The pandemic has presented additional auditing challenges this year as previously unimaginable scenarios have become plausible for businesses. We’re proud of the way our 5,000 audit partners and staff have responded, focusing on obtaining the right evidence, and applying challenge and rigour to estimates and judgements used in reporting.
Building trust is core to our firm’s purpose and the BEIS consultation marks an important step in increasing trust and confidence in UK business. We support many of the proposals, particularly those we believe will lead to positive, lasting change.
This year we established an Audit Oversight Body to provide governance and challenge to the Audit practice. The creation of this Body forms part of our submitted plan to comply with the FRC’s principles for operational separation by June 2024.
Two years into our Programme to Enhance Audit Quality (PEAQ), we continue to invest an additional £30m annually in people, training and technology, with a reinforced focus on culture and quality control. While there is still more to do, we're encouraged by the results of our Financial Reporting Council (FRC) 2020/2021 Audit Quality Inspection & Supervision report. These improved results demonstrate the positive impact of the actions we’ve taken.
We continue to invest in technology that improves quality through standardisation and automation. Following a pilot in FY20, we’ve now rolled out cash.ai, our artificial intelligence tool which automates the audit of cash. The creation and use of digital assets, and our increased use of data analytics and visualisation platforms such as Alteryx and Tableau, also enhance audit quality.
People are at the heart of our business, and attracting and retaining people from diverse backgrounds is critical to our strategy. This year, we announced the expansion of our Flying Start programme with Queen Mary University of London, while our mutual mentoring programme is one of the ways we’re focusing on inclusion and racial equality. Since the implementation of PEAQ, we’ve recruited over 950 additional experienced auditors and continued to recruit graduates too, virtually bringing on board more than 700 this financial year.
As organisations work to overcome the challenges posed by Covid, they must stay focused on combating climate change. We’re helping companies understand and disclose the impact of climate change risk on their business. Since 1 January 2021, all UK premium listed companies are required to meet new reporting standards on climate. As the environmental, social, and governance agenda becomes increasingly critical, we're excited about the role auditors will play in making a difference.
The lessons we've learned during the pandemic will shape how we work in the future but, as we emerge from the crisis, our commitment to performing consistently high-quality audits and to audit reform remains paramount.
FY21 brought an enormous need and appetite for transformation. Throughout the year, our 2,600+ consultants helped organisations to implement new technologies, map their route to decarbonisation, design and deliver hybrid working strategies, adopt new business models, and improve customer experiences. We did this by combining strategy, experience, and technology, and bringing together knowledge from across our lines of service.
The pandemic accelerated demand for digital and cloud transformation this year. Our investment in alliance partnerships with both business applications (Guidewire, Oracle, Salesforce, SAP, and Workday) and cloud (Google, Microsoft, and AWS) underpinned our work with clients across their transformation agendas. In financial services, for example, where change was also driven by new entrants and regulation, our strategic approach to tech investment has delivered resilient systems alongside commercial and customer benefits.
Finance transformation was another area of growth as clients seek digitally enabled, data-driven insight. Outcomes for clients in sectors such as consultancy and construction ranged from strengthened internal controls to improved profitability reporting, ultimately contributing to better business insight and decisions.
In addition to strategy and transformation, we’ve seen growing interest in Execution Managed Services, our unique approach to operational delivery. For example, we used our capabilities to help get much-needed Government funds to businesses and other organisations in distress. We continue to build out our services, underpinned by our Operate business, and this year announced a £40m Advanced Research and Engineering Centre in Belfast.
We’re proud to have been recognised with a record number of shortlistings for the MCA Awards 2021 (winners to be announced in November). Our finalists include eight individuals and 16 projects, including engagements with the Courtauld Institute of Art, Jaguar Land Rover and Help NHS Heroes. We also earned 28 gold and silver medals in the FT’s Leading Management Consultants 2021 ratings, including a gold for Digital Transformation. By innovating with our technology alliance partners and investing in products, platforms, and emerging technologies, we’ve found exciting new ways to support clients across industries - for example, delivering next generation digital banking.
