Professional Documents
Culture Documents
Ey 2022 Audit Quality Report
Ey 2022 Audit Quality Report
to audit quality
Information for audit committees,
investors and other stakeholders
Ernst & Young LLP
January 2023
Leadership Key focus A snapshot of Our commitment to Innovating and Our Supporting External
Monitoring Appendix
message areas in 2022 key metrics the public interest executing the audit people our teams inspections
Continuing to Continuing to
strengthen our promote diversity,
Key focus
system of quality equity and inclusion
control
areas in 2022
Expanding our use of Enhancing our audit
data to manage risks approach to drive
in our audit portfolio greater consistency
Reinforcing the
Expanding our use
importance of project
of audit technology
management
Instilling a continuous
improvement mindset
on our audits
Our people
10,750
US audit professionals by rank who are women Percentage of newly
promoted US audit
66%
3448+50 1328+36
US audit professionals, by rank
Partners and
11%
managing directors
Senior managers
and managers
Seniors and staff
23%
Partners and
managing directors
4 of the 7
Senior managers
and managers
34%
46%
or racially and
ethnically diverse
25%
partners who manage our audit practice at the regional
level are women or racially and ethnically diverse
Our commitment to
the public interest
We strive to continuously improve the quality
of our audits to protect investors and are taking
actions to drive greater consistency in the
execution of our audits. We are also reinforcing
the cornerstones of our audit culture: being
independent and objective, acting with integrity,
exercising professional skepticism and being
accountable for the quality of our work.
55 || Our
Our commitment to audit quality
quality
Leadership Key focus A snapshot of Our commitment to Innovating and Our Supporting External
Monitoring Appendix
message areas in 2022 key metrics the public interest executing the audit people our teams inspections
EY professionals in the US, like those at all EY member to the SEC in response to a voluntary request in June 2019
firms, are required to affirm their commitment to and that we should have updated that response.
upholding the EY Global Code of Conduct each year. The
Code stresses the importance of performing quality work, Our partners and managing directors are evaluated based
acting with integrity, maintaining our objectivity and on factors such as the tone they convey to their teams,
independence, and protecting confidential information, including their emphasis on the behaviors that contribute to
among other things. In the US, our professionals also sign audit quality, their level of consistent and direct involvement
a pledge to uphold the Firm’s values. In addition, all EY US in the audit, the results of inspections, achievement of
professionals and certain others affirm their compliance milestones on their audits and their mentoring activities.
with our independence policies each quarter, as discussed
below. All of our professionals are held accountable for
living our values and adhering to the Code of Conduct.
Meet our new Chair
After starting her career as an auditor and CPA, Julie
Our values: who we are worked in investment banking and then served as chief
• People who demonstrate integrity, respect, financial officer at public and private companies before
teaming and inclusiveness joining EY. She brings to our leadership team a deep
understanding of the role an audit plays in a company’s
• People with energy, enthusiasm and the courage
to lead ability to raise capital and the importance of operating
with ethics and integrity and upholding the values of the
• People who build relationships based on doing the
profession. Her commitment to investments in our people
right thing
and our audit process enables us to keep striving to
raise the bar on audit quality and contribute to trust and
We investigate potential violations of our Code of Conduct. confidence in the capital markets.
In June 2022, the Securities and Exchange Commission
(SEC) announced a settled order against EY US concerning
conduct that was discovered in an extensive internal
investigation and voluntarily shared with the PCAOB. The
order refers to incidents in the past of inappropriate and Our culture promotes performing
unacceptable answer sharing on continuing professional
high-quality work with integrity in
education and, by some individuals, on the ethics exams
required to earn or maintain a license as a certified public all of our audits.
accountant (CPA). Our response to this unacceptable
behavior has been thorough, extensive and effective. EY
Julie A. Boland
has reinforced our commitment that all of our people act
US Chair and Managing Partner
with integrity and ethics through training, communications,
ongoing monitoring and discipline. The order also states
that EY US failed to update information that was provided
66 || Our
Our commitment to audit quality
quality
Leadership Key focus A snapshot of Our commitment to Innovating and Our Supporting External
Monitoring Appendix
message areas in 2022 key metrics the public interest executing the audit people our teams inspections
77 || Our
Our commitment to audit quality
quality
Leadership Key focus A snapshot of Our commitment to Innovating and Our Supporting External
Monitoring Appendix
message areas in 2022 key metrics the public interest executing the audit people our teams inspections
88 || Our
Our commitment to audit quality
quality
Leadership Key focus A snapshot of Our commitment to Innovating and Our Supporting External
Monitoring Appendix
message areas in 2022 key metrics the public interest executing the audit people our teams inspections
99 || Our
Our commitment to audit quality
quality
Leadership Key focus A snapshot of Our commitment to Innovating and Our Supporting External
Monitoring Appendix
message areas in 2022 key metrics the public interest executing the audit people our teams inspections
We believe our advice helped EY US shape the The IAQC’s input is especially valuable to me. I am
strategies it is implementing to enhance audit quality focused on enhancing our audit quality, and the IAQC
in both the short term and long term. provides me with an independent perspective on key
topics that impact audit quality. I expect to continue to
Jeanette M. Franzel — IAQC member
benefit from their advice and insights on a variety of
Dina Dublon — IAQC member
topics, including emerging issues that affect financial
reporting and the profession.
