Employee holding a lightbulb

EY UK 2023 Transparency Report

Welcome to the EY UK 2023 Transparency Report (PDF, 3.6MB). This is the 16th edition and, over the years, the report has proven to be an important means to reflect on each financial year and consider how best to apply the lessons learned for the next. It outlines key issues affecting audit in the UK and underscores our commitment to continuously delivering high-quality audits whilst simultaneously supporting our teams in their work, training and wellbeing. Our annual Transparency Report, together with the Audit Quality Report (PDF, 3.1MB) and Impact Report, explains how we put this commitment into practice.

For your information, the EY UK 2023 Transparency Report refers to the Audit Firm Governance Code 2016, Local Auditors (Transparency) Regulations 2020 and Article 13 of the EU Audit Regulation (537/2014). Other documents available from this webpage, in addition to the ones mentioned above, include:  The EY Global Code of Conduct, The EY Whistleblowing Policy and EY UK Terms of Reference.

  • Independent Non-Executives (INEs), Audit Non-Executives (ANEs), and EY UK governance related matters

    In reference to the Audit Firm Governance Code 2016 (AFGC) and Local Auditors (Transparency) Regulations 2020, certain disclosures (and links to specific EY documents) are required on our website. This section includes, amongst other things, information on our governance e.g., INEs, ANEs, stakeholder engagement and support for the AFGC.  

    • Duties of the INEs and ANEs, and EY support

      The duties required of non-executives (INEs and ANEs) are covered in the Financial Reporting Council’s (FRC) Audit Firm Governance Code and operational separation principles. The Non-Executives' (NE) engagement with the EY UK governance structure includes membership of:

      • Public Interest Board (PIB)
      • UK Audit Board (UKAB)
      • Audit Board Remuneration Committee (AB RemCo)
      • Nomination Committee (NomCo)

      The NE chairs of the PIB and UKAB also attend the EY UK  Board meetings.

      The remit of PIB is to enhance  EY UK’s  performance in meeting the purpose of the AFGC. Its principal objectives are to promote audit quality, to help EY UK secure its reputation more broadly, including its non-audit business, and to reduce the risk of firm failure. In connection with the AFGC purpose, the PIB is responsible for the independent oversight of the EY UK  policies and procedures in relation to financial resilience, governance and leadership, values and culture and risk management and resilience. A review of people strategy and people policies and procedures to help ensure the public interest is protected is a standing item on PIB’s agenda.

      The role of the UKAB is to provide independent oversight of EY UK’s pursuit of audit quality improvement by ensuring that people in the UK audit practice are focused above all on the delivery of high-quality audits in the public interest, having regard to the need to ensure that audit remains an attractive and reputable profession and to increase deserved confidence in audit.

      The AB RemCo (formed in response to the operational separation) has the task of overseeing the remuneration of audit partners with a remit to consider the policies and processes in relation to audit partner remuneration and whether these policies and processes have been appropriately applied. The NomCo’s role is to consider the appointment and extensions to the terms of appointment of:

      • INEs and ANEs.
      • The EY UK Board representatives of the UK&I and FSO Regional Partner Fora.
      • Additional co-opted members of the EY UK  Board pursuant to the UK Board Terms of Reference.
      • Members of the Audit Committee and Risk Oversight Committee. 

      The role of the INE stems from the AFGC, while the ANE role was introduced as a result of the FRC’s operational separation principles. In each case, the role of an EY UK NE differs materially from that of a Non-Executive Director (NED) of a corporate entity. The NEs have full access to the EY UK management and the chairs of the UKAB and PIB attend EY UK Board meetings, which helps to ensure that the INEs and ANEs have visibility of the entirety of the EY UK business.

      EY UK provides INEs and ANEs with full administrative support in performing their duties, including assistance from the Company Secretary, Regulatory and Public Policy (stakeholder engagement) and an EY Executive Assistant (administration and expenses). INEs and ANEs are entitled to request all relevant information about EY UK’s affairs including access to relevant partners, as is reasonably necessary to discharge their duties. One of the areas of EY UK’s activity in FY23, to which the INEs and ANEs devoted a significant amount of time monitoring, was EY UK’s progress towards compliance with the International Standard on Quality Management (UK) 1. All such information is provided in a timely manner and in an appropriate form and quality. We also provide the NEs with access to professional advisers at EY UK’s expense (subject to consultation with the UK Board Chair to establish and approve the appropriate means of obtaining this professional advice).

