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Our commitment toexecuting quality audits

Information for audit committees

Ernst & Young LLPNovember 2012


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Auditors play a vital rolein the ef cient functioningof the capital markets. Werecognize and embracethe responsibility that hasbeen entrusted to us asindependent auditors.


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1Document title Additional text

Contents

Letter from Steve Howe and Tom Hough 2

Our commitment to executing quality audits 5

The importance of communication 6

Global integration and how it supports audit quality 7

The Firms quality control system 8

Instilling professional values across the organization 9

Our audit quality support structure 10

How we work to perform quality audits 13

Integrated multidisciplinary service delivery 15

Our accounting and auditing review and consultation process 16

Our client acceptance and continuance procedures 18

Our recruiting and professional development objectives 19

Our compliance with legal requirements 22

Our independence procedures and monitoring efforts 23

Our practices related to evaluating and compensating our audit partners 26Our internal and external inspection programs 27

Appendix A: Glossary 33


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2

From an of ce opened in Cleveland, Ohio, by theErnst brothers in 1903 and one in Chicago, Illinois,started by Arthur Young in 1906, Ernst & Younghas grown to be a worldwide professional servicesorganization of more than 167,000 people operatingin more than 140 countries a global leader inassurance, advisory, tax and transaction advisoryservices.

Quality audits instill con dence in and credibility tothe nancial reporting that is so vital to the ef cientfunctioning of the capital markets. The substantialprocedures and analyses performed by theindependent auditor enable the auditor to opine onan entitys nancial statements and, for certain publiccompanies, internal control over nancial reporting.Performing this work with integrity, expertise,objectivity and professional skepticism is at the heartof our responsibility as independent auditors aresponsibility we take most seriously.

Our commitment to audit quality means we mustmake continuous investment and continuousimprovement. Audits cant be static and remaineffective over time. Audits are conducted in adynamic marketplace with increasingly challengingand complex business activities. We recognizethe importance of this role and take seriouslyour commitment to executing quality audits. Ourorganizational structure, methodologies, policies,practices and procedures are all designed to ful llthat important responsibility.

The enactment of SOX marked a signi cant milestonein the US audit professions history by moving the

audit profession from self-regulation to the regulatedenvironment of the Public Company AccountingOversight Board (PCAOB). We have supported thisexpansion in regulatory oversight of our audits ofpublic companies because it has contributed torebuilding con dence in the capital markets andimproving the quality of our work.

The importance of the audit practice to EY

The assurance practice (including audit) is the Firmslargest service line. Performing audits is our largestactivity and is our central priority critical to ourbrand in the marketplace. In the US, EY audits morethan 4,000 entities. They range from multi-nationalpublic companies operating around the globe that

le nancial statements with the Securities andExchange Commission (SEC) to privately -held,family-owned businesses that may supply nancialinformation to a local lender. These entities operate inmyriad industries from software to nancial services,from retail to real estate, from energy to consumerproducts and the public sector.

Who is accountable for audit quality?

The answer here is simple: We all are. Theresponsibility for quality begins at the top of theglobal organization at the Global and AmericasExecutive Boards and senior leadership level of the

Firm and runs throughout the Firm to our partnersand to our professional staff in all of our service linesinvolved in performing and supporting audits. Inshort, the responsibility for quality is an importantattribute of everyone who works at an Ernst & Young

rm. We are mindful of the public franchise that hasbeen entrusted to us. We recognize and embrace theresponsibility that this role represents and take ourobligation to serve the public interest as independentauditors seriously.

How is the Firm investing in the audit practice toenhance audit quality?

Our ve major quality initiatives are described in theintroductory letter from Steve Howe and Tom Hough.Those initiatives (Resources and workload, Training,Audit tools, Top-down emphasis on audit quality andAccountability for audit quality) represent signi cantmulti-million- dollar investments in our audit practice.These initiatives represent a major focus of ourongoing commitment to executing quality audits.

We are pleased to present this report discussing the commitment of Ernst & Young LLP

(the Firm or EY) to executing quality audits and describing our system of quality control.Quality is the bedrock of what we do every day. As a leader in the audit profession, wemust serve our stakeholders with passion and integrity and ful ll our independent roleto serve with objectivity and skepticism, excellence and professionalism. Our audit practiceis not just our largest service offering; it is central to our brand a brand that de nesour organization.

Since the enactment of the Sarbanes-Oxley Act of 2002 (SOX), many audit committeeshave taken on a greater role in the oversight of a companys nancial reporting and itsdealings with the independent auditor. Empowered and independent audit committees playa vital role on behalf of shareholders in promoting audit quality, protecting independenceand preventing con icts of interest. The global Ernst & Young organization is committed torobust and transparent communication with audit committees. We also believe that greaterinvestor understanding of audit rms quality control systems and the measures such audit

rms are taking to improve audit quality could further bolster con dence in the profession.

The purpose of this report is to describe the system of quality control for the audit practiceof EY, the US member rm of Ernst & Young Global Limited (EYG), and the signi cantinvestments we have made and continue to make to enhance audit quality. We describethe global Ernst & Young organization, processes and procedures that have one goal providing seamless, consistent quality service worldwide to stakeholders. While EYG hasmade signi cant investments in organizing the network of member rms around the worldand operating as a highly integrated, multidisciplinary global organization, this reportfocuses on the Firms US audit practice, the investments we have made in people andprocesses in the US, and initiatives resulting from practice monitoring activities, includinginternal and external inspection ndings. For more information on the global Ernst & Youngorganization, please refer to the Transparency Report 2012: Ernst & Young Global , which is

available on our website at www.ey.com.

Audits in todays complex nancial environment require outstanding people supportedby an organization with a clear focus on quality. Our passion for quality begins at thetop of the global Ernst & Young organization, permeates every level and is an ongoingcommitment. To execute quality audits in todays complex and challenging environment,we focus on our organization, our service delivery model, including professionalssupporting audit engagement teams, our people, our policies and procedures, and ourmonitoring activities by:

Developing and executing a common global audit methodology designed to achievequality audits with seamless, consistent service regardless of location

Supporting an audit delivery model with an organization where a quality tone is stressed

throughout and signi cant investments are directed to continuously maintain a robustsystem of quality control

Fostering a culture where all professionals are held accountable for their performance

Accepting and retaining clients that share our values for integrity in nancial reporting

Attracting and developing the best talent from various professional disciplines toconduct audits in an independent, objective fashion with integrity and professionalskepticism

Audit committee chairs and members

Stephen R. Howe, Jr.Managing PartnerErnst & Young LLP

G. Thomas HoughVice Chair ofAssurance Services

Ernst & Young LLP

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3Our commitment to executing quality audits















Making sure we have an appropriate complement of audit professionals in the eld,

supported by national resources, with workloads that provide them with the time toexecute our audit responsibilities in the quality manner you and we expect

Openly communicating in a timely and robust manner with the entitys audit committeeand management

Objectively evaluating the work performed by our audit teams and providing enhancedguidance in response to the changing environment

Many of these facets overlap. All of the elements of our system of quality controloperate together to enable audit quality. We have made and continue to make signi cantmultimillion-dollar investments in initiatives to meet the challenges of auditing in anever-changing world and to enhance the objectivity, independence and professionalskepticism we bring to the delivery of our audit services. In this regard, we are focusedon making continuing investments and progress in ve important areas:

Resources and workload The demands on our people have continued to increase. Newauditing standards, complexity in accounting standards and heightened expectations areall providing additional challenges for our audit engagement teams. We have recognizedthese demands and have taken actions to increase our resources. For our scal yearending June 30, 2012, client service head count across our audit practice increasedby more than 10%, inclusive of an increase in the partner and senior manager levels.This increase in resources accompanies our need to spend more time in planning andexecuting our work in the quality manner you and we expect. To that end, we havedeveloped improved ways to monitor the workload and deployment of our seniorengagement executives to help make sure such workloads are balanced and that ourpeople have the capacity to devote enough time to our audits so that they are executedin a quality manner. This effort continues.