10
10 || Our
Our commitment to audit quality
quality
Leadership Key focus A snapshot of Our commitment to Innovating and Our Supporting External
Monitoring Appendix
message areas in 2022 key metrics the public interest executing the audit people our teams inspections
11
11 || Our
Our commitment to audit quality
quality
Leadership Key focus A snapshot of Our commitment to Innovating and Our Supporting External
Monitoring Appendix
message areas in 2022 key metrics the public interest executing the audit people our teams inspections
Looking ahead
Cybersecurity ESG
With cyber attacks on the rise, our partners proactively We are sharing our perspective with the SEC and other
engage management and audit committees at the regulators on which climate disclosures would provide reliable
companies we audit in discussions about the heightened information to investors. Our auditors are prepared to
risks. We also provide our audit teams with guidance provide assurance on greenhouse gas emission disclosures,
so they can assess the effects of cyber incidents when and we have shared our recommendations for improvements
they arise and adjust their audit plans as necessary. We to climate-related disclosures the SEC has proposed
generally support the SEC’s proposal to require public requiring. We believe certain disclosures about greenhouse
companies to make more robust disclosures about gas emissions and other material climate-related matters
material cyber incidents and to provide disclosures would be useful to investors because they address long-
about their cybersecurity risk management and term value. We already offer a separate service of providing
governance. In addition, we continue to offer the assurance on a company’s voluntary ESG disclosures, and
companies we audit separate cyber-related services our sustainability specialists advise companies on reporting
that provide an independent and objective assessment on these topics. Senior members of our audit teams are
of the company’s cyber risk management activities to also proactively helping management and audit committee
support board and management oversight of this issue. members understand the evolving ESG reporting landscape.
Through our EY Career Path We’re developing a pipeline of We are working with the Center for
Accelerator program, we’re racially and ethnically diverse Audit Quality to generate excitement
expanding access to a career as a accounting professionals through about the profession among both
CPA by providing our interns with a our partnerships with organizations racially and ethnically diverse
way to earn the extra college credits such as the National Association individuals and those with a degree
they need to meet the licensing of Black Accountants and the in accounting and a major or minor
requirements and, in many cases, Association of Latino Professionals in data analytics, management
providing need-based scholarships. For America. information systems or computer
information systems.
12
12 || Our
Our commitment to audit quality
quality
Leadership Key focus A snapshot of Our commitment to Innovating and Our Supporting External
Monitoring Appendix
message areas in 2022 key metrics the public interest executing the audit people our teams inspections
Innovating and
executing the audit
Our data-first approach and innovative
technology help us drive audit quality
and execute our audits with objectivity
and professional skepticism.
Our focus on consistency the audit, including potential fraud risks, that arise during
We are laser-focused on driving consistency in how we the year. It allows us to see trends and anomalies and
apply our audit methodology, how we manage our audits understand how anomalies occur and how prevalent
and how we use innovative technology. To do that, we have they are.
clarified our methodology in certain areas, simplified and
standardized aspects of our audit approach, and created Our US public company audit teams use our digital audit
centralized teams that provide audit support on specific methodology to enhance their risk assessments for all
topics. We are also placing a greater emphasis on timely significant accounts and key business processes. That
supervision by executives, project management means they start their audit planning with a full population
and accountability. of data about the company’s transactions recorded in
the general ledger. They also used data-driven audit
Our data-first mindset procedures to better understand key business processes
Our data-first approach enhances audit quality because and to obtain substantive audit evidence for many of the
our teams see the big picture and focus on the key risks in company’s account balances.
