionals in independence, financial internal audit programme within the
supported by service-line quality crime, enterprise risk management, firm’s consulting service line.
teams. data protection and business resilience. • This team is committed to
• Key activities include client and • Policy development, framework, continuous improvement and reports
engagement acceptance and risk tools, advice, guidance, monitoring regularly to the PIB and EY UK LLP
management during project and and assurance are provided by the Board on progress against the firm’s
audit delivery. second line. Quality Improvement Programme.

The views from our independent regulators are, of course, a further important source of feedback.

EY UK 2023 Audit Quality Report | 19

EY | Building a better working world
EY exists to build a better working world, helping
to create long-term value for clients, people and
society and build trust in the capital markets.

Enabled by data and technology, diverse EY

teams in over 150 countries provide trust
through assurance and help clients grow,
transform and operate.

Working across assurance, consulting, law,

strategy, tax and transactions, EY teams ask better
questions to find new answers for the complex
issues facing our world today.

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. Information
about how EY collects and uses personal data and a description of the
rights individuals have under data protection legislation are available via
ey.com/privacy. EY member firms do not practice law where prohibited
by local laws. For more information about our organization, please visit
ey.com.

Ernst & Young LLP

The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales
with registered number OC300001 and is a member firm of Ernst & Young Global Limited.

Ernst & Young LLP, 1 More London Place, London, SE1 2AF.

© 2023 Ernst & Young LLP. Published in the UK.

All Rights Reserved.

EYSCORE 009741-23-UK

UKC-030767.indd (UK) 10/23. Artwork by Creative UK.

ED None

In line with EY’s commitment to minimise its impact on the environment, this document
has been printed on paper with a high recycled content.

Information in this publication is intended to provide only a general outline of the subjects
covered. It should neither be regarded as comprehensive nor sufficient for making decisions, nor
should it be used in place of professional advice. Ernst & Young LLP accepts no responsibility for
any loss arising from any action taken or not taken by anyone using this material.

ey.com/uk