Training The continuing training and education of our professional staff are keycomponents of our audit quality initiatives. Over the past year, we have signi cantlyexpanded classroom training for all levels. For our partners and senior managers, thisadded training comprises ve days that can be tailored to address current developmentsand hot topic practice issues that have been identi ed in internal and externalinspections. This is a signi cant but critical investment for us and one that we arecommitted to expanding.

Audit tools Our policies, procedures, tools and enablers are important to theexecution of quality audits. In the normal course, we re ne such policies to be responsiveto new standards, current practice developments, and internal and external inspection

ndings. Moreover, the Audit Tool of the Future project is part of a global AuditTransformation initiative and investment to design and develop the next generation suiteof audit tools for managing and documenting the audit process, replacing our existingaudit support platform and integrating new techniques (including an expanded useof data analytics) to deliver an improved audit. This initiative is a large and importantinvestment for our global organization and one that will take several years to complete.In the meantime, several smaller elements of this larger effort have been madeoperational and are being deployed currently to improve the quality of our work.



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A top-down emphasis on audit quality The actions of the Firms leadership

signi cantly in uence the culture of the Firm. The promotion of a quality-orientedculture depends on clear, consistent and frequent messages, from all levels of the Firmsmanagement, emphasizing our commitment to audit quality. We believe our focus herehas been clear. In addition, this messaging must be supported by actions and increasedvisibility into the types of investments, many of which are described in this document,we are making in our audit business to continue to improve quality.

Accountability for audit quality We have long-standing policies designed to sustainand promote a culture that recognizes the performance of quality audit work. Thisaccountability is a market demand that we must meet and is essential to the long-termsuccess of our Firm. Accountability is critical to effectively meeting our quality controlstandards and making progress in many of the areas outlined in this document. At EY,we are all responsible for audit quality. This responsibility begins with our leadershipand lters down to auditors just starting their careers with the Firm. Over the past year,we have implemented changes to strengthen the goals and actions of all professionalsinvolved in our assurance practice, from members of our Board to new hires. Our focuson this front continues.

Our commitment to audit quality means we must make continuous investment andcontinuous improvement. To that end, we have developed a suite of ideas, efforts andinitiatives that must be pursued collectively and aggressively. We believe we are makingsigni cant progress on these initiatives and that our many efforts demonstrate our passionfor quality and service excellence.

In the decade since the enactment of SOX, we have undertaken signi cant reforms.Our investments in structure, people, methodology and various processes have beensubstantial and, at the same time, have been required to meet the increasing challenges

of todays business and regulatory environment. We believe that audit quality today ishigher as a result of our continuous focus and improvement. We commit to sustain thispath because that is what is right, what the investing public demands and what all of ourstakeholders deserve.

As always, we welcome comments or questions you might have about the globalErnst & Young organization, the Firm or the matters discussed in this report.Please contact the EY partner serving your committee.

Sincerely,

Stephen R. Howe, Jr. G. Thomas Hough Managing Partner Vice Chair of Assurance ServicesErnst & Young LLP Ernst & Young LLP

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From an of ce opened in Cleveland, Ohio, by theErnst brothers in 1903 and one in Chicago, Illinois,started by Arthur Young in 1906, Ernst & Younghas grown to be a worldwide professional servicesorganization of more than 167,000 peopleoperating in more than 140 countries a global

leader in assurance, advisory, tax and transactionadvisory services.

Quality audits instill con dence in and providecredibility to the nancial reporting that is so vital tothe ef cient functioning of the capital markets. Thesubstantial procedures and analyses performed bythe independent auditor enable the auditor to opineon an entitys nancial statements and, for certainpublic companies, internal control over nancialreporting. Performing this work with integrity,expertise, objectivity and professional skepticismis at the heart of our responsibility as independentauditors a responsibility we take most seriously.


The enactment of SOX marked a signi cant milestonein the US audit professions history by moving theaudit profession from self-regulation to the regulatedenvironment of the Public Company AccountingOversight Board (PCAOB). We have supported thisexpansion in regulatory oversight of our audits ofpublic companies because it has contributed torebuilding con dence in the capital markets andimproving the quality of our work.


The assurance practice (including audit) is the Firmslargest service line. Performing audits is our largestactivity and is our central priority critical to ourbrand in the marketplace. In the US, EY audits morethan 4,000 entities. They range from multinationalpublic companies operating around the globe that

le nancial statements with the Securities andExchange Commission (SEC) to privately held,family-owned businesses that may supply nancialinformation to a local lender. These entities operate inmyriad industries from software to nancial services,from retail to real estate, from energy to consumerproducts and the public sector.


The answer here is simple: we all are. Theresponsibility for quality begins at the top of theglobal organization at the Global and AmericasExecutive Boards and senior leadership level of theFirm and runs throughout the Firm to our partnersand to our professional staff in all of our service linesinvolved in performing and supporting audits. Inshort, the responsibility for quality is an importantattribute of everyone who works at an Ernst & Young



Our ve major quality initiatives are described in theintroductory letter from Steve Howe and Tom Hough.Those initiatives (resources and workload, training,audit tools, top-down emphasis on audit quality andaccountability for audit quality) represent signi cantmultimillion- dollar investments in our audit practice.These initiatives represent a major focus of ourongoing commitment to executing quality audits.

Our commitment to executingquality audits

Cleveland, OH


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Ernst & Youngs global approach and organizationare designed to support the provision of seamless,consistent, quality audit services worldwide. AllErnst & Young member rms share consistent andhigh standards of quality and integrity in our work,a single global audit methodology and a single audittechnology platform. We believe Ernst & Young wasthe rst accounting and auditing network to make anextensive investment in a truly global integration andthat today, the worldwide Ernst & Young network ofmember rms is the most globally integrated of theBig Four accounting and auditing organizations.

There are a number of bene ts to our globalintegration, including a greater scale of resources,more effective use of people, greater consistencyin the application and inspection of our auditmethodology, and a more effective implementationof global strategy. Ernst & Youngs global integrationdrives exceptional service, enhances audit quality,and bene ts investors and the capital markets.

The global Ernst & Young organization is a leader inassurance, advisory, transaction advisory servicesand tax. Worldwide, more than 167,000 people inmore than 140 countries are united by our sharedvalues and a commitment to quality, integrity andprofessionalism. Ernst & Young has developed aglobalized approach to businesses through mindset,culture and policies. We operate under global EYGregulations overseen by a Global Executive Board

and advised by our Global Advisory Council (GAC),which comprises partners drawn from acrossdifferent geographic Areas and includes independentnon-executive representatives (INEs). These INEs,all individuals from outside Ernst & Young, bringthe GAC and the global organization as a wholethe bene t of signi cant external perspectives andviews. We believe the INEs collectively enhance the

con dence in the public interest aspects ofErnst & Young decision-making, stakeholder dialogueand management of reputational risks. The approvalof the GAC is required for many signi cant mattersaffecting the Ernst & Young organization.

