Deloitte Australia Transparency Report 2012

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See within.

Transparency Report 2012


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Audit is core to Deloittes heritage. The auditors reportprovides independent assurance on the fnancial in ormationprepared by our clients. In conducting audits, the auditpro ession plays an important role in creating and

maintaining the investor confdence required or a airand transparent fnancial market.

We support audit quality by living our Signals, whichdefne our corporate culture, and by investing in people andprograms to meet the high expectations that others placeon our work. We will continue to strive to improve andmeet our responsibilities to our clients, their investors and

our people.Giam SwiegersChie Executive O icerDeloitte Touche Tohmatsu tralia

Accounting Firmof the Year 2012


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Contents

1 Introduction 3

2 About Deloitte 4

3 Governance and leadership 7

4 Audit quality 11

5 Our people 216 Ethics and independence 25

7 Continuous improvement 29

8 External monitoring and contributions 31

Appendix 1 Deloitte audit clients 33

Appendix 2 Deloitte Network and legal structure 36

Glossary 37


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1

Deloittes Assurance Practice is core to our irm andwe are dedicated to per orming high quality auditsor the business community. As auditors, we recognisethat we play an essential role in ensuring that inancialin ormation is air and transparent so that investors canhave con idence in inancial reporting in the market.

We seek to instil con idence in inancial reporting by

developing talented practitioners who are committed toexcellence and can provide in ormation and insights toclients in innovative ways. While attesting to the veracityo inancial statements is at the centre o what we do asauditors, our value also lies in enabling our clients to seetheir business as we do: objectively and transparently.

As a pro ession, we are held accountable to the highestpro essional and ethical standards. We conduct our auditsin accordance with the Auditing Standards issued bythe Australian Auditing and Assurance Standards Board,which align with international requirements. Ourindependence obligations and responsibilities to complywith the auditing standards are also prescribed in theCorporations Act 2001 and have the orce o law.

Directors and audit committees, along with auditors,are subject to increasing levels o scrutiny in dischargingtheir obligations. This largely stems rom a commonobligation to protect our stakeholders, includingshareholders, and maintain investor con idence.

This Transparency Report provides relevant in ormationor management, audit committees and investors tobetter understand the governance structures, the people

and the quality control systems that underlie a Deloitteaudit. In line with the orthcoming Corporations Act 2001 requirements, this report provides a detailed overview oour organisation and audit related quality control systems.

Deloitte prides itsel on being an innovative irm whichalways strives to do things better. We recognise thatas business evolves our audit approach must also evolveto remain relevant. With this in mind, we are currentlytransitioning to a new audit technology plat ormand ramework that is being implemented globally by theDeloitte Network. This includes a greater ocus on auditormindset, which is as important as the audit methodologyand technology. Our ramework recognises this and has

our key components: Methodology, Mindset, Contentand Technology.

We look orward to continuing to deliver on ourcommitment to excellence through a team o highlyquali ied pro essionals that place audit quality at the apexo everything we do.

An audit provides a unique opportunity to look intothe heart o an organisation. We see it as our duty toprovide our clients with arms-length insight, perspectiveand straight talk by conducting objective and unbiasedaudits. This is an essential ingredient in ul illing our publicinterest role. We have in turn prepared this report to allowyou, our stakeholders, to see us more transparently.

We invite you to see within.

Cindy HookNational Leader, Assurance and Advisory

Committed to excellenceand transparency


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Deloitte Transparency Report 2012 2

Quality controle ectiveness statement

The systems o quality control supporting our AssurancePractice are designed to provide reasonable assurance that:

(a) Assurance engagements conducted by Deloitte complywith Australian Auditing and Assurance Standards,relevant ethical requirements, and applicable legaland regulatory requirements

(b) Reports issued by Deloitte are appropriatein the circumstances.

We are satis ied our internal quality controls are robust,operating e ectively and allow us to readily identi y areasor potential improvement.

The results o our internal monitoring programs providethe basis to conclude that our systems o quality controlare operating e ectively.

Giam SwiegersChie Executive O cer


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1 Introduction

Audit transparency reports were introduced in Europeas a result o the Statutory Auditors (Transparency)Instrument 2008 as a way to provide additionalin ormation about audit irms and thereby allowentities to make a more in ormed choice whenselecting an audit irm. In June 2012, the Parliament o Australia passed laws to

require a irm that audits 10 or more prescribed entitiesto produce transparency reports or inancial yearscommencing on or a ter 1 July 2012. Although Deloitteis not required to produce a transparency report in 2012,we have chosen to do so to support this initiative andas a re lection o our commitment to audit quality.

Our transparency report aligns with the requirements setout in the Corporations Amendment Regulation 2012(No. 5). This report is or the Assurance Practice o theAustralian partnership o Deloitte Touche Tohmatsu(herein re erred to as Deloitte or the Firm). The Firmis a member o the Deloitte Touche Tohmatsu Limited(DTTL) network o member irms (Deloitte Network).

The Assurance Practice re erred to in this report comprisesthe audit practitioners, partners and sta and their clients,and the systems o quality control that are present in theFirm as at 31 May 2012. Our report includes a detailedoverview o the Assurance Practice, including in ormationon the Firms leadership and governance, quality controlsystems, culture and people, as well as key inancial dataand relevant clients.


