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Transparency report
OUR COMMITMENT TO TRANSPARENCY
QUALITY Membership of BDO enables our firms to deliver quality services at the highest level.
During the due diligence process, prospective firms are evaluated against BDO’s membership criteria, which include the prospective firm’s: • Reputation for quality and high ethical standards • Compliance with domestic and international standards and requirements • Commitment and capability to adopt our global policies, procedures, methodologies and tools • Ability to maintain a system of quality control that meets or exceeds the International Standard on Quality Control (ISQC-1). All BDO firms are subject to the obligations set out in the BDO Regulations and are required to abide by our global policies, procedures, methodologies and tools. QUALITY MONITORING PROGRAMME The Quality Monitoring Programme is designed to monitor firms’ adherence and compliance with professional standards, as well as incremental BDO standards and requirements, including policies, procedures, methodologies and tools.
RISK MANAGEMENT The use of the BDO International Risk Management Manual is mandated throughout BDO. It provides guidance on the design and implementation of quality control systems, including cybersecurity, to support our firms’ compliance with both domestic and international standards. Additionally, and in accordance with the requirements of the International Standard on Quality Control (ISQC-1), all BDO firms have their own internal systems of quality control. NEW FIRM ADMISSIONS BDO seeks to admit new firms that share BDO’s values and cultural approach. Each prospective new firm is subject to a due diligence process, the outcome of which forms the basis for the decision of whether or not to admit that firm to BDO. These due diligence reviews are conducted by the Global Quality & Risk Management department, based in BDO’s Global Office in Brussels, or under their direction. The global CEO then makes a recommendation to the Global Board, based on the due diligence report, which ultimately decides on the admission of the firm to BDO.
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Internal Inspection Programme or other Monitoring Procedures, an assessment of compliance with professional and incremental BDO standards and the review of a sample of assurance engagements. The Quality Assurance Review programme is managed by the Global Quality & Risk Management department and is carried out by a teamof independent and suitably qualified dedicated reviewers, for whom an ongoing training process is in place. Many of our firms are also subject to external inspections by local professional institutes and local regulators, or undergo a peer review. ACCREDITATION The primary purpose of the accreditation process is to enhance all our firms’ focus on quality, in line with the key global strategic aim to deliver consistently exceptional and high quality services. Both the process of, and the criteria included in BDO’s internal accreditation procedure are subject to consistent revision and strengthening. Every firm receives an accreditation score based on an assessment of compliance with 56 criteria, for each of the
Our QualityMonitoringProgramme consists of: • An Internal Inspection Programme for firms with more than five audit partners • Other Monitoring Procedure s for firms with five audit partners or less • The International QualityAssurance Reviewprogramme for all firms with an audit practice. • The Internal Inspection Programme for audit is performed at firm level on an annual basis by the firm’s partners and directors. A set of global criteria for what constitutes a satisfactory Internal Inspection Programme has been developed which covers an assessment and monitoring of our firms’ compliance with professional standards, including leadership responsibility for quality, ethics and independence, client acceptance and continuance, human resources, engagement performance and monitoring. The evaluation of a firm’s performance also involves the review of a sample of assurance engagements. Other Monitoring Procedures are implemented and performed at firm level by the firm’s partners and directors on a periodic or continuous basis, depending on the nature of the procedure. These are focused on compliance with professional standards and incremental BDO standards. Quality monitoring on a global level within BDO originates from the BDO Regulations, which stipulate that each firm is subject to regular Quality Assurance Reviews. In practice, this results in a process where each firm is reviewed at least once every three years. Equally, the results of the Internal Inspection Programmes are monitored through the global Quality Monitoring Programme. The scope of a Quality Assurance Review covers an assessment of the design and effectiveness of the firm’s
following categories: • Audit &Assurance • Tax Advisory • Tax Compliance • Advisory • Business Services &Outsourcing • Risk Management • Business Development &Marketing • HR & Development • Firm Development &Governance • InformationTechnology.
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INDEPENDENCE Independence remains the cornerstone of our profession. It is the fundamental principle driving trust in the reliability of audit, review and other assurance reports to third parties. BDO is dedicated to upholding the highest ethical standards and maintaining compliance with the independence standards of the International Ethics Standards Board for Accountants (IESBA) and, in countries where they are more stringent, those of national regulatory or standard setting organisations. BDO is a member of the Forum of Firms and subject to the membership obligations, which include promoting the consistent application of high-quality audit practices worldwide. BDO frms’ independence and objectivity on assurance clients are achieved and maintained through the Global Independence Programme (the Programme), a framework comprising eight elements (including, among others, Policies & Procedures, Technology, Training & Communications and Monitoring & Reporting). Each frm appoints a designated independence champion, an experienced professional who is responsible for implementing and monitoring compliance with the Programme. As part of our control environment designed to avoid threats to independence and potential conflicts of interest, BDO maintains a worldwide database of all our frms’ restricted entities, including listed companies and other public interest entities. This is available on our global intranet with the objective of preventing the performance of prohibited non-assurance services or investment in these entities. The worldwide database is continuously updated and the Independence Champions positively affrm both the accuracy of their frm’s listing, as well as their frm’s compliance with the Programme. Comprehensive due diligence is performed prior to accepting any new client or assurance engagement. BDO frms perform specifc procedures to identify any potential conflicts of interest and threats to independence. These procedures include the use of a global technology solution that facilitates international conflict and independence requests across BDO.