    • Appointment and termination of INEs

      Prior to appointment, INEs and ANEs are interviewed and briefed on the ongoing independence requirements and any firm issues. The INEs and ANEs are required to confirm their independence from the EY UK organsiation and the entities we audit in accordance with the AFGC and the FRC’s Ethical Standard. Independence from the EY UK requires, among other things, that: 

      • The appointment of the INEs and ANEs by the Board is limited to an initial term of three years that may only be extended by a maximum of two additional three-year terms. 
      • Members of the INE’s and ANE’s immediate family are not partners or employees of the EY UK. The INEs and ANEs may not have a joint investment with the EY organisation. 

      Independence from the entities the firm audits:   

      • Generally, there are no restrictions on the types of relationships INEs and ANEs may have with entities audited by EY UK as they are not considered to be in EY UK’s Chain of Command and the FRC’s Ethical Standard specifically excludes them from these requirements. 
      • However, EY UK prohibits the INEs and ANEs from holding an officer, director or employee role at an entity audited by the EY organisation. 
      • The INEs and ANEs confirm their independence in accordance with the EY requirements, both on appointment and annually thereafter. 

      Rights and responsibilities of the INEs and ANEs are set out in a Letter of Appointment and Service. An appointment may be terminated by either the INE, ANE or EY UK giving six months’ written notice. In the event of a fundamental disagreement that cannot be resolved, the appointment may be terminated immediately under the dispute resolution provisions (see further detail below). In addition, immediate termination may be required where a conflict occurs with other roles that the INE and ANE hold, an example being where an entity we audit acquires an entity in which the INE and ANE also hold an appointment.

      PIB Members (as at 30.06.23)  

      Title

      Time served on  PIB to the nearest year
      Non-executive members

      Tonia Lovell (Chair)

      Independent Non-Executive

      4 Years

      David Thorburn

      Independent Non-Executive

      6 Years

      Mridul Hegde

      Independent Non-Executive

      2 Years
      Roles-based appointments
      Anna Anthony  Managing Partner, UK FSO  2 Years
      Hywel Ball UK Managing Partner  2 Years
      Jane Goldsmith  Managing Partner, Risk Management, UK 2 Years

      UKAB Members (as at 30.06.23)  

      Title      

      		 Time served on the UKAB to the nearest year
      Non-executive members (including period on the IOC)
      David Thorburn Independent and Audit Non-Executive 2 Years
      Mridul Hegde  Independent and Audit Non-Executive 2 Years
      Philip Tew (interim chair) Independent and Audit Non-Executive 2 Years
      Tonia Lovell Independent and Audit Non-Executive 2 Years
      Roles-based appointments
      Andrew Walton UK Head of Audit 2 Years
      Javier Faiz UK FSO Head of Audit 2 Years
      Justine Belton  UK Country Professional Practice Director and UK Audit Compliance Principal 2 Years

      AB RemCo Members (as at 30.06.23)

      Title 

      		 Time served on the ABRemCo to the nearest year
      Philip Tew (Chair) Doubly independent Audit Non-Executive  2 Years
      Mridul Hegde  Independent and Audit Non-Executive 2 Years
      Tonia Lovell Independent and Audit Non-Executive 2 Years
      NomCo non-exec member (as at 30.06.23)

      Title

      		 Time served on NomCo to the nearest year
      Tonia Lovell Independent and Audit Non-Executive 2 Years

      Please note that there was a temporary reduction in the number of NEs during FY23 which resulted in non-compliance with certain provisions of the Audit Firm Governance Code.  However, this did not deplete the effectiveness of the remaining NEs’ oversight or ability to provide constructive challenge, and the issue was subsequently resolved through the process for appointing replacement NEs post year-end.