EY is a part of EYG. The member rms of EYG,a UK private company limited by guarantee, aregrouped in four geographic Areas: the Americas,Asia-Paci c, EMEIA (Europe, Middle East, India andAfrica) and Japan. The Areas comprise a number ofSub-Areas that comprise member rms or sectionsof those rms. The Firm is part of the Americas Area.The Firm is a private limited liability partnershipregistered with the PCAOB, the independentorganization established by the SOX legislation thatis responsible for regulating accounting rms whoseaudit reports are led with the SEC.

More information about the global networkarrangements and organization is included in theTransparency Report 2012: Ernst & Young Globalthat is available on our website at www.ey.com.

Global integration and how it supports audit quality

What global integration means to you:

A worldwide organization providingquality seamless service

Consistent audit services

supplemented with local perspectivegrounded in one worldwidemethodology

Access to global resources

Greater ability to identify and resolveissues as they arise

Boston, MA


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The Firms quality control system

Our system of quality controlserves as the foundationfor our execution of qualityaudits. Providing qualityprofessional audit services

in an independent, objectiveand professionally skepticalmanner is fundamental toaudit quality and our successas independent auditors. Wecontinue to invest in initiativesto keep these importantattributes at the forefrontof what we do.

Our role as auditors is to provide assuranceon the nancial reports and internal controlover nancial reporting of the entities weaudit. We bring together quali ed teamsand subject matter resources, drawingon our experiences across industrysectors, service lines and geographies. Wecontinually strive to enhance our qualityprocesses across the global organizationand the Firm so that the quality of ourservice is at a consistently high level.

We recognize that in todays environment,with continuing globalization and therapid movement of capital, the qualityof our audit services has never beenmore important to investors and otherstakeholders. That is why we and the global

organization continue to invest heavily indeveloping the audit methodology, toolsand other resources to support qualityservice delivery. While investors, themarket and other stakeholders continue todemand quality audits, they also demandincreasingly ef cient and effective deliveryof audit services. We continue to seek waysto enhance the effectiveness andthe ef ciency of our Ernst & YoungGlobal Audit Methodology (EY GAM) andprocesses, without losing sight of our auditquality objective.

As part of our process to continuouslyenhance audit quality, we also seek tolearn from external and internal inspectionactivities and identify potential causes ofany noted quality occurrences. In this way,we nurture an environment of continuousimprovement.

Effective quality control system

The global Ernst & Young organizationhas designed and implemented acomprehensive set of global audit qualitycontrol policies and practices, as describedin this publication. We supplement themto comply with local laws or professionalguidelines. The Firm also has designedand implemented additional qualitycontrol policies and tools in response toprofessional standards set by the PCAOB,

the SEC, the American Institute of Certi edPublic Accountants (AICPA), and otherregulators and standard-setters. As amember rm of EYG, the Firm is alsorequired to execute the Ernst & YoungGlobal Audit Quality Review program.

Each year, we evaluate whether our systemof audit quality control has operatedeffectively to provide reasonable assurancethat the Firm and its personnel complywith professional, regulatory and internalrequirements.

The results of the Firms Audit Quality

Review program and external inspectionsare evaluated and communicated withinthe Firm and EYG to provide the basis forcontinuous improvement in audit qualityand to leverage knowledge and experiences.Our internal practice monitoring andour evaluation of the feedback receivedfrom independent regulatory inspectionsprovide us with a basis to concludethat, notwithstanding opportunities forcontinuous improvement in audit quality,our audit quality control systems aredesigned appropriately and are operatingeffectively.

In the following pages, we describe thesigni cant components of our audit qualitycontrol system:

Our professional values instilled acrossthe organization

Our audit quality support structure

Our methods for performing qualityaudits with multidisciplinary teams

Our accounting and auditing review and

consultation process

Our client acceptance and continuanceprocedures

Our inspection program procedures

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Instilling professional values across the organization

We operate under a comprehensive set ofpolicies, processes and procedures thatprovide a framework for the delivery ofquality audit services to serve the interestsof the investing public, as well as those ofthe entities we audit.

Setting the right tone at the top is a keyresponsibility of our senior leaders, whomake clear for our people that quality

and professional responsibility are ofparamount importance. Our approachto ethics and integrity is embedded inour culture of consultation, our trainingprograms and internal communications.Our internal message consistently has beenthat no company is more important thanprofessional reputation the reputationof the Firm, EYG and each of ourprofessionals.

We communicate to our people thatquality and professional responsibility startwith them and are the most importantresponsibilities they execute on everyday. Senior leadership regularly reinforcesthese expectations and the importance ofperforming quality work and complyingwith professional standards and our policiesthrough various forms of communication.Quality is a key element in evaluating andrewarding our audit professionals.

Our culture strongly supports collaborationand teamwork and places special emphasis

on the importance of consultation indealing with complex or subjectiveaccounting, auditing, reporting,regulatory and independence matters.

Code of Conduct

The global organization promotes aculture of integrity and responsibility forthe performance of quality audit workfor all Ernst & Young professionals. TheGlobal Code of Conduct, which can beaccessed using the following link:www.ey.com/GL/EN/home/Global-Code-of-Conduct, provides a clear set of thestandards and behaviors that guide ouractions and business conduct. The GlobalCode of Conduct is organized into vecategories containing principles that areto be followed to guide behavior acrossall areas of activity:

Working with one another

Working with clients and others

Acting with professional integrity

Maintaining our objectivity andindependence

Respecting intellectual capital

All Firm personnel must af rm compliancewith the Global Code of Conduct annually.Through procedures to monitor compliancewith policies and processes and through

frequent communications, we strive tocreate an environment that encourages allof our people to act responsibly, includingreporting misconduct without fear ofretaliation.

EY/Ethics, a global ethics hotline, providesour people, stakeholders and othersoutside of the organization a con dentialmeans to report activity that may involve

unethical or improper behavior that maybe in violation of professional standards orotherwise inconsistent with the Global Codeof Conduct. EY/Ethics is operated on behalfof the Firm by an external organization thatprovides con dential and, if so desired,anonymous hotline reporting services forcompanies worldwide.

Our values who we are:

People who demonstrate

integrity, respect and teaming People with energy,

enthusiasm and the courageto lead

People who build relationshipsbased on doing the right thing

Chicago, IL

Quality begins with setting the right tone at the top of the organization. The global Ernst & Young organizationpromotes a culture of integrity. EYGs Global Code of Conduct provides a clear set of standards and behaviorsthat are grounded in our values and guide our actions and business conduct. Through a combination of manyof our activities, including our training, our coaching and supervision, and our compliance programs, we striveto create an environment that encourages all of our people to act responsibly.


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The Firm operates in seven Sub-Areas, primarilyalong geographic lines. Each Sub-Area is led by aSub-Area Managing Partner who is responsible forthe delivery of services across our four service lines:Assurance (including Audit), Advisory, TransactionAdvisory Services and Tax.

Our Assurance service line is led by our Vice Chairof Assurance Services.

The Sub-Area Assurance Managing Partner(Sub-Area AMP) is responsible for the day-to-dayexecution of the Firmwide assurance strategy,including all aspects of People, Quality, Growthand Operational Excellence.