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We are proud o the contribution the DeloitteNetwork has played in the establishment o theauditing pro ession. Deloitte can trace its origins backto William Welch Deloitte, who in 1849, was the irstperson ever appointed as an independent auditor.

Today, the Deloitte Network is the worlds second largestnetwork o accounting irms and the second largest

provider o audit services. In Australia, Deloitte is currentlythe astest growing major accounting irm. Our scaleenables us to develop best practice systems o qualitycontrol, supporting our teams to deliver high qualityaudits on a consistent basis domestically and globally.

Deloitte provides audit, tax, consulting and inancialadvisory services to public and private clients spanningmultiple industries. We ocus on providing world classcapabilities and high quality services to clients, deliveringthe insights they need to address their most complexbusiness challenges.

The Deloitte Networks revenue was US$31.3 billionor the year ended 31 May 2012 (US$28.8 billion orthe year ended 31 May 2011). It employs approximately195,000 pro essionals worldwide across a globallyconnected network o member irms operating in morethan 150 countries.

The Deloitte Network o member irms audit practice

is also the second largest in the world, with revenuesor the year ended 31 May 2012 o US$13.0 billion(US$12.3 billion or the year ended 31 May 2011).

2 About Deloitte

$12.3

$10.5

Figure 1: Global revenue or Big Four Networks scal 2011 (US$ billion)

Deloitte Ernst & Young KPMG PwCOther revenue

$12.3

$16.5

$28.8

$22.9 $22.8

$29.2

$12.3

Audit revenue

US$bn

35

30

25

20

15

10

5

0

$10.6$14.1

$15.1


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Figure 3: Comparison o Australian revenue among Big Four Networks (AU$ million)

FY07 FY08 FY09 FY10 FY11 FY12

1,600

1,200

800

400

0

Total revenue AU$ million

Deloitte

PwC

Ernst & Young

KPMG

Figure 2: Total Australian revenue and growth trends or Big Four rms (AU$ million)

FY11 FY12 FY11/12 growth Five year CAGR

PwC 1,429 1,478 3.4% 3.2%

Ernst & Young 1,053 1,125 6.8% 5.6%

KPMG 1,064 1,120 5.3% 4.6%

Deloitte 946 1,102 16.5% 12.5%

Figure 4: Breakdown o Deloitte revenue or the year ended 31 May 2012 (AU$ million)

AU$m

External audit and related services 210

Non-audit services to audit clients 78

Non-audit services to non-audit clients 814

Total 1,102

Deloitte AustraliaDeloitte is currently the astest growing o the major accounting irms in Australia, with revenue or the year ending31 May 2012 o $1.1 billion and almost 6,000 people across 14 o ices.

Our Assurance Practice had total revenues o $210 million or the year ended 31 May 2012.


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Our distinctive approachWe believe that the strong growth in DeloittesAssurance Practice during iscal 2012 can be attributedto the way we serve clients and ensure quality: we striveto be di erent, we collaborate and we are transparent.We convey this through our See what we see positioning,which rein orces how we help our clients broaden theirvision to encompass what has happened within theirbusiness, what is happening and what is likely to happenin the uture.

Three areas in which Deloitte has a strongly di erentiatedapproach are:

Design thinking In 2012, Deloitte trained its senioraudit leaders in design thinking, a methodology thatcombines empathy, creativity and rationality to meetusers needs and drive business success. The conceptso design thinking have been pushed through the practice

and we believe this gives our audit practitioners a uniquetool that allows them to create a tailored approach toeach audit. This approach results not only in higher auditquality but a unique audit experience or our clientsand our people.

Data analytics We use sophisticated data analyticsto identi y the characteristics o inancial and businessrisks within an individual clients business, and use theresulting insights to improve the quality, e iciency andvalue o the audit. In 2012, we success ully incorporatedanalytics into 50 engagements across multiple industries.Our 2013 plan is or the use o data analytics to becomebusiness as usual on all signi icant audit engagements.We have also developed diagnostic tools to enable ourpartners and sta to better understand their clientsoperations and industries.

Clarity in reporting In an environment o greater riskand increasing compliance obligations, Chie FinancialO icers and Directors are looking or more candid viewsand analysis rom their external auditors. A dedicated auditinnovation team within the Firm has created a simple,clear and visual way or us to present audit indings.

Incorporating data analytics and other diagnostic toolsinto our audits has allowed all members o my engagementteams to understand our clients businesses better and indoing so to gain a fner appreciation o risk. Understanding

risk is at the heart o per orming a quality audit. Thesetools have been very power ul in identi ying and sharpeningour ocus on risk.Peter Forrester, O ice Managing Partner, Canberra and Western Sydney


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Our governance and leadership structures aredesigned to ensure that the Firms commitmentto audit quality and pro essional independenceare hard wired into our daily operations. Thisstarts with putting in place the right tone at thetop and lows through to our systems andinteraction with clients.

Tone and cultureWe respect the trust placed in Deloitte by our clients,investors, regulators and the wider business community.Sustaining this trust by delivering high quality audits isan individual and collective responsibility at every level within our Firm. We recognise that this starts with thetone at the top set by the Firms leadership.