      In September 2023 Mridul Hegde stepped down as an NE, and two NEs were recruited to EY UK: Ruth Anderson and Carl Hughes. They both joined as INEs and ANEs and sit on the PIB, UKAB and AB Remco. Ruth has now taken over from Philip Tew as Chair of the UKAB. More details are provided in Appendix 3 of the EY UK 2023 Transparency Report.  

    • Remuneration of INEs and ANEs

      During the 2023 financial year, EY UK’s INEs and ANEs were paid a fixed annual income based on an agreed number of days’ service per annum and whether they also chaired one of EY UK’s Boards, benchmarked with FTSE 100 NED roles. The annual salaries of the INEs and ANEs in respect of their UK roles were: 

      • David Thorburn: £86,667 
      • Tonia Lovell: £140,000
      • Mridul Hegde: £100,000
      • Philip Tew: £116,000 

    • Procedures for dealing with fundamental disagreements between INEs and the EY UK management team

      In the event that there is a fundamental disagreement between an INE/ANE and members of the EY UK  Board and/or its governance structures, the INE/ANE shall set out the nature and status of the disagreement in writing to the Chair of the EY UK Board (copied to the members, including the other party in disagreement), together with any other details such as a need for further information, the respective positions of the parties and any preferred criteria for resolving the disagreement.

      The Chair shall respond to the INE/ANE in writing by setting out any proposed timescale and method for resolving the disagreement. At the conclusion of the proposed time, the INE/ANE and the other party in disagreement shall indicate to the Chair whether or not the disagreement has been resolved. In the event that the disagreement has not been resolved, both the INE/ANE and the other party in disagreement must indicate whether a further intercession by the Chair is desired. In the event that no such indication is made and the disagreement persists or, if the nature of the disagreement relates directly to the Chair, the INE/ANE or the EY UK  may terminate the INE/ANE appointment.

    • Examples of how EY UK supports the principles of the Audit Firm Governance Code 2016 (AFGC)

      EY UK could not have a successful and resilient business without the knowledge, skills, experience and professionalism of all of its people in the UK. The firm continues to create an open and inclusive culture in which anyone can succeed irrespective of race, gender or social background. 

      • Openness

        The culture strongly supports collaboration and places special emphasis on the importance of reviews and consultation when dealing with complex or subjective matters (e.g., accounting, auditing, reporting, regulatory and independence matters). In developing the firm’s people with the right mindset, EY UK needs to have suitable resources aligned to the right reward, with the best systems and support structures in place to empower its people. The firm encourages a culture of openness and ensures its people can consult and share problems with experienced colleagues. 

      • Risk management principles

        The Board of EY UK (the Board) has overall responsibility for risk management and internal control over the entire business in the UK. In discharging this responsibility, the Board periodically – and at least annually – conducts a review of the effectiveness of the firm’s system of internal control.

        The Board is supported in the task of managing risk by the Risk Oversight Committee (ROC). It meets regularly with a standing agenda covering both risk and assurance activity. As in every year, the ROC has continued to drive ongoing enhancements to our internal governance, processes and controls.

        ROC’s monitoring, oversight and review of EY UK’s activity during FY23 included: 

        • Monitoring risk exposure for each of EY UK’s principal risks
        • Reviewing and discussing the performance of Key Risk Indicators (KRIs) against risk tolerances
        • Monitoring the response to the Ukraine crisis and risks arising from it, including the implementation of revised sanctions
        • Monitoring the risks associated with the proposed structural separation of the Global EY firm, including implementation risks and the impact on EY UK’s principal risks
        • Assessing the risks associated with the financial downturn and recommending mitigating actions to the Board
        • Overseeing the ongoing development and strengthening of the Three Lines of Defence
        • Managing risks associated with third parties and Global EY-related risks as they impact EY UK
        • Overseeing the internal audit function, including the FY23 audit plan and the results of audits conducted during the year
        • Reviewing the identification and management of firm and service-line-specific risks
        • Monitoring regulatory requests and developments relevant to the management of the EY UK’s  risks
        • Overseeing the ongoing development of the EY UK Enterprise Risk Management Framework
        • Maintaining risk policies including new policies and amendments required

      • Recruitment, professional development, remuneration and retention

        Recruitment

        In a world with a decreasing talent pipeline, where the number of students graduating with an accounting degree continues to drop, competition for talent with the relevant skills has never been higher. Finding the next generation of high-quality auditors remains our top priority. We keep the recruiters who we work with up to date and upskill them with current trends and hot topics in audit so that they are armed with the information to talk to candidates.