Starting with data gives us a better understanding of how Our newest general ledger analyzer provides enhanced
transactions are processed. By evaluating data and applying visualizations, including highlighting changes in the data
professional skepticism and judgment, we can better identify from the previous year, and allows team members to quickly
changes in processes and unusual journal entries that require drill into the data so they can discuss it in real time with audit
follow-up than if we used traditional sampling techniques. team executives. It also allows our teams to analyze very large
populations of data from the companies we audit. In addition,
As a result, we are asking better, more timely questions the analyzer helps our teams identify significant or unusual
of management and improving the experience for our patterns in journal entries, grouping them by combinations
professionals. Management of the companies we audit also of characteristics, such as the same posting details.
benefits by spending less time pulling documentation of
transactions and answering basic questions. In some cases,
management gains new insights into the company’s processes
We continue to maximize our use of
or operations based on information we share with them.
data and technology. Our teams are
building on the knowledge they have
EY Helix data analyzers
gained by working with data, and they are focusing
We have a robust library of EY Helix data analyzers that our
on changes that may indicate new risks.
teams use to perform risk assessments, identify anomalies
and obtain audit evidence. They include our EY Helix
William R. Strait
general ledger analyzers and our subledger analyzers. US Deputy Vice Chair — Assurance
Sector-specific analyzers
• Investment analyzer • Premiums and claims non-life insurance analyzer
• Lease revenue analyzer for lessors of real estate • Mortgage loan analyzer
• Health revenue analyzer • Commercial loan analyzer
• Life sciences gross-to-net analyzer • Automotive warranty liability and expense analyzer
We also have sector-specific EY Helix data analyzers that We evaluate the latest technology businesses are using
help our teams evaluate transactions and metrics that are and develop tools to address new issues that may arise.
unique to the company’s industry. These analyzers are often For example, our blockchain analyzer gathers a company’s
developed by EY auditors who want to address the needs of cryptocurrency transaction details from public blockchain
their own teams that aren’t addressed by existing analyzers. ledgers using public addresses supplied by the company
We then test the analyzers and certify them for use by and reconcile the data with the company’s records. The
other US teams auditing companies in the same industry. latest version of the analyzer has a digital signature
verification feature that allows companies to demonstrate
The general ledger, subledger, transaction and sector- ownership of digital wallet addresses without needing to
specific analyzers can be used to perform risk assessments move cryptocurrencies.
and a variety of substantive audit procedures.
The analyzer supports data for five blockchains: Bitcoin,
We also have a robust pipeline of ideas in development to Bitcoin Cash, Litecoin, Ethereum and Ethereum Classic.
create new tools, and we encourage our professionals to
continue to innovate.
Jeffrey Lang
Partner in charge of a large
multinational public company audit
Automation
We continue to automate aspects of the audit to improve
audit quality by collecting evidence and enhancing project Lexi M. Ott
management to allow our people to focus on higher-risk Audit senior
areas of the audit. For example, our custom confirmation
solution allows teams to automate parts of the
Working with the right companies made by the team. The engagement quality review is an
We focus on making sure the companies we audit share important element in our system of quality control.
our commitment to quality and transparency in financial
reporting, and we do not pursue audits of companies The factors we consider when we assign partners to
that do not share our values. Every year, there are many these roles include data about their workloads and their
companies we decline to audit. experience with both the industry and public companies,
their skills and the SEC’s partner rotation requirements. We
We perform rigorous risk assessments and obtain also consider the company’s risk designation identified in
approval from regional leadership before we accept our firmwide assessment process.
audit engagements and then again annually to continue
our audit work. These assessments help us identify the About 63% of our audit partners serve as the partner in
companies we want to audit, considering factors such charge of a public company audit. If audit partners who
as management’s integrity and approach to meeting its serve as engagement quality reviewers on public company
financial reporting responsibilities, the company’s financial audits are included, the percentage rises to 82%.
condition and the strength of its audit committee.
Our other audit partners help manage our public company
As part of the process, which is an important element audits or serve in quality or leadership roles, or as partners
in our system of quality control, we develop an overall in charge of private company audits. We have additional
risk designation for each audit. It is based on the risk partners on 33% of our public company audits to assist the
factors specific to the company, which might include partner in charge of our larger and more complex audits.
risks associated with adopting new accounting standards,
entering into a business combination, going public, To make sure our partners have enough time to lead quality
accounting for complex income tax matters, and holding audits, we review their workloads semiannually and when
and/or transacting using digital assets, among other factors. the scope of an audit changes significantly due to a major
transaction or when there is significant turnover on the team.
Throughout the audit cycle, our teams reassess risks using We perform a comprehensive annual review of each team to
evidence they gather from their audit procedures. We also make sure we are staffing our audits with audit professionals
alert our teams about fraud risk indicators such as short and specialists who have the right skills and capacity to
selling and adverse news reports. execute quality audits, given the risk factors identified in
each engagement. We also monitor the composition of our
Establishing the right team teams throughout the audit and determine what actions to
Each public company team has a partner in charge, who take to respond to potential audit risks.
sets the tone and has overall responsibility for the direction,
supervision and performance of the audit. On all public We believe that timely executive involvement is a key driver
company audits, another partner serves as engagement of audit quality, and we track and evaluate hours incurred
quality reviewer and evaluates significant judgments by managers and above at various points during the audit.
