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Our Transparency Report sets out how the firm is governed, details on our audit quality processes, independence and principal risks, together with the challenges we face and how we are responding to them. It also provides an update on our ongoing initiatives to improve audit quality, and how we have adapted our audits to respond to the COVID-19 pandemic.
While PwC is a multidisciplinary firm, this report is primarily focused on our Audit practice and related services and therefore will be of particular interest to the investor community and Audit Committee members and chairs.
Hear from our Chairman, our Head of Audit, and Chair of our Public Interest Body as they reflect on the last year and look ahead on our continuing journey to enhance audit quality.
“While the COVID-19 crisis has dominated this year, it has highlighted the vital importance of high quality audit in times of significant uncertainty. The year has also brought further progress on the reform of the audit sector and we remain committed to playing our role in the ongoing discussions. We recognise that auditing needs to evolve, and believe that to be effective this needs to be done alongside reform of the wider corporate governance system.”
As audit reform discussions have evolved we have continued to engage with our stakeholders and listen to their views. In response to what we heard, we launched our Programme to Enhance Audit Quality (PEAQ) in June 2019 - a package of measures designed to ensure we deliver consistently high-quality audits.
“Audit quality is critical to the functioning of the capital markets and I am proud of the work our audit teams do. We are committed to making the changes necessary to enhance the quality of our audits and I am pleased that the investments we have made this past year through our Programme to Enhance Audit Quality are already changing how our auditors go about their work. But we still have more to do and it will take time for the full benefits of this three-year programme to be realised.”
We have made significant progress since the start of the PEAQ programme and remain committed to continued focus and investment in the programme over the next two years. PEAQ activities are structured under four workstreams – Structure and Governance, Culture and Recognition, Quality Control Activities and Supply and Demand. We recognise that it will take time for all of the changes being made as part of the PEAQ to fully embed within the practice and be reflected in our quality results.
In addition to the changes driven by the PEAQ, the COVID-19 pandemic has shown that our Audit practice is able to be agile and adapt to new ways of working quickly while maintaining high audit quality. From mobilising our workforce overnight to deliver audits remotely to changing the ways we gather evidence. We embraced new technology, for instance using security cameras to attend stock counts virtually and using AI to automate the audit of cash.
“Strong audit quality is rooted in a healthy culture of challenge and relies on an auditor’s ability to ask the right questions, take an independent view and challenge management when necessary. That is why as a Public Interest Body we are focused on the changes being introduced in the Audit practice to improve audit quality, to address emerging challenges such as the implications of COVID-19, and reflect the outcomes and objectives within the FRC's Operational Separation principles.”
The proactive steps we took in 2019 to create a distinct Audit practice, together with our investment in our people and technology, support the FRC's objectives of improved quality and confidence in audit, market resilience and the continued attractiveness of the profession as a career. The structural changes made in implementing the PEAQ mean we are already aligned with a number of the FRC's Operational Separation principles. Looking ahead, we are strengthening the governance of our Audit practice through the creation of an Audit Oversight Body.