Audit quality implementation leaders

As part of our continuing focus on audit quality andto help us execute various quality processes and

procedures in the Sub-Areas, we instituted a seniorleadership role, the Sub-Area Quality ImplementationLeader (QIL). The QIL reports to the Sub-Area AMPand assists in matters related to:

Acceptance and continuance

Inspection activities (Assurance Quality Review(AQR), PCAOB inspections and peer review)

Quality occurrences (i.e., those situations involvinga signi cant de ciency identi ed in the internal orexternal inspections or a restatement of nancialstatements) and related remediation efforts

Other Sub-Area audit quality mattersAudit control and methodology leaders

In each Sub-Area, another resource available toaudit teams is the Control and Methodology Leader(CAML). The CAMLs are supported by a network ofaudit professionals who respond to questions aboutEY GAM and help teams implement it effectivelyand ef ciently.

The CAML works with the Sub-Area AMP, QIL,Assurance Learning Leader and other Sub-AreaAssurance resources and the Professional PracticeDirector (PPD) located in the Sub-Area on mattersinvolving the application of audit standards, ourmethodology and execution of quality audit work.

Professional Practice organization

Professional Practice consists of the NationalAccounting and SEC Matters groups, Sub-Area-based Professional Practice, Financial ServicesIndustry (FSI) Professional Practice, Auditing andAssurance Standards and Methodology, and Qualityand Regulatory Matters (collectively, ProfessionalPractice). The Vice Chair of Professional Practiceleads this group of partners and other professionals.

National Accounting

The National Accounting group provides guidanceon accounting, reporting and other technical issuesto our personnel, the entities we audit and otherstakeholders. This group works with Sub-Area-basedProfessional Practice, audit teams and the entitiesthey serve to provide counsel on a variety of issuesincluding complex and innovative transactions.

National Accounting also provides timely thoughtleadership by communicating practical and forward-looking implementation guidance on new andcontinuing accounting issues. In addition, NationalAccounting also provides input to the FinancialAccounting Standards Board (FASB), the FASBsEmerging Issues Task Force (EITF), the InternationalAccounting Standards Board (IASB), the AICPA, theGovernmental Accounting Standards Board andthe SEC on their projects and actively seeks inputfrom the entities we audit so that we thoroughlyunderstand the underlying business issues.

The National Accounting group also issues numerousinternal and external publications on accounting

Our Quality& RiskManagement

structuresupportsquality acrossthe Firms fourservice lines.

Our audit quality support structure

Los Angeles, CA


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and other technical matters, including Accounting& Auditing News, To the Point, Technical Line,Financial reporting briefs, EITF Update and QuarterlyStandard Setter Update , among many others.

SEC Matters

The SEC Matters group (SEC Group), based inWashington, DC, includes some of the Firms mostknowledgeable professionals on interpretation ofthe SECs rules, policies and procedures. The SECGroup monitors the SECs activities and maintainsour knowledge base on how the SEC staff interpretsthe federal securities laws and related SEC rulesand regulations. The SEC Group also advises auditteams, company personnel and others on the latestdevelopments in SEC rulemaking, emphasizingpractical implementation guidance.

The SEC Group provides assistance to Sub-Area-based Professional Practice and National Accountingwith a companys pre- ling submissions to the SECstaff and responses to SEC staff comment letters.In addition, the SEC Group provides interpretiveguidance on the SECs rules and regulations andthe SEC staffs interpretations. The SEC Group alsomaintains our guidance on consents, comfort lettersand communications with underwriters and preparestraining courses on applying SEC rules.

Auditing and Assurance Standards and Methodology (National Audit)

National Audit formulates and communicatesour policies and guidance on audit and otherattest services and determines that they re ectthe professional requirements established by thePCAOB, the AICPAs Auditing Standards Board (ASB)and other bodies. National Audit develops auditmethodologies, forms and templates to help ourengagement teams deliver consistent, qualityattest services.

National Audit also oversees the developmentand delivery of training programs for our audit

professionals. We have signi cantly increased ourtraining efforts with our Executive Events for auditsenior managers and partners and increased coretraining for our audit managers.

Quality and Regulatory Matters

The Quality and Regulatory Matters group leads ourinternal AQR program and interacts with the PCAOBand the peer review rm on their inspections. Thisgroup, together with others in the Professional

Practice organization, evaluates practice monitoringand inspection ndings to determine whether we

need to change our policies, processes or procedures.Sub-Area-based Professional Practice

We have a unique accounting and auditing technicalresolution structure, a key part of which is ourdistributed network of senior national of ce technicalpartners who are located across the country in theSub-Areas. This distributed network is a key aspect ofour accounting and auditing consultation process.

Each Sub-Area has at least one PPD assigned to itand, depending on the size of the Sub-Area, severalother partners in the Professional Practice group.

The Sub-Area-based Professional Practice networkis designed to be readily accessible to our partners,audit teams and the entities we audit. We believethis structure provides our partners, audit teams andthe entities we audit with more timely guidance andfaster issue resolution. This proximity allows the PPDsto know the partners and their capabilities better, bemore attuned to the effects of the regional economyand better understand the businesses we audit andrelated risks. While located geographically in the Sub-Area, these partners are part of the National Of ceProfessional Practice group and report to the ViceChair of Professional Practice.

The PPD also is involved in risk management matters,including engagement acceptance and continuance(described later), restatements, whistleblower letters,SEC lings and comment letter responses, reportabledisagreements and con ict of interest resolution. ThePPD concurs with the Sub-Area AMPs assignment ofpartners on public company and higher-risk audits.The PPD also provides the Sub-Area AMP with inputrelated to audit quality for every audit partnersannual performance evaluation.


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FSI Professional Practice

The FSI Professional Practice group supplementsour other Professional Practice resources, giventhe unique environment and regulatory structurein which the nancial services industry operates.

FSI Professional Practice consults with audit teamson technical accounting, reporting and regulatorynancial services industry issues and provides

guidance on current and emerging technical andregulatory issues. This group develops and leadstraining programs related to the nancial servicesindustry.

Accounting and Auditing Committee

The Firms Accounting and Auditing Committee(AAC) consists of the leaders of various ProfessionalPractice functions, the PPDs located in theSub-Areas and client-serving partners. The Vice

Chair of Professional Practice chairs the AAC.The AAC provides a forum for the Firms ProfessionalPractice partners to discuss emerging accounting,auditing and nancial reporting issues.

Quality Control Committee

An element of our quality control system is theQuality Control Committee (QCC). The QCC wasformed as part of our commitment to continuousimprovement. The QCC meets monthly toevaluate internal and external inspection ndings,restatements and consultation activity to determine

whether steps need to be taken, such as clarifyingguidance, to improve audit quality. The QCC:

Determines what actions should be taken and whatrecommendations should be made to the Firmsleadership, the assurance practice or others inthe Firm for improving audit quality (e.g., practiceguidance, training) and enhancing the system ofaudit quality control (e.g., improving controls orprocesses and documenting existing controls)

Communicates, where appropriate, matters forconsideration by others who evaluate individualpartner and staff performance and determinepromotions, disciplinary actions and compensation(e.g., Assurance leadership) and provides relevantinput on business unit performance or otherconsiderations (e.g., Quality & Risk Management)

The QCC obtains a timely understanding of (1)emerging accounting and auditing issues (e.g.,proposed standards, new standards and practiceissues) identi ed through the consultation processand other means; (2) the results of practicemonitoring activities; (3) other identi ed events thatmight potentially involve signi cant departures fromapplicable professional standards or our policies andprocesses. The QCC also identi es and communicateslessons learned from past experiences, emergingregulatory, reputational and legal issues, and leading

professional practices pertaining to the performanceof assurance services.