Our culture, is driven by our Chie Executive O icer(CEO) and ully endorsed by our Board o Partners and theNational Executive. Our seven Signals are at the heart othe Deloitte culture and are the ramework or deliveringon our promise to deliver client service excellence.

These Signals are so core to what we believe and how webehave that they are listed on the back o every Deloitte

business card, showing we are proud to share these withour clients and business networks.

3 Governance and leadership

Figure 5: Deloittes seven Signals

How our Signals support audit quality

Recruit and retain the best

We seek to attract the best talent in the market with the right skills and experience so thatwe can serve our clients well and deliver high quality solutions and output.

Empower and trust We empower our people to take personal responsibility or delivering high quality workto clients.

Play to win think globally

We encourage our people to approach every client engagement with the right team drawnrom the capabilities o the entire Australian irm, and where needed the DTTL Network,to ensure the highest quality output.

Talk straight Through a culture o talking straight, our people are encouraged to voice their ideas andchallenge each other. Constructive, two-way communication is viewed as a way to achievethe right quality outcome or our teams and clients.

Aim to be famous We encourage our people to become market leaders by developing specialist skills, gaining

recognition and building extensive networks that they can draw on to enhance quality andinsight in their work.

Continuously grow and improve

Through an ongoing commitment to learning and development, we ensure our people havethe necessary skills to deliver high quality outcomes on a consistent basis.

Have funand celebrate

We believe that when our people enjoy what they do and are recognised or theiraccomplishments, they are inspired to deliver to the highest standard and quality.


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Governance structureOur delivery o high quality pro essional services isachieved through e ective quality control systems anda ocus on strong leadership, e ective communication,appropriate in rastructure and per ormance management.

The leadership and management o the Firm includestrong governance structures, including a national qualityand risk unction that provides oversight o the activitieso the Assurance Practice.

Figure 6: Deloitte Australia organisation chart

* Assurance services are provided by partners and s ta within these service lines.

Board o Partners

Service Line Leader Assurance and Advisory*

Service Line Leader Consulting

Service Line Leader Deloitte Private*

Service Line Leader Tax

O ce ManagingPartner NSW

O ce ManagingPartner Vic

Service Line Leader Risk Services*

Service Line Leader Financial Advisory

Services

Chie ExecutiveO cer

Audit and RiskCommittee

Chie OperatingO cer

Partner RemunerationCommittee

Chie Financial

O cer

Partner AdmissionCommittee

Chie StrategyO cer

AcquisitionsCommittee

Board Executive


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The Board o PartnersOur Board o Partners (the Board) is responsible orprotecting the interests and reputation o the Firm andits partners and or the oversight o the managementand the operations o the Firm at a strategic level.The Board ensures that the Firm has an appropriatestructure or corporate governance and has speci icoversight o risk and quality.

It comprises:

The elected Chief Executive Officer (CEO)

At least a further seven, but not more than 10 electedpartners (o which at least two must be women)

A Chairperson who may be a partner of the Firm.

Members o the Board are elected by the equity partnerso the Firm or terms o three years. The maximum perioda partner can serve as a Board member is nine years.

The Board elects a board member other than the CEO

to act as Chairperson who serves or a our year term.The separation o the roles o Chairperson and CEOprovides a strong measure o accountability. Our currentChairman, Wayne Goss, is an external, non-executivechairman.

The Board has established our committees to provideoversight o management. The committees are comprisedentirely o board members and have an allocatedchairperson who is responsible or reporting the activitieso the committee to the ull Board. The committees andtheir objectives are:

Committee Objectives

Audit and RiskCommittee

Assists the Board withits inancial reportingresponsibilities, managemento risks and regulatorycompliance

PartnerRemunerationCommittee

Addresses matters relatingto partner remuneration

Partner AdmissionCommittee

Assists the Board with itsresponsibilities relating tothe admission o lateral hirepartners

AcquisitionsCommittee

Assists the Board inoverseeing the acquisitionor disposal o partnershipproperty

Figure 7: Deloitte Board committees

The Chie Executive O fcerOur CEO, Giam Swiegers, has ull executive authorityor the management o Deloitte. The CEO is nominatedby a Board appointed committee o between our andeight partners. The CEO is elected by the equity partnersor a our year term o o ice.

The CEO has overall responsibility or managing alloperations o the Firm including the development,implementation and monitoring o quality policiesand procedures.

The CEO communicates regularly with the partnersand with all o our people, in person and by nationalvideo-link meetings, voicemails, emails and social medianetworks.


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The National ExecutiveDay to day activities are managed by the CEO throughthe National Executive, which is appointed by the CEO.The National Executive is comprised o the CEO, the ChieOperating O icer, the Chie Financial O icer, the ChieStrategy O icer, along with the six service line leaders(Assurance and Advisory, Consulting, Deloitte Private,Financial Advisory Services, Risk Services and Tax) and

the managing partners or New South Wales and Victoria.

The responsibility or quality control, policy and risk relatedmatters is allocated as ollows:

Chie Executive O cer People and performance

Ethics program.

Chie Operating O cer Independence and conflicts

Client contracts

Compliance, including regulatory compliance

Engagement risk, client and engagement acceptanceand practice quality

Security

Enterprise risk framework.