17.8%
We include in our audit teams EY professionals who focus
on tax matters, IT and valuation matters, and, in certain
audits, forensic accounting. Having specialists in these
areas collaborate with our audit professionals helps us
deliver high-quality audits at a time when IT environments,
business models, transactions and worldwide tax regimes
are increasing in complexity.
In fiscal 2022, EY US specialists, who are members of our 10.7% 4.7% 1.4% 1.0%
audit teams and are highly valued by EY, accounted for a
total of 17.8% of our US public company audit hours, which IT Tax Valuation Other
is consistent with 2021. IT specialists accounted for 10.7%
of US public company audit hours. Tax, valuation and other
specialists’ time represented 4.7%, 1.4% and 1.0% of total the specialists who work on our teams. In fiscal 2022,
US public company audit hours, respectively. these professionals accounted for 20% of US audit hours,
compared with 18% the previous year.
In some cases, our specialists may spend considerably
more time working on audits than these percentages In the US, we are driving consistency in our approach and
indicate, depending on the complexity of the audit. For documentation by building centralized teams that provide
example, our IT specialists typically spend more time audit support on various topics. Our Service Delivery
auditing internal controls when the company has a more Center (SDC) currently supports audit teams by performing
complex IT environment or performing procedures related routine independence procedures such as reviewing the
to cyber incidents. As part of our collaboration, we involve services we provide to a company we audit and making
our IT specialists early and often in the audit to develop sure they are all pre-approved. Having individuals who
and execute the audit plan. specialize in performing these procedures frees up our core
audit team members to spend more time on other areas of
EY US and other members of the EY global network the audit that require more judgment.
will continue to have the outstanding multidisciplinary
capabilities to support our audits now and in the years We are also developing US-based groups to support our
ahead, even if the member firms separate into two teams in certain areas of the audit that require judgment
distinct organizations. or pose a higher risk. Specially trained auditors in these
groups will perform key procedures related to certain
Offshore professionals who support the EY global complex topics, in close collaboration with engagement team
organization perform certain audit procedures and other members, as well as more-complex independence procedures
tasks under the supervision of our US audit teams and such as researching potential independence conflicts. We
are prioritizing the development of these groups.
Managing the audit partners and other audit executives, use EY Canvas to
We believe that timely pacing of the audit and strong track the progress of their audits and completion of tasks in
project management, including timely supervision and real time. This visibility enables executives to provide more
review by audit executives, are important drivers of audit targeted supervision and to better identify team members
quality. Our experience indicates that teams that complete in need of coaching.
their work at the appropriate time, including reviews by
audit executives, execute higher-quality audits. Over the past year, we stressed the importance of a
continuous improvement mindset to further enhance
We emphasize the importance of project management audit quality. Our teams use Lean Six Sigma principles to
through our milestones program, which promotes discipline manage their audits more effectively so they can focus on
and timely executive involvement by focusing our teams on the risks that matter most in each audit, eliminate rework
completing procedures, documentation and reviews by a and drive greater consistency in our audit execution.
specified date for key phases of the audit. We have enhanced
how we analyze real-time data for our milestones program, Cybersecurity
which helps us proactively reach out to teams ahead of Cyber risks are a major threat to businesses. A breach of an
deadlines and provide additional support when necessary. organization’s systems can disrupt operations, significantly
To facilitate timely reviews, we also require our teams to set increase costs and harm an organization’s reputation.
specific executive discussion and approval points throughout
the audit cycle to make sure the partner in charge holds On every audit, we obtain an understanding of a company’s
discussions with the right people at the right time. processes and controls that relate to IT and are relevant
to the audit. We also perform procedures to understand
While a significant amount of audit work needs to management’s approach to identifying, evaluating,
be completed at or after a company’s year-end, our investigating and communicating cybersecurity breaches. If
milestones program helps our teams perform as many information about a material breach is identified, we consider
tasks as possible before that busy period. Performing work the effect on the financial statements, including disclosures,
earlier in the audit cycle gives teams more time to address and the effect on internal control over financial reporting.
any issues that arise before the year-end crunch.
EY US also offers the companies we audit separate cyber-
In fiscal 2022 (mostly audits of 2021 financial statements), related services that provide an independent and objective
our teams performed 36% of their work three months assessment of a company’s cyber risk management
before the company’s year-end and 62% of their work activities to support board and management oversight of
before the company’s year-end. Our teams, including our this issue.