As at a firmwide level, Consulting continued to take action on inclusion. We introduced sponsorship and fair work allocation programmes to improve access to opportunities. We committed to starting leadership meetings with what we call ColourBrave moments. We had 250 of these short personal and professional reflections on experiences with race and racism, which end in a call to action. Meanwhile, our quarterly Inclusion Series series of cultural events to explore and celebrate a range of inclusion topics drew almost 2,000 viewings.
Looking ahead, whether it’s cloud-based transformation or purpose-led reinvention, we’re investing to help clients unlock opportunities and deliver change that makes a difference.
Our 2,400 Deals professionals create, realise and protect value when advising on mergers, acquisitions, restructuring, or operating in a crisis.
While Government financial packages helped prevent the volume of insolvencies that some anticipated for FY21, many businesses still felt huge pressure on multiple fronts. From squeezed revenues and rising debt to legacy inefficiencies and demand for increased transparency, the priority for Business Restructuring Services has been helping organisations take control of these challenges and plan their path to recovery. We supported clients with action on operations, cash and liquidity, financial restructuring and stakeholder management, and strategic options such as mergers and acquisitions.
Activity in Corporate Finance and Transaction Services was suppressed in the first part of the year, but a deals-led recovery is now underway as clients seek a return to growth. The pandemic has changed the deals landscape with the low-yield environment focusing minds on how to best invest record levels of private capital. As well as identifying sectors where returns are likely to be higher - digital, tech, and life sciences, for example - we’ve created value and built trust by supporting deals that benefit jobs, innovation, and economic security.
We also used technology in new ways. An example of this is a collaboration with our drones team. We helped a client conduct tours of and ultimately sell its UK site, providing access to a wider pool of global buyers despite travel restrictions.
In Forensics, we expanded our suite of in-house digital solutions and continued our alliances with third-party vendors. These investments continue to help transform the way we deliver large-scale investigations and dispute resolution engagements, as well as reducing client costs on large-scale capital programmes. Demand for Execution Managed Services, such as surveillance execution enabling financial crime compliance, and supply chain risk and resilience, has also been part of the Forensics growth story this year.
Programmes to build our people’s resilience and knowledge, and improve inclusion remain a vital focus. We launched the award-winning Project Me to equip our Associates and Senior Associates with the skills they need to manage competing priorities and change, work well, and use technology mindfully. We’re also helping women in Deals advance through new talent and sponsorship programmes. Meanwhile, our Reinventing the Future training helps people at all grades learn about the macro issues fuelling business disruption and changing client needs. In particular, this has enhanced our ability to support clients in transforming their businesses to meet their Net Zero ambitions.
We’re ever mindful of the mandate for a responsible recovery and the need to protect the investment of the public purse in business throughout the pandemic. Looking ahead, we’re committed to delivering our part in this recovery, working alongside government, investors, and corporates, and ultimately unlocking value for shareholders, stakeholders, and wider society.
This year, business leaders showed a great willingness to respond to risk and resilience challenges beyond the pandemic. Two years on from forming our Risk practice, we’re proud of how our 2,100 people are helping clients rethink risk, make data-driven decisions, and find growth.
As businesses sought to understand their balance sheet, raise funding, list and transact, demand for Capital Markets, Accounting Advisory and Structuring Services was high. Working alongside Deals colleagues, we saw a surge in the second half of the year as a deals-led recovery began. In Risk Modelling Services - one of the firm’s fastest-growing areas - our actuaries and data scientists pioneered new ways of quantifying risk, enabling clients in sectors including insurance, banking, and healthcare to best allocate their spend.