Chie Financial O cer Professional Indemnity insurance

Information technology.

Quality & Risk CommitteeThe Quality & Risk Committee is led by the Firms ChieOperating O icer, Keith Skinner and two national qualityand risk partners. The committee also works closely withthe Risk and Reputation Leader (RRL) or the irm, JohanDuivenvoorde, who is a senior partner and Board member.

The committee is responsible or supporting the businessin the provision o pro essional services to clients andoverseeing and advising the service line quality and riskunctions. The committee also oversees national teamsresponsible or independence and con licts, complianceand regulatory policy.

Assurance PracticeLeadershipThe National Leader, Assurance and Advisory (A&A) CindyHook, and the A&A Executive are responsible or thedelivery o the Assurance Practices business objectivesand are accountable or its ul ilment o rigorous qualitystandards. Members o the A&A Executive are appointedby the National Leader A&A a ter consultation with the

CEO. The A&A Executive meets monthly and a portiono each meeting is dedicated to audit quality.

The Assurance Practices quality and risk unctionThe National Leader A&A in consultation with the RRLappoints an experienced, skilled and respected leaderas the National Pro essional Practice Director (NPPD).Greg Couttas is our NPPD and is a member o the A&AExecutive and the irms Board. He is responsible or alldecisions relating to interpretation o accounting andauditing matters, and is responsible or the systemso quality control in the Assurance Practice.

In addition, the Assurance Practice has a dedicatedRisk Leader, who is assigned operational responsibilityor the quality control systems. The Assurance RiskLeader oversees the Assurance Quality & Risk Teamwhich includes 22 pro essionals who are responsible orimplementing the quality agenda, establishing unctionspeci ic policies and procedures, and supportingengagement teams on a day-to-day basis.

The Assurance Quality & Risk Team is responsible orthe ollowing areas within the Assurance Practice:

Client engagement and acceptance

Audit methodology and training

Partner portfolio reviews, including monitoring of auditpartner rotation

Ongoing engagement risk mitigation

Risk assessment of existing and proposed serviceo erings and new audit techniques

Practice review program

Regulatory reviews

Professional standards reviews.


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Shareholder

Client

Engagementteam selection

Audit process,tools and

methodology

Engagementacceptance and

continuance

Supervision,review and

consultation

Because o the importance o high quality auditsto the integrity o international and local capitalmarkets, audit quality is requently debated amongauditors, regulators, directors, investors and thepublic. Auditing standards provide an importantoundation to support the achievement o highquality audits. Deloittes audit delivery systems aredesigned to ensure high quality outcomes or clients

and other stakeholders.Our audit delivery modelThe key elements in our audit delivery model are:

Engagement acceptance and continuance Consideration o client engagement risk, independenceand capacity and capability to act

Understanding the entity A partner led processthat draws on industry expertise and innovative audittechniques to enhance our understanding o entitiesbusiness models, operating drivers and risks

Engagement team selection Creating teams withan appropriate mix o partners, sta and specialistswho hold relevant accounting, auditing and industryexpertise and experience

Audit process, tools and methodology The application o a well-structured and disciplinedapproach to audits based on our global manual,documentation and enabling so tware technology

Supervision, review and consultation Engagementreviews, consultation and access to specialist networksto support the delivery o high-quality audits

Communication with those charged withgovernance E ective, two-way communicationwith our ultimate clients: the Boards and AuditCommittees o the entities we audit.

4 Audit quality

Figure 8 : Deloittes audit delivery model

Communicationwith those

charged withgovernance

Understandingthe entity


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A mindset o pro essional scepticismUnderpinning each o these elements is a mindseto pro essional scepticism among all assurancepro essionals, which we believe is essential to deliveringon our commitment to provide quality in our audits.

At Deloitte, we continually emphasise the importanceo our role as evaluators. This is re lected in many aspects

o our policies, methods, procedures and training.

Further, we in luence behaviour by sharing knowledgeand lessons rom internal and external reviews in ourtraining and other communications or audit pro essionals.We also encourage teams to ensure that our pro essionalscepticism is evidenced in audit documentation.

For example, when reporting to those charged with

governance, we include discussions o areas o signi icantpro essional judgement to make it clear how we haveexercised scepticism and reached conclusions.


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Client acceptance and continuanceClient acceptance and continuance considerations arethe irst step in driving audit quality. In this process weocus on con irming we have the capacity and capabilityto act, that we can comply with relevant ethical andindependence requirements, and that we have consideredthe integrity o the client. This process is completed priorto our initial engagement and again annually be ore weagree to re-appointment as an entitys auditor or be orewe are engaged on a new assignment.

Deloitte has rigorous policies, procedures and approvals inplace or accepting prospective clients and engagementsand assessing engagement risk. This includes adocumented evaluation o the clients risk pro ile andin ormation regarding the client and its management.