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Our people
Our people are essential to our ability to
execute high-quality audits. We focus on
creating diverse teams of audit professionals,
supporting their wellbeing and providing
them with career development opportunities.
We remain focused on creating the right opportunities to help our audit professionals
develop and providing them with experiences to become tomorrow’s leaders.
Rebecca A. Burke
US Assurance Talent Leader
To promote a sense of belonging, we assign our audit recommend nonprofit organizations or contribute
professionals to small groups, which we call EY Circles, so funding to organizations focused on addressing inequity,
they can meet several times a year to discuss matters that discrimination or racism. The fund builds on our existing
impact them. We have over 350 of these circles in the US and longstanding corporate responsibility efforts to
audit practice. address the root causes of social injustice.
Corporate responsibility and social equity initiatives Leveraging diversity and promoting equity and inclusion
EY US continues to promote equity inside our organization Diversity, equity and inclusion are key pillars of the US
and in our communities. By leveraging the power of our Firm’s strategy and commitment to delivering high-quality
people and collaborating with like-minded organizations, audits. We believe diverse perspectives, combined with
we aim to solve societal challenges facing our world today. an equitable and inclusive culture, drive better decision-
making, stimulate innovation and increase our agility.
Through our Bridging the Digital Divide initiative, we
collaborate with other organizations to help provide We also foster a sense of belonging for all of our people by
underserved populations with devices and broadband access, making sure everyone’s voice is heard. We staff our audits
as well as mentors so they can develop the necessary skills with diverse teams and sponsor nine professional networks
to participate in the digital age. Our College MAP program that provide opportunities to bring our diverse workforce
matches underserved students with EY mentors who help together for connections, support and engagement. One
them navigate the path to higher education. example is Unity, our professional network supporting
lesbian, gay, bisexual, transgender and other professionals
We also provide pro bono services to impact entrepreneurs (LGBT+) and their allies.
who use business as a force to address poverty, inequality
and environmental issues, among other things. And, each We are committed to attracting and developing women and
year, thousands of EY people team with Earthwatch to racially and ethnically diverse professionals and recognize
combat climate change and environmental injustice. individuals who serve as role models and sponsors, live our
values and demonstrate inclusive leadership.
Another way we effect change is through the EY
Social Justice Fund, a platform where EY people can
Percentage of newly promoted audit partners/managing Percentage of newly promoted audit partners/managing
directors who are women directors who are racially and ethnically diverse
In 2022, 46% of the audit professionals we promoted to ranks, our retention rate for women was consistent with
partner or managing director were women and 25% were our overall retention rate of 73%, but our retention rate for
racially and ethnically diverse (R&ED). R&ED includes R&ED professionals in this group was slightly lower.
individuals who identify as American Indian/Alaskan Native,
Black or African American, Asian, Hispanic or Latinx, We also monitor the percentage of partners and managing
Native Hawaiian or other Pacific Islander, or two or more directors in leadership positions who are women and R&ED
races or ethnicities. professionals. In 2022, 28% of the partners in charge of
public company audits were women and 11% were R&ED,
In our campus hiring, 50% of our recruits in fiscal 2022 up from 25% and 8% two years earlier, respectively. The
were women and 40% were R&ED. percentage of women and R&ED partners who lead our
most complex multinational public company audits is also
Our retention rates for both women and R&ED professionals rising. We expect women or R&ED partners to lead 30% of
at the senior manager/manager ranks exceeded our overall these audits for periods beginning in 2023, up from 28%
retention rate of 74% for these ranks. At the senior/staff two years earlier.
We are proud of the recognition we have received for our efforts, including recognition from DiversityInc, a leading source
of business information on diversity management.
The right people at the right time Number of US audit professionals (on a full-time
We continuously analyze macroeconomic data and equivalent, or FTE, basis)
information about our audit practice to forecast the Fiscal Fiscal Fiscal
number of people at each rank we will need to deliver 2022 2021 2020
high-quality audits. Geography is no longer the key Partners and managing
1,159 1,142 1,181
directors
consideration. Our professionals can now work remotely
Senior managers and
on audits in other locations, and we’re incorporating this 2,458 2,575 2,564
managers
flexibility into our planning. Seniors and staff 7,133 7,218 7,325
Total 10,750 10,935 11,070
We have a process to identify partners with high potential
so we can make sure they have the experiences they need
to move into leadership roles, such as leading our most The table above does not include offshore professionals
complex and challenging multinational audits. who support the EY global organization. The number of
hours these professionals worked on US public and private
We recognize and reward our top performers to help company audits was the equivalent of having another
us retain professionals with the skills and experience 2,618, 2,291 and 2,064 full-time auditors in fiscal years
to perform high-quality audits. We also promote top 2022, 2021 and 2020, respectively.
performers when they’re ready and when the Firm needs
them, rather than using the traditional approach of
requiring them to complete a specified number of years of
service in each rank.