In addition to three one-year rotating positionsconsisting of a Sub-Area AMP, PPD and aclient-serving partner, the standing members ofthe QCC are the individuals in the following roles:

Vice Chair of Professional Practice

Vice Chair of Quality & Risk Management

Assurance Chief Operating Of cer

Director of Quality and Regulatory Matters

Director of Sub-Area Professional Practice

Director of Consultations ProfessionalPractice Accounting

Director of Professional Practice Auditing andAssurance Standards and Methodology

Director of Risk Management

Director of Professional Practice Operations

Representative of the General Counsels Of ce


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How we work to perform quality audits

Dallas, TX

Performing audits in todays environment is increasingly challenging. Reporting deadlines are shorter.Accounting and auditing standards are more complex, business models and technologies are changing,and the global business environment remains uncertain. Quality audit execution begins with an appropriaterisk assessment and development of the appropriate nature, timing and extent of audit procedures that areresponsive to the risks identified. EY GAM focuses on the entitys business and financial statement risks andhow those risks can be addressed during the audit of the financial statements.

To deliver quality audit services, the globalorganization has invested in a global auditmethodology that promotes consistencyin audit processes, judgment frameworksand audit procedures across not only theFirm but other member rms that may beinvolved in providing audit services to USmultinationals and foreign private issuers.We continue to invest signi cantly in ourprofessionals and in the development ofnew audit methodologies and technologiesto help audit teams perform effective andef cient risk-based quality audits in todaysincreasingly complex environment.

One common audit methodology

One of the cornerstones of EY GAM ismaking risk assessments that we use todetermine the nature, timing and extent of

our audit procedures (and reconsideringand modifying those assessments, whenappropriate, throughout the audit). EYGAM also emphasizes applying appropriateprofessional skepticism in the executionof audit procedures. EY GAM is basedon International Standards on Auditing(ISA) and is supplemented in the US withcontent developed to comply with PCAOBand AICPA auditing standards and other

regulatory or statutory requirements. EYGAM is a technology-enabled, top-down,risk-based approach that focuses on thedrivers of the business, the associated risksand the potential effects on the nancialstatements.

EY GAM is organized into interdependentphases designed to focus on the entitysbusiness and nancial statement risksand how those risks affect the audit of the

nancial statements. The methodologyand guidance in EY GAM represent acomprehensive methodology consistingof three key components: requirements;supplemental guidance; and supportingforms, templates and examples. Therequirements re ect the typical ow ofhow we execute an audit. The supplementsprovide the requirements and guidancefor speci c situations and circumstancesthat may arise during an audit. The forms,templates and examples include leadingpractice illustrations to help our teamsperform and document audit procedures.

EY GAM is updated regularly to re ect newstandards, emerging auditing issues andmatters, and implementation experiences

and to respond to external and internalinspection results. In addition, throughaudit planning and other reminders, weemphasize key topics of interest to thePCAOB including professional skepticism,revenue recognition and engagementquality reviews.

Technology enablers

Our audit teams use many technologyenablers to execute and document the workperformed under EY GAM and supplementalUS guidance. GAMx is our primary auditsupport platform that helps drive uniformexecution of EY GAM and appropriate auditdocumentation. GAMx provides links toknowledge databases (audit guidance andinterpretations), professional standards,documentation templates and other tools

necessary to execute and documenta risk-based audit effectively. GAMxprovides a team-collaboration environmentthat facilitates sharing information andthe documentation of procedures andconclusions and enables secure peer-to-peer communications so that, regardless ofgeography, our people can work togetheras if they were in the same location. Audit


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How we see it:

One global audit methodology One global audit technology

One goal seamless, qualityservice

teams use other software applications,

forms and templates during variousphases of the audit to help them performand document audit considerations, dataacquisition and analysis.

GAMx-SA is our documentation tooldesigned speci cally for audits ofsmall, non-complex businesses. TheEY GAM Supplement for Audits ofSmall, Non-Complex Businesses enables the appropriate applicationof EY GAM objectives in an effectiveand ef cient manner.

The global network is also investingsigni cantly in the development of the nextgeneration of audit tools. The new toolswill enhance audit quality and performanceby better aligning the signi cant risks ofan engagement with the audit proceduresthat respond to those risks. Greatertailoring of audit procedures to the speci ccharacteristics of the entity being auditedwill result in a more effective and ef cientaudit process. Similarly, the new tools willfacilitate and enhance the review process bypartners and other executives. In addition,

new analytical tools will enable more criticalanalysis of data and further support criticalthinking to identify issues, trends andanomalies.

Formation of audit engagement teams

EYG and Firm policies require an annualreview of partner assignments by Sub-Area Assurance leadership so that theprofessionals leading audits possessthe appropriate competencies, i.e., theknowledge, skills, abilities and experienceto ful ll their responsibilities, and, ifapplicable, that they are in compliance withthe audit partner rotation requirements.Partner assignments for public companiesalso require concurrence by the PPD.

To facilitate the audit partner assignments

by Assurance leadership, we developedthe Partner Workload Template (PWT).The partner completes the PWT to identifyall of his/her audit responsibilities andother activities (e.g., recruiting, practicedevelopment, training, professionalorganizations). Sub-Area Assuranceleadership discusses the completedPWT with each partner to determinethat the partner has an appropriateworkload that provides suf cient timeto properly supervise the audits andperform quality work.

Sub-Area Assurance leadership isresponsible for the assignment ofpeople to audit engagement teams.Factors considered when assigning ourprofessionals to audit teams includecompetence (including knowledgeof required accounting and auditingrequirements and standards), engagementsize and complexity, specialized industryknowledge and experience, timing of work,continuity, and opportunities for on-the-jobtraining. Where applicable, consideration is

given to whether specialized or additionalexpertise is needed to supplement orenhance the audit team.

In many engagements, internal specialistsare assigned as part of the audit teamto help perform audit procedures andobtain appropriate audit evidence. Theseprofessionals are used in situationsrequiring special skills or knowledge,such as taxation, information technologysystems, asset valuation and actuarialanalysis.

Audit partner rotationAn aspect of audit partner assignments iscompliance with applicable audit partnerrotation requirements. The Ernst & Youngorganization views mandatory audit partnerrotation as one of the measures that helps

strengthen auditor independence. Wecomply with the audit partner rotationrequirements of the SEC, PCAOB and otherregulatory bodies as applicable (e.g., forcertain nancial institutions and insurancecompanies). Audit partner rotationprovides a fresh perspective and promotesindependence from company managementwhile retaining some important aspectsof audit team continuity, expertise andknowledge of the business. Audit partnerrotation, independence requirements,effective systems of internal qualitycontrols, audit committee oversight and

independent audit regulatory oversighthelp strengthen independence andobjectivity and are important safeguardsof audit quality.

For audits of public companies, we rotatethe partner-in-charge of the audit, theengagement quality reviewer and certainother audit partners (as de ned) no lessfrequently than the maximum consecutiveyears of service permitted under theSEC independence rules. The partner-in-charge of the audit and the engagement

quality reviewer are permitted to servea maximum of ve years and then musthave a time-out of ve consecutive yearsbefore resuming a role on the same audit.All other audit partners who are subject tomandatory rotation are permitted to servea maximum of seven years with a time-outof two consecutive years. We track partnerrotation in our electronic database.