        We are also exploring several recruitment innovation platforms and talent attraction initiatives with the purpose of networking with new and diverse audiences that we did not  have the opportunity to connect with via the traditional channels and innovate in the ways we connect and attract our future talent.

        For example, in the last year, EY UK designed a Talent Tree in the metaverse. Through a series of global talent events, teams have hosted hundreds of potential future audit professionals in an environment that strips away the physical barrier of real-world meeting rooms, and replaces them with a new, highly interactive virtual world.

        What has been achieved so far is very exciting—a series of events on a global scale that helped identify new talent from the next generation of potential accounting professionals, who live and breathe technology and who will help forge the future of our profession.

        In order to recruit people who fit with the organisational culture, it is important to consider not only technical excellence but also other attributes: communication skills, high ethical standards and the ability to collaborate in high-performing teams. All joiners are expected to live up to high standards of integrity and to have strong business acumen and leadership potential.

        Professional development

        Our auditors receive world-class and globally consistent core learning. Whether that involves focussing on changes in regulation, mastering emerging technologies or embedding data analytics into existing audit practice, resources are in place to support every need. Moreover, the firm’s Audit Academy encourages and empowers individuals to apply professional scepticism and to think critically to deliver high-quality audits.

        EY UK requires audit professionals to obtain at least 20 hours of continuing professional education each year and at least 120 hours over a three-year period. Of these hours, 40% (eight hours each year and 48 hours over a three-year period) must cover technical subjects related to accounting and auditing.

        To encourage the building of new skills, the EY Badges programme enables professionals to gain future-focussed skills in three distinct pillars: technology, leadership and business. Subjects covered in the programme include analytics, transformative leadership, sustainability, artificial intelligence, blockchain, robotic process automation, innovation, cybersecurity and digital skills, as well as certain sector capabilities that are in high demand. New badges are added regularly as the programme evolves.

        As of 30 June 2023, almost 47,000 EY Badges had been awarded to current audit professionals, including 16,000 in analytics and data strategy alone. In addition, more than 23,000 EY Badges have been awarded to people who have since left EY. In total, during the financial year to 30 June 2023, EY audit professionals undertook 8.8m hours of learning (compared with 8.2m hours for the previous year), averaging 87.6 hours each.

        Remuneration and retention

        EY UK’s partners are evaluated and compensated based on criteria that includes specific quality and risk management indicators. Equally, when UK partners do not adhere to quality standards, remedial actions are taken. These may include performance monitoring, compensation adjustment, additional training, additional supervision or reassignment — or, in instances of repeated or particularly serious non-compliance, separation from EY UK.

        EY UK’s policies prohibit evaluating and compensating lead audit engagement partners and other key audit partners on an engagement based on the sale of non-assurance services to companies they audit. This reinforces to EY partners their professional obligation to maintain independence and objectivity. 

        Retention can vary based on external drivers, such as market conditions. However, there is one factor that is globally consistent: employee expectations. Achieving a work-life balance between professional and personal lives is important for the organisation’s people. Therefore, an increasingly important priority for the Talent team is promoting wellbeing and improving the day-to-day experience of our people. The overarching goal is to embed a wellbeing culture through the commitment of leadership to provide the financial, physical, emotional and social support that enables EY UK’s people to be the best they can be. In practice, this can include equitably balancing work allocations and breaking down barriers that have previously prevented professionals from setting and adhering to healthy boundaries.

        The better EY UK can support people’s wellbeing, the more likely it is to provide them with compelling reasons to continue their career journey within the organisational network. However, new entrants to the world of work are less likely to stay at the same organisation for their entire careers. Boosting retention, therefore, now means focussing more on the journey than the destination. As part of this commitment, there is a stronger focus on experience management and scheduling auditors onto engagements where they can find opportunities to expand their knowledge as part of longer-term career progression.