Figure 9: Client and engagement acceptanceand continuance considerations

Client risk Management characteristicsand integrity

Organisational andmanagement structure

Nature of the business

Business environment

Financial results

Business relationships andrelated parties

Service risk Nature of the engagement

Engagementrisk

Team competence to handle thetechnical aspects o the speci icengagement

Speci ic engagement risk

Independence Financial and other relationships Non-audit services

Other threats: self-interest, sel -review, advocacy, amiliarityor intimidation

Our Firms engagement risk assessment proceduresprovide a basis or tailoring the audit approach in orderto address engagement speci ic risks. For higher riskengagements, additional risk management sa eguardsare applied, such as: assigning a more experienced partneras the Engagement Quality Control Review partner(EQCR); assigning a special review partner in additionto the EQCR; involving experts; or having a reviewby a national panel o experienced audit partners.

Our assessment o engagement risk begins during

the client acceptance and continuance processand is reconsidered throughout the engagement.On an annual basis, a continuance assessment isper ormed to determine i the Firm should continueproviding the services. In addition, any time an entityundergoes a signi icant change (e.g. a change inownership or management, inancial condition orbusiness model), continuation o the relationship isreconsidered. Decisions o engagement continuanceare also reviewed by a partner who is independento the engagement.

We build quality in rom the beginning. It is all aboutchoosing the right clients, understanding their risksand ormulating an appropriate audit response to addressthose risks.Johan Duivenvoorde, Risk and Reputation Leader and Board Member


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Understanding the entityGaining a thorough understanding o our clientsbusiness is vital to per orming an e ective audit. Ouraudit engagement teams develop their understandingo their clients businesses and assess inancial statementrisks in a number o ways. These include:

Analysing financial information to identify trends and unusual balances

Holding in-depth discussions with management and those charged with governance

Considering the inherent nature of each financialstatement component and the risks associated withthat component

Evaluating the reliability of internal controls relevant to the audit

Assessing the extent to which technology is used in the inancial reporting process

Reviewing internal audit findings (if applicable).

Our audit partners also collaborate in cross service lineindustry groups, which are led by senior partners withdeep industry knowledge and expertise. These groups

share their understanding o market developments,risk assessments and emerging trends. This enables themto bring their knowledge to bear on audit engagementsand to per orm this role more e ectively.

As an Assurance Practice, we are enhancing our auditapproach through several ongoing initiatives, including:

Data analytics We have moved beyond basicinancial analytics to dive deeper into risk assessmentand audit testing. Our approach integrates the useo client inancial and operational data, publiclyavailable data sets and our own proprietary data sets.

From this, we tightly pinpoint risk, ocusing our audite ort to drive up quality. The output is also usedto identi y opportunities or improvement in clientprocesses and operations

Diagnostic tools Focused on key areas o inanceunction operations, tax and treasury, these toolsprovide our audit practitioners with deeper riskidenti ication earlier in the audit process, and enablesaudit teams to more readily and e ectively addressaudit risks. In addition, outputs are presented inan interactive manner to make the experience orpractitioners and clients more engaging and enriching

Benchmarking With the growing use o diagnosticsand analytics, we are incorporating benchmarkingin ormation wherever possible. Benchmarking providesan additional layer o insight or audit risk assessmentto ensure audit testing remains highly ocused onwhat matters

Innovative audit techniques The growing amounto in ormation produced by clients and audit teamsmakes getting to core issues and risks more complexand challenging. Balanced against the need to ensureour documented audit iles comply with regulatoryobligations, we are actively encouraging auditpractitioners to collaborate on issues and risksoutside the computer. These include creating auditworking environments that take a design approach

to issue identi ication and problem solving as well asaiding our practitioners to gain certain skills equivalentto ratings and broker analysts.

These initiatives are helping us to deepen ourunderstanding o our clients businesses and enhancingour risk assessment capability so that teams can tailortheir audit approach when identi ying and respondingto risks o material misstatement.

Our use o analytics and diagnostics is not only helpingus get a deeper understanding o our clients, it is providingpartners with materials to have a much richer conversationabout risks, options and potential scenarios with clients.Philip Hardy, Assurance and Advisory Financial Services Leader


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Engagement team selectionThe selection o the engagement team is key tothe development and execution o an e ective ande icient audit. Every Deloitte audit engagement is ledby a partner, and our engagement partners are ullyresponsible or the services they provide and orunderstanding the clients business.

The partners involvement is required rom the outseto any client relationship and engagement. Partnersassigned to audit an entitys inancial statements musthave the necessary competence and industry expertise tolead the engagement. In addition, where the pro essionalservices we provide are subject to external regulation,they are led by partners who are individually authorisedby the appropriate regulatory body.

Audit engagement teams typically also include atleast one director, manager, senior analyst and analyst.The composition o engagement teams varies dependingon the size, nature and complexity o the clientsoperations. The engagement partner is responsibleor ensuring that the pro essionals assigned to anengagement have the required competencies.

Given the increasingly complex nature o our clientsbusinesses, engagement teams o ten also involvespecialists rom across the Firm. These include expertsin areas such as valuation, tax, actuarial servicesand in ormation technology.

On an annual basis, the port olio o each partner inthe Assurance Practice is subject to review to ensurethe partner has the capacity to per orm their assignedengagements. During this review process, consideration

is given to the rotation requirements or the client.

Audit partner rotationRotation o the engagement partner, the EQCR andother key audit partners helps to provide a reshperspective and to reduce amiliarity and sel -interestthreats to independence. Deloittes partner rotationpolicy and procedures comply with the requirementso the Corporations Act 2001, APES 110 Code of Ethics

for Professional Accountants and Australian PrudentialRegulatory Authority (APRA) Prudential Standards.