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To tackle todays complexity, we bring togethera multidisciplinary team. Resources in valuation,information technology systems, taxes, actuarialscience, derivatives and other elds help audit teamsexecute audit procedures, identify issues, evaluatemanagement assumptions and sensitive estimates,and document judgments and decisions. Effectivecollaboration between Assurance professionals andother EY professionals is an important element inthe design and execution of an effective and ef cientaudit strategy that focuses on the key accounting,valuation and nancial reporting matters. Theseother professionals are members of the auditengagement team, their work product is part of theaudit work papers, and their activities are reviewedand supervised by the audit executives on theengagement.

The ability to bring together professionals in variouselds together in an integrated team enhances

audit quality. Whether the issue involves valuationof derivatives or harder-to-value investments inan illiquid market, pension obligations, workerscompensation or environmental liabilities, uncertaintax positions, corporate responsibility reporting orthe investigation of a whistleblower allegation, ourability to bring together resources from variousdisciplines to address issues as part of one auditengagement team enhances audit quality and

service execution. A coordinated effort involvingEY resources with experience in areas such as tax,information technology systems, actuarial andvaluation to support the audit team is vital to ourability to deliver the seamless, quality servicesthe entities we audit deserve and the investingpublic expects.

These other disciplines can also provide other

permitted services to the companies we audit.By providing such services to these companies,we contribute to audit quality by enhancing ourknowledge of the companys operations. We providethese services with a careful eye to the independenceimplications, and teams work with our Independencegroup so that only permitted services are provided.Audit Committee preapproval is obtained whenapplicable.

Integrated multidisciplinary service delivery

What it means to you:

Subject matter professionalsassisting audit teams

Integrated service delivery

One goal seamless, quality service

Seattle, WA

Audits today are increasingly complex as new financial instruments have beenintroduced, new revenue recognition models developed, and new accounting andauditing standards issued all against a backdrop of the financial crisis and worldwiderecession. Effective integration and communication between the audit team andservice lines that support the audit team greatly enhance audit quality and service

execution.


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Our policies describe the requirements for timely,direct executive participation in audits and variouslevels of review of the work performed. Membersof the audit team perform a detailed review of theaudit documentation while engagement executivesperform a second-level review. A tax professionalreviews the signi cant tax and other relevantwork papers. An engagement quality review (EQR)partner (described below) reviews importantareas of accounting, nancial reporting and auditexecution, and the audited nancial statements andour accompanying report(s). The nature, timing andextent of these reviews depend on many factors,including the materiality, subjectivity and complexity

of the subject matter; the ability and experienceof the audit team member who prepared the auditdocumentation; the level of the reviewers directparticipation in the audit work; and the extent ofconsultation employed.

Our policies also describe the roles andresponsibilities of each team member and therequirements for documenting the auditprocedures performed and conclusions reached.

Consultation requirements

We have a long history of promoting a culture ofconsultation as the best means to providing a qualityaudit. Many of todays nancial reporting issues canbe challenging, and the accounting guidance also hasbecome more complicated. In this environment, webelieve our consultation culture is a sign of strength.

The partner in charge of the audit is ultimatelyresponsible for the audit, accounting and reportingconclusions (that are supported by the Firm) relating

to the nancial statements being audited. Ourconsultation process is a decision-making processthat results in an answer supported by the Firm.

Consultation requirements and related policiesand procedures are designed to involve the rightresources so that audit teams can reach appropriateconclusions. For complex and sensitive matters,we encourage, and in speci c situations require,consultation with others who may have moreexperience or specialized knowledge, primarilyProfessional Practice and Independence personnel.

We document these consultations and obtainwritten concurrence from the person consulted to

demonstrate his or her understanding of the matterand agreement with its resolution.

As described earlier, an important element of ourconsultation network is our distributed group ofProfessional Practice partners located in theSub-Areas readily accessible to our partners,audit teams and the entities we audit. OurProfessional Practice partners have a wealth ofexperiences dealing with accounting, auditing,SEC and nancial reporting matters.

Consultation requirements and related policies and procedures are designed to involvethe right resources so that audit teams can reach appropriate and timely conclusions.

Our accounting and auditing review and consultation process

New York, NY

What it means to you: Subject matter professionals

assisting audit teams

Integrated service delivery

One goal seamless, quality service


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The global and Firm acceptance and continuancepolicies describe principles we use to determinewhether to accept a new client or a new engagementor to continue a relationship with an existingaudit entity. These principles are fundamental to

maintaining quality, managing risk and meetingregulatory requirements. The objectives of thepolicy are to:

Establish a rigorous process for evaluating riskand making decisions to accept or continueclients or engagements

Meet applicable independence requirements

Identify and deal appropriately with any con ictsof interest

Identify and decline situations that pose excessiverisk

Require consultation with designated professionalsto identify additional risk-management proceduresfor speci c high-risk factors

Comply with legal, regulatory and professionalrequirements

The global con icts policy establishes the frameworkfor evaluating potential con icts of interest. It de nescategories of con icts of interest and the processfor identifying potential con icts. The policy alsodescribes how to manage potential con icts asquickly and ef ciently as possible through the use

of appropriate safeguards. Such safeguards rangefrom obtaining consents from the entities involved toceasing to act to avoid a potential con ict.

The Global Tool for Acceptance and Continuance(GTAC) is the Ernst & Young organizations intranet-based system for ef ciently and effectivelycoordinating acceptance and continuance activities inline with global, service line and Firm policies. GTAC

takes users step by step through the acceptanceand continuance requirements and connects to theresources and information needed to assess businessopportunities and associated risks.

The acceptance process involves a carefulconsideration of the risk characteristics of aprospective entity and includes several due diligenceprocedures. Before we take on a new engagementor client, we determine whether we can committhe necessary resources to deliver quality service,especially in highly technical areas, and that theservices the entity wants are appropriate for us toprovide. The approval process is rigorous. No newaudit entity may be accepted without the approvalof the Sub-Area AMP and the PPD.

In our annual continuance process, we reviewour ability to continue to provide quality service

and con rm that the entities we audit share ourcommitment to quality and transparency in nancialreporting. The partner in charge of each audit,together with the Sub-Areas Assurance leadership,annually reviews our relationship with the entity todetermine whether continuance is appropriate. Asa result of this review, certain audit engagementsare identi ed as requiring, and are then subjectedto, additional oversight procedures during the audit.Some engagements are discontinued. As with theacceptance process, the Sub-Area AMP and PPD areinvolved in the continuance process and must concurwith the continuance decisions.

Both acceptance and continuance decisionsdepend on, among other things, the absence ofany perception that a companys managementpressures the audit team to accept inappropriateaccounting and reporting or uses nancial pressuresto undermine audit quality. Considerations andconclusions on the integrity of management areessential to acceptance and continuance decisions.

Providingservices tothe rightorganizationsis an essentialfoundationalelementof theErnst & Youngorganizationsqualityand riskmanagement

processes.

Our client acceptance and continuance procedures

St. Louis, MO


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Our core training programs involve self-study,web-based learning and in-person classroomtraining. Our multimillion-dollar annual investmentin training further develops our people, providesopportunities for networking and enhances auditquality. Our Executive Events training programs forsenior managers and partners focus on emergingaccounting and auditing matters as well as lessonslearned from our internal and external inspections.

One of our strategic objectives is to attract andbuild lifelong relationships with talented auditprofessionals. We are proud of our People Culture,and we are committed to doing even more to advancethe development of our professionals.