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GOVERNANCE The global BDO network is governed by the Council, the Global Board and the Executive of BDO International Limited.
BDO COUNCIL The Council comprises one representative from each voting BDO Member Firm – generally the managing partner – and represents the members of BDO International Limited in general meeting. In 2018 there were 115 Council members. The Council is chaired by the Council Chairman, elected among the existing Council members by the Council upon nomination by the Global Board. The current Council Chairman is Werner Schiesser, managing partner of BDO in Switzerland. The Council approves BDO’s global budget, appoints the Global Board and approves any changes to the Articles of Association and the Regulations of BDO International Limited. The Council meets at least once a year during BDO’s leadership conference – and more if the Council Chairman and/or the Secretary of BDO International Limited consider this necessary or appropriate, or upon request of a certain number of Council members.
GLOBAL BOARD The Global Board is the Board of Directors of BDO International Limited. It comprises the managing partners of at least the three largest firms of the EMEA region, the two largest firms of the Americas region and the two largest firms of the Asia Pacific region. The (re)appointment of the Global Board members, each for a three year term, is approved by the Council. The table on the left sets out the present composition of the Global Board, which is currently chaired by Wayne Berson, managing partner of BDO in the USA. The Global Board Chairman is elected by the Global Board members and serves for a period of three years. The Global Board sets policies and priorities for the global organisation and oversees the work of the Executive. The Global Board meets at least four times a year, and more if required.
Council
115 members
Chair: Werner Schiesser Managing Partner BDO Switzerland
Global Board
7 members
Chair: Wayne Berson Managing Partner BDO USA
Executive/Global Leadership Team
11 members
Led by Keith Farlinger CEO of BDO International Limited
*as of 1 February 2019
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GLOBAL BOARD AT 23 OCTOBER 2018
EXECUTIVE The Executive comprises the CEO, who is appointed by the Global Board, and members of the Global Leadership Team (GLT) appointed by the CEO.
USA Wayne Berson Global Board Chairman
Martin van Roekel is the Vice Chairman of BDO. Martin was previously global CEO and currently assists the CEO on a number of matters pertaining to the BDO organisation. The members of the Global Leadership Team (GLT) are appointed by the CEO, who allocates and delegates responsibilities to them as he deems appropriate. The GLT comprises the regional CEOs, the Global Heads of service lines and of support services, as well as the Secretary of BDO International Limited. The majority of the members of the GLT are full time dedicated to their role within BDO International Limited. The CEO and the GLT are supported by the Global Office: Brussels Worldwide Services BVBA is a limited liability company incorporated in Belgium, which coordinates the service provision within BDO. The Global Office includes the following Global departments: IT, Audit & Assurance, Tax, Quality & Risk Management, Legal, Business Development & Marketing, HR & Development, Regulatory & Public Policy Affairs, Events, EU Key Account Procurement, Accounting and Administration.
The current global CEO is Keith Farlinger, previously CEO Americas and formerly managing partner of BDO in Canada. The CEO’s powers and responsibilities are set out in the Regulations and as further determined by the Global Board. The CEO is tasked with the day- to-day management of the affairs of BDO globally, as well as the development and implementation of the global strategy for the organisation. He recommends quality standards, policies and strategies to the Global Board. The CEO also acts as spokesperson for BDO at international forums and organisations and represents the global organisation in discussions with international regulatory bodies. Anders Heede is the Chief Operating Offcer (COO). Working closely with the CEO, the overarching responsibilities of the COO are to ensure that the global BDO organisation is equipped to meet the challenges of today and is prepared for the future. Anders joined BDO in Denmark as CEO in 2008 and has held global roles since 2011, including that of CEO EMEA. He currently fulfils the role of Global Head of Advisory & BSO as well.
AUSTRALIA Tony Schiffmann
CANADA Patrick Kramer
CHINA Jiandi Zhu
GERMANY Holger Otte
THENETHERLANDS Dick den Braber
UK Paul Eagland
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GLOBAL LEADERSHIP TEAM AT 1 APRIL 2019
COO/GLOBALHEADOF ADVISORY&BSO Anders Heede
GLOBAL CEO
Keith Farlinger
CEOASIAPACIFIC
CEOAMERICAS
Stephen Darley
Albert Lopez
GLOBALHEADOF AUDIT&ASSURANCE Chris Smith
CEOEMEA
Trond-Morten Lindberg
GLOBAL HEADOF TAX Robert Aziz
GLOBALHEADOF BUSINESS DEVELOPMENT&MARKETING Allan Evans
GLOBAL HEADOF IT Belinda Thompson
GLOBALHEADOF HR&DEVELOPMENT Alette Ducro
SECRETARYOFBDOINTERNATIONAL LIMITED&HEADOFLEGAL Basile Dura
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REGIONAL STRUCTURE To facilitate the communication and coordination of actions and the sharing of best practice, BDO is divided into three regions: EMEA (Europe, Middle East and Africa), Asia Pacific and Americas (Latin America, North America and Caribbean), each supported by a regional board. Each region has its own Regional CEO, who chairs the respective Regional Board and provides support and guidance regarding the strategic initiatives of firms in the region.