Our rotation policies require that the engagement partnerand the EQCR or the audits o listed entities and APRA-regulated entities are rotated a ter ive consecutive yearso service. For other key audit partners involved in theaudits o l isted entities and other public interest entities,the rotation requirement is seven years. Followingrotation, these audit partners are not permitted to haveany involvement in the audit engagement or a periodo two years.

Deloitte maintains a database that tracks the number oyears o audit partner involvement to acilitate successionplanning and monitor compliance with rotationrequirements. Reassignment or rotation o an audit partneris planned well in advance and coordinated with the clientto ensure a smooth transition.

The NPPD has overall responsibility or the assignmento the appropriate partners to audit engagements. Figure10 summarises the person responsible or approval o theEQCR assigned to particular categories o engagements.

Our partners are responsible or sharing theirunderstanding o each clients business as well as theirindustry knowledge with the engagement team to ensurewe deliver quality outcomes.Andrew Gri iths, New South Wales Assurance Leader


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Figure 10: Individuals responsible or approval o engagement quality control review partners

Assurance Quality& Risk

National Pro essionalPractice Director

Risk &Reputation Leader

Engagement category

Audits o listed entities

Greater than normal risk

Much greater than normal risk

Audit process, tools and methodologyOur audit process, tools and methodology are designedto oster pro essional scepticism and encourage ourteams to robustly challenge the in ormation they receiverom the client. Our global audit technology plat orm,AuditSystem/2, provides a comprehensive system orthe planning, per ormance, documentation and reviewo our work in accordance with auditing standards andapplicable pro essional, regulatory and legal obligations.

AuditSystem/2 enables us to understand clients businessand transaction lows. It includes the Audit ApproachManual, common documentation and enabling so twaretechnology. Using this common and proven packageo guidance and tools enables Deloitte Network irmsto provide consistent, high quality and e icient auditservices, while maintaining the lexibility required to servevaried clients that o ten have complex requirements.

The Audit Approach Manual complies with InternationalStandards on Auditing. In Australia, Deloitte supplementsthe global methodology with material to re lect localobligations, including the Corporations Act 2001, pro essional and ethical standards, and di erencesbetween Australian and international audit standards.The Audit Approach Manual and AuditSystem/2 are wellstructured and require active involvement o partnersand managers in audit planning. AuditSystem/2 alsoprovides a system and process or e iciently obtainingand capturing appropriate audit evidence. In addition,they underpin our ability to ensure compliance withauditing, ethical and other standards. This approach andour overarching quality control system provide con idencein our integrity, objectivity and independence.

Engagement teams are urther supported by a wealtho other resources delivered via the global intranet toassist teams in delivering excellence. This includes Firmpolicies, industry in ormation, templates, tools, practice

aids and requently asked questions. The AssuranceQuality & Risk Team also issues a weekly newsletter,Deloitte Audit+, to maintain ocus on audit quality andin orm or remind partners and sta about topical issues.

In addition, technical alerts are issued to auditpractitioners to clari y or communicate aspects o theAudit Approach Manual or to convey indings rommonitoring processes.

Deloitte Audit program under development:US$300 million global investment

The Deloitte Network has invested over US$300million in the development o its Deloitte Audittrans ormation program. Deloitte Audit includes newso tware known as the Engagement ManagementSystem (EMS), which will succeed the currentAuditSystem/2 technology plat orm, combinedwith a program o broader, practical changes tourther enhance our pro essional service delivery.This combination o so tware and service practiceswill support audit quality, provide greater agility in

responding to uture regulatory requirements andenable us to provide an enriched experience or ourclients and people.

We believe that our approach, which transcends puretechnology implementation to encompass behaviouralchange will allow us to deliver best in class statutoryaudits once ully implemented.

The Deloitte Audit trans ormation program isexpected to be ully implemented in Australia byMay 2015. It ollows the introduction o signi icant

changes to the Deloitte audit methodology in 2010.


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Engagement documentation and securityIt is o the utmost importance to Deloitte to maintainthe con identiality o client and other in ormation.The Deloitte Policy Manual includes speci icrequirements in relation to client con identiality andin ormation security. In addition, access to individualclient AuditSystem/2 iles is restricted to engagementteam members.

Firm policy requires audit iles to be archived in accordancewith relevant requirements. Archiving is closely monitoredand a weekly report is issued to partners, directors andmanagers to acilitate compliance. Non-compliance witharchiving policy impacts partner per ormance and ourPractice O ice Review Program rating.

All work papers supporting our audit reports are retainedor seven years as required by the Corporations Act 2001.

Supervision, review and consultationOur audit approach requires that audit engagementsare adequately planned, supervised and managed so thatthe work per ormed is both e ective and e icient, and toprovide reasonable assurance that work complies with ourpolicies and applicable pro essional standards. The overallsupervision o each audit engagement is the responsibilityo the engagement partner.

Supervision and reviewFigure 11 summarises the Firms policies and proceduresor review. A number o the reviews, including Pro essionalStandards Review and our policy to have an EQCR on allCorporations Act 2001 engagements go beyond legal andpro essional requirements and are a strong eature o ourquality control system.