US audit overall staff through senior manager retention top-rated seniors and staff is similar to the overall retention
rate by rank rate for professionals at these ranks.
Fiscal Fiscal Fiscal
2022 2021 2020 We track how our professionals feel about their experience
Senior managers and managers 74% 72% 85% at EY by surveying them three times a year. In our
Seniors and staff 73% 69% 79% survey in November 2022, 79% of our people said “my
EY experience is exceptional,”a substantially higher
percentage than in 2021. We believe this improvement
We retained a higher percentage of our audit professionals indicates that our continuing investments in our people are
in fiscal 2022 than we did the previous year, but our total having a positive effect.
retention rate of 74% was still below our historical rate of
approximately 78%, due to the Great Resignation and the Our professionals’ average annual hours in excess of 40
strong job market. To continue to boost retention, we are hours per week by rank are generally consistent with the
investing in our culture and our people. For example, we are previous year.
providing more opportunities for our professionals to work
on more challenging assignments as we expand our focus
Average annual hours in excess of 40 hours per week
on analyzing data and expand our teams that specialize in by rank
certain auditing topics. Over the past two years, the US firm Fiscal Fiscal Fiscal
has increased compensation, bonuses, recognition awards 2022 2021 2020
and wellbeing benefits. Partners and managing directors 373 401 393
Senior managers and managers 287 290 298
Our retention rate for top-rated senior managers and Seniors and staff 203 212 226
managers is 79%, which is higher than our overall retention
rate for professionals at these ranks. Our retention rate for
Our professionals can also earn EY master’s degrees online Average hours of continuing professional education by
from Hult International Business School, free of charge, in fiscal year
Business Analytics, Sustainability or Tech. 2022 2021 2020
85 97 96
In 2022, our audit professionals completed approximately
115,000 hours of training on digital auditing, much Attracting exceptional talent
of it embedded in our core audit training. This training We focus on attracting a talented and diverse group of
followed the 190,000 hours of training on digital people who share our values and our commitment to
auditing our professionals completed in 2021, when executing high-quality audits. In our campus recruiting,
we fully implemented our digital audit methodology on we stress the importance of the work we do as auditors in
public company audits. Our junior audit team members serving the public interest, the value that DEI brings, the
were required to complete a fraud training that focused opportunities to develop digital skills and grow as a leader,
on asking better questions, while audit partners and as well as the value of EY’s reputation as a great place to
senior managers were required to complete a training build a career.
on professional skepticism. We also required our more
experienced team members to complete training on In fiscal year 2022, we hired more than 2,200 people from
cybersecurity and ESG topics. college and university campuses. We continue to actively
hire people who have both an accounting degree and a
As they have in the past, our audit professionals substantially major or minor in data analytics, management information
exceeded our requirement to complete 40 hours of systems or computer information systems.
continuing professional education in any given year.
Our professionals are rewarded financially for passing the CPA exam early
in their careers. We also reward professionals who are recognized by the
American Institute of Certified Public Accountants (AICPA) with Elijah Watt
Sells Awards for achieving exceptional results on the CPA exam. We are
proud to report that eight EY US professionals were among the 57 people
who received this honor in 2022.
Intern to partner
Jamelia Livingston, a newly promoted audit partner, got her first taste of life
at EY as a sophomore in college. She joined the inaugural class of 50 Launch The Launch internship
interns who rotated through each of EY’s service lines, building relationships,
creates an environment
soaking up the Firm’s culture and gaining the confidence to pursue a career
in a field they felt passionate about. For Jamelia, that was our audit practice, where you gain enriching
where she did a summer internship the following year. She credits her experiences that propel
internships with preparing her to quickly become a high performer when she your career forward.
joined the EY audit practice full time in 2009. Since then, she has audited
large multinational companies and worked with colleagues around the world.
Jamelia Livingston
Throughout her career, Jamelia has also focused on diversity, equity and
Audit partner
inclusion and helping the Firm expand the Launch program. In June, Jamelia
addressed this year’s class of more than 500 Launch interns and encouraged
them to be authentic as they pursue their careers.
We also have internship programs that prepare college For list for 24 consecutive years. EY US also continues to
students for a career in accounting. Students just be among the top 20 employers for business graduates in
beginning their college careers can gain exposure to Universum’s annual Most Attractive Employers ranking.