      • Leadership Evaluation and Development (LEAD)

        EY UK has a performance management framework, LEAD, that supports our people’s careers, inspires their growth and recognises the value they bring to EY UK. Through ongoing feedback, counsellor insights and development conversations, LEAD helps align individuals with EY UK’s strategy and enables a focus on the future. An individual’s dashboard provides a snapshot of performance against the Transformative Leadership dimensions, including quality, risk management, technical excellence and engagement metrics. Feedback received during an annual cycle is aggregated and used as input to compensation and reward programmes.

        At the centre of the framework are conversations between counselee and counsellor, covering topics such as understanding diverse career paths, creating an inclusive and equitable environment and pursuing learning and new experiences. These conversations help to identify opportunities for further development and to build future-focussed skills.

        The performance management framework extends to partners, principals, executive directors and directors, and applies to all member firms around the world. It reinforces the global business agenda by continuing to link performance to wider goals and values. The process includes goal setting, ongoing feedback, personal development planning and an annual performance review, all tied to partners’ recognition and reward. Documenting partners’ goals and performance is the cornerstone of the evaluation process. A member firm partner’s goals are required to reflect various global and local priorities across six metrics, the most important one being quality.

    • Whistleblowing policies and procedures – INEs’ and ANEs’ consideration of issues raised

      In EY UK, we have various avenues in place for our people to make a whistleblowing report in confidence and anonymously. The UK whistleblowing guidance has been drafted to be fully accessible and user-friendly for everyone in EY UK. It explains clearly and directly:

      • The types of behaviour that should be reported
      • How to make these reports
      • What EY UK does to protect whistleblowers from any retaliation or adverse treatment which may result from speaking up

      There are robust procedures in place for the investigation and handling of whistleblowing reports to ensure consistency of process and record-keeping.

      More recently, EY UK  has placed an increased emphasis on our ‘Speak Up’ campaign, particularly further to the launch of the CultureShift Report & Support app in December 2022. A reminder that people can raise concerns about any unethical behaviour or treatment they have faced or witnessed is circulated on regular leadership emails and other firm-wide communications. These communications remind all partners and staff that they have a personal responsibility to report all instances of non-compliant and unethical behaviour without fear of reprisal.

      The Ethics Hotline provides EY UK’s people, clients and others outside the organisation with a means to confidentially report activity that may involve unethical or improper behaviour, and that may be in violation of professional standards or otherwise inconsistent with the organisation’s shared values or Global Code of Conduct. Globally, the hotline is operated by an external organisation that provides confidential and, if desired, anonymous hotline reporting.

      When a report comes into the EY Ethics Hotline, either by phone or the internet, it receives prompt attention. Depending on the content of the report, appropriate individuals from Risk management, Talent, Legal or other functions are involved in addressing the report. The same procedures are followed for matters that are reported outside of the organisation’s Ethics Hotline.

      It should be noted that by chairing the PIB and UK Audit Board, the INEs and ANEs have visibility of the whistleblowing process and are able to satisfy themselves that the process is effective. They oversee the whistleblowing arrangements and monitor the types of issues raised under that process, enabling them to identify any trends that may be arising and/or actions that need to be addressed.

    • EY UK Audit Committee (UKAC)

      The UKAC reviews and monitors the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements. It is also responsible for making recommendations in relation to the appointment of the external auditor and for approving the remuneration and terms of engagement of the external auditor. The UKAC monitors the integrity of the financial statements of the firm, reviews significant financial reporting judgements and recommends the approval of the financial statements to the Board. The membership of the UKAC as of 30 June 2023 was as follows:

      UKAC Members 

      Title      

      		 Time served on the UKAC 
      to the nearest year 
      Alison Duncan (Chair) Audit Partner 2 Years
      Chris Voogd Audit Partner 5 Years
      Jane Goldsmith Managing Partner, Risk Management, UK 2 Years
      Lloyd Brown Audit Partner  5 Years
      Sarah Williams Audit Partner 4 Years
      Stuart Wilson Audit Partner  5 Years

      EY UK’s Board selects UKAC members based on their roles and expertise, with their period of appointment reflecting this. As a UKI Partner Forum representative Board member, Alison Duncan chairs the UKAC.   