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Figure 11: Deloittes review policies and procedures or audit engagements

Type o review Required on Per ormed by Review objective

Working paper reviews

Detailed review All engagements A moreexperiencedmember o theengagement

team

To consider whether: The work has been completed appropriately

Any significant matters have been raised for further consideration

Appropriate consultations have taken place and the resulting conclusions havebeen appropriately documented

There is a need to revise the nature, timing and extent of planned audit procedures

The evidence is sufficient to support our report

The objectives of the engagement procedures have been met.

Primary review All engagements Manager, Directoror Partner

Overriding review All engagements Partner

Engagement quality reviews

Engagementquality controlreview

Listed andhigh-risk entities

Partner To consider whether: The conclusions reached on significant judgements made by the engagement team

are appropriate

The report is appropriate

Appropriate consultations have taken place and the resulting conclusions havebeen appropriately documented

The workpapers in respect of significant judgements support the conclusionsreached.

Engagementquality controlreview

Other entities Partner ordirector

Specialist reviews

Pro essionalstandards review

Selection oengagements

Director To con irm that all required quality control procedures have been completed.

Pre-issuancereview

Disclosing entities Accountingtechnical directoror partner

To assess inancial statements or compliance with the inancial reporting ramework.

Panel review All engagementswhere we areconsidering amodi ied opinion

Partner To consider the appropriateness o the type o audit to be issued and the wording othe modi ication or emphasis o matter..

ConsultationWhile each partner is empowered to make appropriatedecisions or their engagements, we strive to maintaina strong consultative culture wherein our partnersconsult requently and early with peers, subject matterexperts and technical specialists rom across the Firm and internationally within the Deloitte Network.

This approach greatly enhances our capacity to answer

complex questions. Engagement teams are encouragedto consult whenever they need additional in ormation,perspectives or specialised knowledge on accounting,auditing, legal, regulatory or other issues.

The NPPD has oversight o the National AccountingTechnical Team, led by the Lead Partner AccountingTechnical, and the Assurance Quality & Risk Team,led by the Assurance Risk Leader. These teams consisto dedicated, experienced pro essionals who providesupport to the engagement teams.

Our consultation policy is designed to provide reasonableassurance that agreement is reached between the partner

seeking consultation and the partner consulted, andthat conclusions o the consultation are documented,understood and implemented.


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Consultation with peers is an imperative given todaysbusiness environment. On many occasions consultingwith colleagues has helped me unravel complexitiesand get to the heart o issues on audits.Sneza Pelusi, Victorian Assurance Leader

It is important that there are skilled and knowledgeable specialists available or our partners and sta to consult with.The table below summarises the dedicated specialist partners and sta available or consultation within the irm.

Technical expertise accountingThe National Accounting Technical Team led by AnnaCraw ord provides timely and expert assistance toengagement teams. It specialises in accounting standardsand interpretations, including Australian InternationalFinancial Reporting Standards (A-IFRS) and United States(US) GAAP, and the inancial reporting requirements othe Corporations Act 2001.

As an IFRS Centre o Excellence and a member o the

Deloitte Global IFRS Leadership Team, the team hasaccess to global expertise and is at the ore ront oaccounting developments. It also bene its rom AnnaCraw ords membership on the Australian AccountingStandards Board.

A ormal documented accounting technical consultationprocess is in place or assistance on technical accountingmatters. This is aimed at enhancing the quality o theconsultation to provide a ull consideration o all relevantacts and circumstances, and to consider alternatives.

Technical expertise auditingThe Assurance Quality & Risk Team ocuses on audit qualityand risk management. It is responsible or maintainingthe methodology, tools and templates; providing guidanceand support to engagement teams; and delivering audit-related technical training. This includes providing irst-line support to our engagement partners and teams.

Throughout its engagement with practitioners and regularcommunications, the Assurance Quality & Risk Team

champions the importance o audit quality. The teamis also responsible or managing the Firms audit qualitymonitoring programs, including the internal PracticeReview Program and external monitoring by regulatorsand the Institute o Chartered Accountants in Australia(ICAA) (re er to sections 7 and 8).

Di erences o opinionThe proper execution o an audit requires pro essionalsto exercise judgement, which can result in di erenceso opinion. When these arise, either among memberso the engagement team or between members o theengagement team and those operating in a consultativecapacity, we have resolution policies and proceduresin place. These include escalation procedures to resolvedi erences and requirements to document outcomes.

Figure 12: Specialists available or consultation

Accounting AuditingLegal& Ethics

Independence& Conficts

National Quality& Risk Total

Partners 2 2 2 1 2 9

Sta 13 22 15 14 5 69

Total 15 24 17 15 7 78


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Communication with those charged withgovernanceE ective communication between the audit engagementteams, client management teams and Board AuditCommittees is critical to the quality o inancial reporting.Open, clear and timely communication deepens ourunderstanding o clients businesses and enables bothus and clients to consider issues as they arise throughouteach inancial year.

Our communications with Audit Committees and ourclients Boards o Directors cover the scope o aud its,any threats to our independence or objectivity and ourrisk assessment and judgements. This dialogue also makesit possible or us to provide insights into more qualitativeaspects o inancial reporting and the management oclients businesses.