GLOBAL COMMITTEES Within BDO there are a number of global committees, composed of professionals from our firms, who report to the respective member of the GLT and the CEO. These committees, which act in an advisory capacity for the benefit of BDO firms, are further supported by a number of sub committees, task forces and working groups.
THE PRIMARY GLOBAL COMMITTEES ARE AS FOLLOWS:
AUDIT Leadership COMMITTEE
AUDIT STEERING COMMITTEE
INTERNATIONAL RISK MANAGEMENT COMMITTEE
TAX ADVISORY COMMITTEE
INTERNATIONAL BRAND&
GLOBAL PEOPLE COMMITTEE
MARKETING COMMITTEE
GLOBAL OPERATIONS GROUP
INTERNATIONAL IT COMMITTEE
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THE REGULATORY ENVIRONMENT It is now a given that policymakers and regulators are expected to regulate all aspects of the economy, notably those areas considered systemic, including professional services associated with those sectors. As a consequence, regulatory and public policy matters are now, more than ever, a strategic factor for BDO and for its clients. The tremendous pace of change brought about by new technologies is dramatically impacting the world in which we live and work - and the world of professional services is no different. Technology is already ensuring that the audit of the future will not look like the audit of today and be unrecognisable from the audit of yesteryear. In addition, the delivery of tax compliance and advisory services is increasingly subject to heightened regulatory scrutiny to reflect societal needs, reaction to past failures and in response to increasing global inequality. It is very likely that future regulators will seek to move from regulating national entities in a sector, to regulating activities across jurisdictions and across clients as protocols, structures and technology are put in place to enable them to regulate in a way that matches the nature of the tech-enabled business environment of the 2020s. This is already evident in how ‘colleges’ of audit regulators in Europe collaborate on inspecting the fles of high- risk audit clients across borders and in joint inspections of audit frms by US and third country audit regulators. Mirroring the globalisation of the business world, regulators now routinely share best practices, regulatory philosophies and results of inspections with each other. The reality is that this trend will continue and be further enabled as regulators increasingly apply technology in carrying out their roles. Meanwhile, public policy thinking on market issues - including concentration and choice in the public company audit market - continues to evolve. Blunt interventions have been proposed in some jurisdictions but are unlikely to improve choice or competition in the market or to have a positive impact in elevating audit quality. In a number of jurisdictions, policymakers also seek to link providers of ‘aggressive tax planning’ advice or high profle business failures with punitive interventions in the audit and public procurement markets. Signifcant regulatory developments in countries such as UK, India, South Africa and Korea have shown that the world of professional services is heavily exposed to public policy imperatives, regulatory response to business failure and changing societal expectations of the business community.
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As a consequence, the environment in which most BDO frms now operate is one of heightened regulation, constant external scrutiny, expanded transparency expectations and ever more detailed compliance obligations. The expectations of the policymakers, regulators and oversight bodies continue to develop exponentially and more of our service offerings are regulated - in one way or another - than ever before. As a globally cohesive and future-focused organisation with exceptional client service at its heart, BDO understands that we must constantly engage with policymakers and regulators and seek to understand the existing and looming public policy imperatives that shape the environment in which we and our clients operate. We constantly invest in service quality enhancement and tools, including state of the art audit methodologies, restricted entity databases, corporate tree databases and a suite of risk management tools that are required and expected to meet stated regulatory requirements and service our growth-oriented, global client base. Those expectations also extend to human resources matters such as recruitment, training and appointment to key positions in our frms, as well as ensuring adequate cybersecurity precautions, data protection procedures and ‘know-your-client’ processes. At BDO, our frms have actively embraced transparency requirements for revamped and enhanced public reporting by audit frms with public interest entity audit clients. In fact, the market expectations are even higher and BDO has sought to lead by the expansive nature and scope of our transparency reporting. We continue to engage positively and constructively with a range of historically relevant policymakers and regulators, but we are equally committed to doing so with the new stakeholders in our ever-evolving regulatory environment. Active engagement on public policy debates is increasingly necessary and expected from a business perspective, on issues such as sustainability, climate change, corporate governance, cybercrime, anti-fraud, anti-bribery and anti-money laundering, as well as on geopolitical and geo-economic themes such as Brexit, trade wars, and EU/OECD digital tax proposals. BDO is involved with the wider profession in extensive discussions with all of the relevant stakeholders in these critical public policy areas. Most importantly, BDO understands the urgent need to build and restore confdence in the quality of the core audit and in the integrity of the audit and assurance profession. Our regulatory and public policy experts’ frequent engagement with audit policymakers and regulators is evidence of our commitment to actively supporting efforts to develop focused, effective and value-adding regulation. This in turn heightens trust in what we do and how we do it. BDO will continue to play its part in engaging constructively and proactively with all stakeholders in this ‘brave new world’.
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