EY through our Expedition internship, in which they
participate in workshops and activities. Students who are
EY US is widely recognized as a great place to
two years or more away from graduation can become
work, as demonstrated by the following:
Launch interns, who are exposed to our Assurance practice
and other service lines. We also have winter and summer • Fortune magazine’s 100 Best Companies to Work
audit internships. In 2022, about 700 winter interns and For list for the 24th consecutive year
more than 1,400 summer interns gained experience • DiversityInc’s Top 50 Hall of Fame recognition
working in our audit practice. for the fourth consecutive year for companies
that have achieved a No. 1 ranking on its Top 50
Our reputation as a great place to work and our culture Companies for Diversity list
of belonging enhance our ability to attract exceptional
people. For example, we are the only Big Four firm to have
made Fortune magazine’s 100 Best Companies to Work
Our Quality Network In fiscal 2022, our Quality Network coaches focused on our
Our Quality Network focuses on proactively improving audit teams’ use of data in our audits, audits of internal control
quality by coaching our audit teams, performing workpaper over financial reporting for companies that were subject
reviews, advising our teams on audit methodology matters, to this requirement for the first time, material business
providing training, and executing various risk management combinations and risks related to increased turnover on
and quality control procedures. our audit teams. Nearly 600 public company audit teams
received coaching or workpaper reviews in fiscal 2022.
Throughout the audit cycle, the Quality Network uses data
analytical techniques to evaluate a wide range of information
about individual engagements and identify teams for
coaching or other help. The information is updated frequently. In fiscal 2023, we are continuing to invest in
supporting our teams through coaching, workpaper
The roughly 120 professionals who make up our national reviews, learning and other quality control activities.
Quality Network are embedded in our Regions. They have This is especially important in the current environment as our
frequent contact with teams and identify and audit teams evaluate macroeconomic and other risk factors.
proactively address emerging risks, including industry-
Linda Lam
specific risks. They’re also able to share that knowledge
US Assurance Director of Quality Implementation
across the practice.
Our independent and objective consultation process drives audit quality by helping our
teams work through new and complex accounting, auditing and reporting issues and
making sure we comply with all relevant standards, rules and regulations.
James R. Estes
US Vice Chair — Professional Practice
In the current audit cycle, our Quality Network coaches are our monitoring and internal inspections programs, which
focusing on our IT audit approach, given the increasingly are described in the next section of this report.
complex IT environment, and other audits we identified in
our risk assessment process. They are also focusing on our Over the last three years, our Professional Practice partners
first-year audits of internal control over financial reporting have conducted an average of 2,200 formal consultations
and our work on material business combinations. annually with audit teams on audit and accounting topics.
Monitoring
Monitoring the effectiveness of our actions
and performing robust root cause analyses
of positive and negative audit performance
are key components of our system of
quality control. The results provide
valuable information about how we can
continuously improve audit quality.
Early assessment of in-progress audits In these inspections, we focus on specific areas of an audit
Our reviews of certain public company audits before we and evaluate our compliance with professional standards,
issue our auditor’s reports are an important component regulatory requirements and our policies. Audits are
of our system of quality control. We conduct these pre- selected for review based on several factors, including how
issuance reviews to provide timely feedback to teams and long it has been since a partner’s last inspection and the
to help us determine whether the actions we are taking results of that inspection.
to improve audit quality are achieving our objectives or
whether enhancements to our training, guidance or tools In 2022, we inspected approximately 200 public and
are required during the current audit cycle. private company audits (generally of financial
statements for the year ended 31 December 2021).
Internal inspections of completed audits We learn from both public and private company internal
We conduct internal inspections of selected engagements inspection results.
after we issue our auditor’s report. We perform many of
these inspections in the first half of the calendar year to
obtain information that we can use to continue to enhance
the quality of upcoming audits.
External inspections
PCAOB inspections have led to improvements
in audit quality, and we expect the PCAOB to
focus on further improvements.
The role of the PCAOB portion of the report to draw conclusions about a firm’s
The PCAOB, which was created 20 years ago, plays an entire practice and says the results aren’t necessarily
important role in maintaining and improving audit quality. comparable over time or from firm to firm.
Through annual inspections and standard setting, the PCAOB
identifies areas where firms can enhance audit quality. We learn from every deficiency identified in inspections.
Some deficiencies require us to perform more work on a
Part I.A of the PCAOB inspection report particular audit. To address others, we make changes to
This section of a PCAOB report, which is released to our processes or reconsider elements of our system of
the public, describes the procedures the PCAOB staff quality control.
performed during the inspection and certain observations
regarding audit deficiencies on these engagements.