      Representatives from the firm’s management teams attended certain UKAC meetings, including the Chief Operating Officer, Finance Director, UK Head of Audit and representatives from EY UK’s legal team. In addition, the Head of Internal Audit and the external auditors regularly attend the UKAC’s meetings, and the Chair has regular informal meetings with the external audit partner. 

      The topics covered throughout the annual cycle of meetings were considered necessary for the UKAC to be in a position to fulfil its responsibilities on behalf of the EY UK Board in relation to the external audit process and the UK LLP financial statements. The UKAC meets at least twice annually, and in relation the FY23 financial reporting, it met five times and undertook the activities set out below. With respect to the external auditor, BDO LLP, the UKAC:

      • Approved the appointment and fees of the external auditor.
      • Challenged and approved the audit plan, considering the risks identified by the external auditor.
      • Read and discussed the audit results as reported by the external auditor.
      • Monitored the effectiveness and independence of the external auditor and considered the need and timing of an audit tender process. 

      With respect to other matters, the UKAC: 

      • Reviewed the FY23 Internal Audit Plan, received reports and discussed with the Head of Internal Audit the findings arising from its work, the status of agreed action plans and considered the impact, if any, on the firm’s financial reporting processes and controls
      • Received reports and presentations on a number of finance-related projects including pensions and annual impairment testing, and considered the implications for the FY23 year-end financial close process and reporting
      • Received a briefing on mandatory statutory climate-related disclosures for UK entities, alongside our approach to FY23 disclosures including the involvement of our Climate Change and Sustainability Services  team and the UKAC Chair discussed directly with these specialist teams, their views on the draft disclosures prior to finalisation
      • Reviewed with the UK Head of Audit an update on the main policies that the firm has implemented in relation to operational separation and the future reporting of the audit business’ financial performance to the FRC

      Specifically, as it pertained to the integrity of the Ernst & Young LLP 2023 financial statements, the UKAC reviewed analyses and/or reports provided by management and the external auditors, specifically focussing on areas of significant estimation and judgement, including:

      • Revenue recognition and the prior year adjustment in relation to the valuation of unbilled receivables and accruals in relation to work subcontracted to EY Member Firms on client engagements
      • Completeness and valuation of provisions for professional liability claims and regulatory matters
      • Valuation of defined benefit pension liabilities and the past service cost arising as a result of the plan amendment (Refer Note 20 of the Members’ Annual Report and Financial Statements)
      • Annual impairment test for the carrying value of goodwill
      • Appropriateness of the going concern basis of preparation of the financial statements

      The UKAC reported to the EY UK Board at its meeting on 12 October 2023 and recommended the approval of the 2023 financial statements, subject to certain updates and clearance from the external auditor, that were subsequently confirmed by the UKAC.

    • Contacts, policies and procedures for dialogue

      The contact details for dialogue with listed company shareholders and listed companies about matters covered by the AFGC are:

      • Christabel Cowling, Audit Partner, EY UK Head of Regulatory and Public Policy.
      • Philip Tew, Audit Non-Executive (ANE), former Interim Chair of the EY UK Audit Board, and Chair of the EY UK Audit Board Remuneration Committee

    • The EY Global Code of Conduct

      Our Global Code of Conduct (PDF 1.95MB) is a clear set of standards for our business conduct. It provides the ethical and behavioral framework on which we base our decisions every day. 

    • The EY Whistleblowing Policy

      The EY/Ethics Hotline is a method for reporting conduct that may be unethical, illegal, in violation of professional standards, or otherwise inconsistent with the EY Global Code of Conduct.

    • EY UK Terms of reference

      For key Governance bodies, March 2024: The Terms of Reference (PDF, 517KB) are kept under review and, when appropriate, revisions are made and published.

Download previous versions of the EY UK Transparency Report