Clients were also faced with complex ESG-related challenges and opportunities this year. As we approach the critical COP26 summit, we’ve helped organisations model the impact of climate scenarios and prepare for wider mandatory climate-related financial disclosures. As part of the broader regulatory and reporting agenda, financial services businesses in particular called on us for help meeting regulatory obligations. We’re also already helping clients prepare for the BEIS consultation outcomes and the likely UK version of Sarbanes-Oxley legislation.
In a year of disruption, cyber security topped UK CEOs’ agendas. As rapid digital transformation increased clients’ vulnerabilities, we quantified risks, protected operations, and managed ransomware incidents. The expertise demonstrated by our European network was recognised by Forrester, which named us a Leader in European Cybersecurity Consulting Providers. This cyber strength allows us to offer differentiated services such as cloud transformation and is one of the ways we contribute to making the UK a secure place to do business.
Alongside accelerating investment in our digital assets and technology capabilities - such as our Connected Risk Engine tool which helps clients visualise risk - developing our people also remains core to our strategy. This year, we launched Evolve, an innovative digital training programme focused on agility and problem-solving. Action on inclusion and diversity included increasing leaders’ accountability. We also invested in sponsorship and progression for women and people from ethnic minority backgrounds, while our fair work allocation principles are improving transparency.
Convening stakeholders on the risks and opportunities facing individuals, organisations, and society was another focus, as part of our Rethink Risk programme. Our steering group, drawn from a range of backgrounds, is an example of this. We also held our first leadership exchange event with clients, the outcomes of which will contribute to our forthcoming agenda for action.
If last year was about managing downside, the year ahead will be about maximising clients’ opportunities for growth and competitive advantage. Our priority is supporting them as they build back and act to thrive in a different world.
Our Tax practice brings together almost 3,800 tax, legal, and people & organisation specialists.
Supporting our clients as they responded to the pandemic was a vital part of our work this year. We helped with everything from designing and delivering new workforce models, to working with clients and engaging with tax authorities to facilitate payback on Covid relief schemes.
Coronavirus was far from the only challenge facing our clients - 1,500 of them joined our Delivering Tax webcasts seeking expertise on themes and issues ranging from Brexit to using technology and new models to deliver integrated tax compliance.
The Chancellor’s Budget brought measures to protect and expand the tax base alongside incentives to stimulate recovery, including the introduction of super deductions on capital investments. The latter is complex, and we’re helping clients with modelling to determine what and when they spend. Looking to the OECD’s international tax reform plans, our teams are helping clients understand the implications of a landmark worldwide minimum corporate tax rate and other changes. We also saw growth from tax and people work on deals, particularly as capital deployment accelerated in 2021.
Demand for managed tax, legal and people services, and for tax, legal and finance function transformation grew, as clients recognised the benefits of alternative delivery and sourcing models, and new ways of using technology. Circumstances accelerated the need for tax and legal departments to modernise. An example of how we’re meeting this need is our ‘New Law’ offering, which helps clients build sustainable legal departments that contribute real value to the business.
Another area of transformation work came from shifting working patterns. We supported clients to rethink the technology, skills, and spaces they need, while maintaining productivity and engagement as part of broader hybrid transformation plans. We used this year to consolidate our own technology and embed consistent use across our practice, improving quality and value for clients.
Having diverse, highly-skilled, and engaged teams is one of our firm’s strategic priorities. In Tax, we’re proud to have earned a strong engagement score in the firmwide employee survey, which we attribute to demonstrating care, clear communication and transparency, and action such as our fair work allocation programme.
The importance of care also shows up in the way we solve problems, particularly in environmental, social, and governance-related (ESG) engagements. Our diagnostic to help clients understand the tax impacts of decarbonisation, the development of virtual reality racial awareness training, and supporting clients as they restructure to improve transparency are just a few examples of this.
Looking to FY22, we expect to progress the ESG agenda, advise on the tax, people and legal aspects of adapting operating models and supply chains, and to support businesses with tax strategies that fulfil their obligations to all stakeholders.
Annual Report enquiries
Corporate Affairs, PwC United Kingdom