The graphics and discussion below reflect results of our PCAOB inspections through the 2021 inspection cycle, which
generally covers our audits of 2020 financial statements and is the latest report the PCAOB has released.
12 8 11
44 44 49
Audits without Part I.A deficiencies Audits with Part I.A deficiencies
2 2
1
2021 9 4 2020 4 2019 5
As shown above, overall inspection findings increased in the 2021 inspection cycle. The number of audits with deficiencies
in both the financial statement audit and the audit of internal control over financial reporting (ICFR) also increased.
We have addressed these 2021 inspection findings and those we expect to be identified in our 2022 inspection report with
the actions described throughout this report. We are enhancing certain aspects of our approach to auditing IT controls,
strengthening supervision by executives, simplifying and standardizing aspects of our audit approach, and creating
centralized teams to provide audit support on various topics.
The PCAOB has said it identified a collective increase in Part II of the PCAOB report and status of
the number of deficiencies in its 2021 inspections of audit inspection reports
firms, and the preliminary results of its 2022 inspections Part II observations about a firm’s system of quality control
indicate even more deficiencies. are only released publicly if the PCAOB determines that a
firm has not addressed the deficiencies to its satisfaction
Part I.B of the PCAOB inspection report within 12 months of the report date.
Part I.B of the PCAOB’s inspection report discusses
noncompliance with PCAOB rules or standards that do In October 2022, the PCAOB updated our 2018 inspection
not relate directly to the sufficiency or appropriateness report on its website to include one Part II criticism after
of evidence the firm obtained to support its auditor’s determining that the Firm had unsatisfactorily addressed
opinion(s). In our latest report, we had these findings its criticism about compliance with the Firm’s independence
related to audit committee communications about policies for reporting personal financial relationships. We
participants in the audit, the population of matters we understand and accept the criticism and are taking actions,
considered as potential critical audit matters and inaccurate including proactively reaching out to our professionals
information we reported to the PCAOB on Form AP, among and working with them to update their reporting. While
other topics. We have taken steps to address these matters. the remedial measures we have taken have contributed to
improvements in compliance, we agree with the PCAOB
that we have more work to do.
We learn from every PCAOB finding and make changes to our approach when
necessary. We are confident that the actions we have already taken and those we
are taking now will enhance audit quality.
Denise M. Pelli
US Director of Professional Practice Quality and Regulatory Matters
The PCAOB’s assessment of a firm’s system of quality control In its 2019 report on our last peer review, Grant
is derived from both the results of its review of the firm’s Thornton concluded that our system of quality control
quality control policies and inferences that can be drawn from for engagements not subject to PCAOB permanent
deficiencies in the performance of individual audits. Certain inspection was suitably designed and complied with to
firm practices, policies and processes related to audit provide the Firm with reasonable assurance of performing
quality are reviewed, including those in the following areas: and reporting in conformity with applicable professional
standards in all material respects.
• Management structure and processes, including tone at
the top
International regulators
• Practices for partner management, including The International Forum of Independent Audit Regulators
allocation of partner resources and partner evaluation, (IFIAR) has issued a challenge to the global audit networks
compensation, admission and disciplinary actions to further reduce the number of audits with at least one
• Policies and procedures for considering and addressing significant finding as reported by 25 countries (including
the risks involved in accepting and retaining the the US) that are members of IFIAR by at least 25% over the
companies a firm audits, including the application of the four years ending with IFIAR’s 2023 survey of inspection
firm’s risk-rating system results. When IFIAR published its survey of 2021 inspection
results, which is the most recent survey, the EY network
• Processes related to a firm’s use of audit work performed
was on track to meet that reduction.
by its foreign affiliates on the foreign operations of
US issuers
IFIAR had previously challenged the global audit networks
• A firm’s processes for monitoring audit performance, to achieve a 25% reduction in inspection findings by 2019
including processes for identifying and assessing for listed public interest entities. The EY network achieved
indicators of deficiencies, independence policies and this goal in 2019.
procedures, and processes for responding to defects or
potential defects in quality control
Peer review
We participate in the AICPA peer review program that
requires a robust review every three years of a firm’s
system of quality control for its private company audit
practice. Grant Thornton is performing our review this
year (primarily of audits for the year ended 31 December
2021), and that review is underway.
EY US Executive Committee
Ernst & Young LLP is a client-serving member firm of Ernst & Young
Global Limited operating in the US.
2203-3997007
ED None
This material has been prepared for general informational purposes only and is not intended
to be relied upon as accounting, tax, legal or other professional advice. Please refer to your
advisors for specific advice.
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