The people joining EY today, especially those joiningstraight from a university campus, are more globalin their outlook than ever. They are more open todiverse points of view and engaged in the worldaround them. Ernst & Young is, and must continueto be, an organization that embraces all kinds ofdifferences and brings together people of differentbackgrounds and capabilities. While we train EYpeople thoroughly in our Ernst & Young culture,values and code of conduct, our people retain theirdifferent perspectives. This diversity of thoughtstrengthens the quality of our work and helps theentities we audit make more informed decisions.We believe strongly in diversity and inclusivenessas drivers of organizational effectiveness andquality service.

A highly integrated organization helps provideexpanded opportunities for its people in terms ofprofessional experience, development, mobility,

exible work structures and community focus.We expect these opportunities to continue togrow over time.

The organization aspires to have a leading peopleculture everywhere in the world. Creating aculture that attracts, retains and develops

outstanding people and helps them thrive leadsto higher-quality service.

Recruiting and hiring

Recruiting and retaining talented individuals andthen creating the right teams are key elementsof success. Recruiting for our audit practice isperformed primarily on university campuses andsupplemented, when necessary, by hiring peoplewith prior work experience.

Candidates are evaluated based on the followingcompetencies:

Technical skills and knowledge Intellectual competencies

Leadership skills

Team/personal skills

Motivation

Communication skills

Our recruiting and professionaldevelopment objectives

Changes in demographics are affecting the composition of the workforce andmotivating us to field diverse and globalized teams. Attracting and developingtalented people are critical to our success. By offering a wealth of experiences andopportunities (both domestic and international), we develop outstanding peoplewho can achieve their potential.

Philadelphia, PA


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For the past 14 years, the Firm has been namedto FORTUNEs 100 Best Companies to Work For list. We are the only Big Four rm in the US that

has achieved such consistent recognition. We inviteyou to go to our website at www.ey.com regardingother awards and accolades the Firm has receivedrecognizing our culture, training and diversity efforts.

CPA exam

A critical milestone of an audit professionalscareer development is passing the US Uniform CPAExamination to become a certi ed public accountant(CPA). We encourage our professionals to take theexam as soon as they are eligible. Passing the CPAexam is required for promotion to audit manager.All EY personnel who are CPAs and all Firm partners

who provide services must hold an active CPA licensein their work location state(s). All CPAs also mustmeet the statutory licensing requirements in anystate in which they perform services. Requirementsvary by state and depend on several factors, includingwhether the services fall within the de nition of thepractice of public accounting in the state. Our CPALicensing Support Team helps our partners andprofessionals navigate the various state licensingrequirements.

Professional development

Ernst & Young and You (EYU) is our globallyconsistent career development framework. ThroughEYU, our professionals have opportunities for theright experiences, learning and coaching to helpthem grow and achieve their potential.

EYU expands the commitment to coaching viavarious forms of counseling and mentoring, from themoment people are recruited through the various

phases of their careers.The learning component of EYU is based on anextensive and globally consistent learning curriculumthat helps Ernst & Young people develop the righttechnical and personal leadership skills whereverthey are around the world. The core audit trainingcourses are supplemented by learning programs thatare developed in response to changes in auditingstandards, accounting and reporting standards,independence and professional standards, andemerging practice issues. Audit professionals arerequired to obtain at least 20 hours of continuingprofessional education each year and at least 120hours over a three-year period. Our professionalsaverage approximately 80 hours per year of learning.In recent years, we have invested in additionalclassroom training for our professionals, especiallymanagers, senior managers and partners. Our annualExecutive Events, which consist of summer, fall andyear-end sessions totaling approximately 40 hoursof continuing education, address emerging issues inaccounting and auditing, including lessons learnedfrom internal AQR and PCAOB inspections.

Professional development also occurs throughcoaching and the experiences our professionalsreceive on the job. Coaching helps to transformknowledge and experience into practice. Experiencedprofessionals are expected to coach and develop less-experienced personnel to create a continual learningenvironment.

People development:

On-the-job training supplementedby classroom learning

CPA exam assistance Performance reviews

Opportunities for advancementthroughout ones career

Mobility (domestic and international)


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Performance management

A comprehensive performance management processrequires our professionals to set goals, have clearwork expectations, receive feedback and talk abouttheir performance. The Performance Managementand Development Process (PMDP) is designed to helpour professionals grow and succeed in their careers.Under the PMDP, periodic performance reviews arecombined with annual self-appraisal and annualreviews. As part of the annual review process, eachprofessional, in conjunction with a counselor (anassigned, more experienced professional), identi esopportunities for further development. Professionalsand their counselors are guided by a set of serviceline competencies that articulate the knowledge andskills that should be developed for a particular rank.

Mobility

During the course of their careers, our professionalsmay seek out or be approached by the Firm toconsider transfers to other locations, both domesticand international. Transfers could also include three-to ve-year residencies in Professional Practiceor Independence for managers, senior managersand partners. We encourage mobility as a way toaccelerate personal and career development.

Global exchange program

The Global Exchange Program (GEP) supports theglobal organizations ability to deliver seamless,consistent, quality service worldwide by offeringinternational assignments to high-performingassurance professionals in member rms toaccelerate their learning and career development.International assignments of varying durations areavailable to professionals, from seniors throughpartners. We are committed to developing high-performing professionals who have a truly globalskill set and understanding of business, political andsocial matters. Mobility helps our people developboth personally and professionally. The GEP makes a

real difference by developing professionals who canhelp meet the increasing needs of our stakeholders instrategic and emerging markets.

Fellow programs

We actively support the various fellow programssponsored by the FASB, the SEC and other regulatoryorganizations. These programs provide theopportunity for high-performing senior managers tospend two years working with these organizations.

Sub-Area residency program with PPD

The Sub-Areas have a senior manager residencyprogram that gives top-rated senior managersan opportunity to spend 18 months to two years

working with the Sub-Area-based ProfessionalPractice partners in consulting with audit teamson a variety of accounting, auditing and nancialreporting matters. The resident maintains some auditresponsibilities. Many senior managers who haveparticipated in this program have advanced in theircareers to become partners handling global accountsor leaders in Professional Practice.


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Our compliance withlegal requirements

The Ernst & Young Global Code of Conduct

provides a clear set of standards that guidethe Firm and our professionals actions andbusiness conduct. We comply with applicable lawsand regulations, and our values underpin ourcommitment to doing the right thing.

This important commitment is supported byErnst & Young global policies and proceduresincluding:

Anti-bribery

The global anti-bribery policy provides ourpeople with direction around unethical and illegal

activities relating to their day-to-day activities.It emphasizes the obligation of our people tocomply with anti-bribery laws and provides greaterde nition of what bribery is. It also identi es ourpeoples reporting responsibilities when theydiscover potentially illegal acts.

Insider trading

The global insider-trading policy reaf rms theobligation not to trade in securities with insideinformation, provides greater detail about whatinside information is and identi es with whomour people need to consult if they have questions

about their responsibilities.Data privacy

The data privacy policy describes principles tobe applied to the use and protection of personaldata of our people, the entities we serve, theirpersonnel or other third parties. This policy isconsistent with applicable laws and regulationsconcerning data protection and privacy whenprocessing personal data.

Document retention

We have record retention policies that applyto all engagements and personnel. We arerequired to retain documents in accordance withprofessional, legal and regulatory obligations. Weemphasize that all documents must be preservedwhenever any person becomes aware of anyactual or reasonably anticipated claim, litigation,investigation, subpoena or other governmentproceeding involving EY or one of the entities weserve that may relate to our work. Firm policiesalso address legal requirements in the US involvingthe creation and maintenance of working papersrelevant to the audit work performed.


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Cleveland, OH

The EYG networks independence policies andprocesses are designed to enable member rmsand professionals to comply with the independencestandards that apply to speci c engagements,including, for example, the independence standardsof the SEC, PCAOB, AICPA, and other US federaland state regulators. The foundation is the Codeof Ethics for Professional Accountants publishedby the International Ethics Standards Board forAccountants. All professionals and certain otheremployees are required to participate in annualindependence learning. The goal is to help our peopleunderstand both their personal obligation and theFirms obligation to be free from interests that mightbe regarded as being incompatible with objectivity,integrity and impartiality in performing our audits.

The Public Company Independence Procedures(PCIP) process is an advance-approval consultationthat documents the results of independenceprocedures completed by engagement or pursuitteams in connection with the acceptance of aprospective SEC audit client, an initial public offeringof a private company audit client, a signi cantacquisition by an SEC audit client, and certain othersituations. We consider and evaluate independencefrom several relevant perspectives including the

nancial relationships of the Firm and professionals,employment relationships, business relationships,the permissibility of non-audit services that may beprovided to entities we audit, partner rotation, feearrangements, partner remuneration and, whereapplicable, Audit Committee preapproval.

A professionals failure to comply with independencerequirements will generally factor into promotionand compensation decisions and may lead to otherdisciplinary measures.

The Firms Independence function has deployedseveral applications, tools and processes to help theFirm, our professionals and other employees complywith independence policies.

Independence provides the infrastructure andresources to help our professionals and the Firmmeet applicable professional standards, regulatoryrequirements and our standards of quality withrespect to independence. The organization consistsof centrally based independence professionals and,similar to the distributed network of ProfessionalPractice partners, a distributed network ofindependence professionals assigned to theSub-Areas. Independence professionals havea wealth of experience dealing with complexindependence matters.

Independence policy

Ernst & Youngs Global Independence Policy containsthe independence requirements for professionals

and other employees. Our separate US IndependencePolicy sets forth the minimum standard expectedfrom the Firm and all US professionals with respectto US independence issues and is designed to complywith or exceed the elements of SEC Regulation S-X,Rule 2-01; the AICPA Code of Professional Conduct;and PCAOB standards that deal with independence,objectivity and integrity.

Our independence procedures andmonitoring efforts

Miami, FL

Independence is a fundamental concept of the audit profession that pervades all ourdealings with our stakeholders. Maintaining the independence of all Ernst & Youngmember firms is essential to achieving audit quality.


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Independence system

The Global Independence System (GIS) is an intranet-based tool that identi es the public entities for whichindependence is required and the independencerestrictions that apply to each one. Most often theseproscribed entities are public companies and theiraf liates, but they can be other entities for whichwe provide attest or assurance services. The toolincludes family tree data relating to af liates of thepublic companies we audit and is updated periodicallyby audit teams. The entity data includes notationsthat indicate the independence rules that apply toeach entity so that our professionals can readily seethe entity and the independence notations. GIS isfrequently used by our professionals to determine thetype of services that can be provided based on theindependence notations.

Independence Monitoring System

The Independence Monitoring System (IMS) is aglobal tool that identi es proscribed securities andother impermissible nancial interests. Professionalswith the rank of manager or higher are required toreport the securities that they or their immediatefamily members hold into the IMS. If a security isproscribed, the individual will receive a notice and

is required to dispose of the security. Identi edexceptions are reported through the GlobalIndependence Incident Reporting Systemfor regulatory matters.

Independence con rmations

Each member rm and associated entities areincluded in an annual process to con rm compliancewith independence policies and requirements and toreport identi ed exceptions, if any. All professionalpersonnel at EYG member rms and certain othersbased on their role or function are required tocon rm compliance with EYG independence policiesand procedures no less than annually. All Firmpartners are required to con rm compliance withcertain independence matters quarterly.

Independence Compliance Team

The Independence Compliance Team conductstesting and visits to assess compliance withseveral independence matters, including reviewingfor non-audit services, business relationships withthe entities we audit and nancial relationships ofmember rms. A separate compliance group, theIndependence Compliance Audit Group, establishesthe annual program for testing compliance withpersonal independence con rmation requirementsand reporting information into IMS. All professionalsare subject to potential selection for independencetesting.

Non-audit services

Compliance with professional standards governingthe provision of non-audit services to entities weaudit is designed to be achieved through a variety ofmechanisms including the use of GTAC (previouslydescribed) and the Service Offering Reference Tool(SORT), training, tools, and required procedurescompleted during the performance of audits and ourinternal inspection processes.

Global independence learning

EYG develops and deploys independence learningprograms. The annual independence learning

program covers our independence requirementsfocusing on recent policy changes and recurringthemes and topics of importance. Professionals andcertain other personnel are required to complete theannual independence learning. Timely completionis required and monitored closely. We supplementthis program with local content that covers PCAOB


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and AICPA requirements that differ from or are in

addition to the Global Independence Policy. We havemany other independence learning programs in thenew-hire program, certain milestone programs andcore service line curricula.

Service Offering Reference Tool

We assess and monitor our portfolio of services onan ongoing basis, con rming that they are permittedby law and professional standards; are supported bythe right methodologies, procedures and processes;and are consistent with our global strategy. Whenappropriate, we exit or restrict services that couldpresent independence or other risks. SORT provides

our people with information about all Ernst & Youngservices worldwide. It includes guidance about whichservices can be delivered to entities we audit andentities we do not audit as well as independence andother risk management issues.

Business Relationship Evaluation Tool

We oversee our compliance with business relationshipindependence requirements through our BusinessRelationship Evaluation Tool (BRET). The Firm, itsprofessionals and other employees are required toevaluate and obtain approval of potential direct orindirect business relationships with third parties,

including entities we audit, in advance so thatour business relationships are consistent with theindependence standards.

Independence:

We view it as fundamental to our roleas auditors.

We provide extensive tools to monitorcompliance.

We require annual learning. We require regular con rmation of

independence compliance.


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Partners and other professionals are evaluated andcompensated based on criteria that include speci cquality and risk management indicators, coveringactions and results.

The Global Partner Performance Management(GPPM) process is a globally consistent evaluationprocess for partners around the world. It reinforcesglobal priorities by linking partner performance toappropriate goals and values. GPPM is an ongoingcyclical process that includes goal setting, personaldevelopment planning, performance review, andrecognition and reward. It is the cornerstone of ourevaluation process to document partners goals andperformance. Partners goals are required to re ectvarious global priorities.

Our partner compensation philosophy calls formeaningfully differentiated rewards based on a

partners level of performance. Partners are assessedannually on their performance in quality execution,leading people, operational excellence, and marketleadership and growth. To recognize differentmarket values for different skills and roles, andto attract and retain high-performing individuals,other factors are also considered when determiningpartner compensation including seniority, roles andresponsibilities, long-term potential and mobility.

In accordance with the SECs independence rules, ouraudit partners do not earn or receive compensationbased on the provision of any non-audit services by

EY to companies they audit.Non-compliance with quality standards results inremedial actions that may include a compensationadjustment in addition to required special training,additional supervision or reassignment. A seriousnon-compliance matter or pattern of non-compliancemay result in actions that include separation fromthe Firm.

In view of the importance we place on quality inthe GPPM process, the PPD based in the Sub-Areaprovides input related to audit quality to the Sub-AreaAMP for each audit part

Documents

materialidad en auditoria