We encourage our clients to take an approach to corporategovernance that attaches importance to inancial reportingand to the audit process. We also urge clients to ensurethat Audit Committees are active and pro essional andthat they challenge management in dealing with issuesidenti ied during the audit. We believe the AuditCommittee has a particularly important role to playin enhancing audit quality by:

Ensuring the company has appropriately skilledpersonnel responsible or inancial reporting anda culture that values high quality and transparentreporting

Ensuring the Board has a good understandingo the businesss model and that it critically evaluatesin ormation, anticipates and manages risks, andengages in rank, open dialogue with the auditor

Challenging disclosures in inancial reports to ensurea high level o transparency and integrity in inancialreporting

Understanding the cause o observations and indingsrom the auditor and ensuring management respondsappropriately.

Our communications are not only about reportingfndings to the Audit Committee, but also aboutproviding them with valuable insights rom our auditand the environment, and obtaining in ormation rom

them about matters relevant to the audit.Greg Couttas, National Pro essional Practice Director and Board Member


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The quality o our people and their collectivecommitment to our agreed standards is central toour ability to deliver world class audit services. Withthis in mind, Deloitte ocuses heavily on developingand rein orcing its culture, its recruitment andremuneration practices, diversity and on providingtraining and development opportunities or partnersand sta .

RecruitmentDeloitte aims to recruit highly talented, well-roundedindividuals with strong academic and technicalcapabilities who can demonstrate exceptional analyticaland innovative thinking. The Firms graduate and lateralrecruitment hiring processes involve detailed screeningand interviews. These steps are combined with robustselection criteria that measure potential new hires againstspeci ic competencies relevant to the hiring level.

Our recruitment program and communications approachhave led us to being awarded Top Accountancy GraduateEmployer 2011 by the Australian Association o GraduateEmployers, winning against organisations such as Google.

During iscal 2012, we made o ers to 229 graduatesrom universities across Australia and globally to joinour Assurance Practice. We had an acceptance rate o83%, resulting in us employing 190 entry level auditors.

Use o social mediaDeloitte is an acknowledged leader in using socialmedia to identi y and secure both graduates andmore experienced sta . We use social media to reach

individuals especially those belonging to the networkso our existing sta and allow potential sta to seeinside our organisation. The use o social media is alsoenabling us to reduce recruitment costs and improveboth sta quality and retention.

Twitter The irm-wide Twitter handle or Deloitteis @Green_Dot, and we currently have over 7,400ollowers. We have been on Twitter since 2009, and usethis handle to talk to our ollowers about li e at Deloitte,our latest thought leadership pieces, events, aroundthe o ice happenings, national and local initiativesand more.

Facebook Our Facebook page is aimed at graduates,and we use this to post events, live stream video chatsand share photos, status updates and general in ormationabout what we are up to at Deloitte. We have over 6,800ans or our page.

On campus We have done away with traditionalmarketing brochures and gone digital with an easy-to-use

iPad app that delivers in ormation about Deloitte.

5 Our people

Our employee value proposition

The value o being an employee or partner inour Assurance Practice is articulated in the Firmsemployee value proposition:

We are re-de ining the audit experience or ourclients and our people

We play to our strengths through our commitmentto diversity and by empowering our peopleto pursue their passions

We are a team o like minded pro essionals,driven to consistently deliver quality outcomesor our clients and the irm

We provide development, career opportunitiesand di erent experiences or our employees andclients, through our ongoing growth

We see the potential in our people and challengethem to develop and excel as business leaders

We oster a culture o continuous learning andpersonal responsibility or career development

We understand talented people can be restless.We encourage and enable mobility opportunities,

both locally and globally, through the diversityo our service lines and networks.


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Per ormance cultureAn important part o our capacity to deliver high qualityaudits is our ocus on recognising and rewardingexceptional per ormance. Partners and sta are regularlyassessed against a range o criteria designed to measureper ormance, with quality being a key consideration.

Every six months and as part o the Firms mid-yearand annual review processes partners and sta areassigned a rating based on criteria including compliancewith independence and ethical rules, attendance and

participation in training, and the results o both internaland external monitoring.

Failure to meet requirements associated with qualitycan a ect an individuals overall per ormance rating,remuneration and their eligibility or promotion.Depending on the severity o any non-compliance withFirm policies, disciplinary action including terminationo employment or removal rom the partnership mayalso be taken. For partners disciplinary action may alsoinclude inancial penalties.

All promotions to manager and director level requirethe submission o a detailed business case, and thedelivery o quality work is a consideration in inalappointment decisions. Those decisions are madeby the relevant business unit leader and peopleand per ormance leader.

In addition, sta receive regular on-the-job eedback,which is acilitated through our engagement per ormancereview process. This process requires sta to establishpersonal objectives at the start o each engagement andto demonstrate speci ic competencies with re erence toa competency model. This model incorporates technicalcompetence, client service, quality and leadershipe ectiveness, among other elements.

Throughout and at the conclusion o each engagement,sta receive in ormal and ormal eedback and anengagement rating which contributes to their overallrating at the mid-year and annual per ormance review.

These measures, combined with eedback rom ellowteam members, allow us to obtain a comprehensiveand ongoing view o individuals and their per ormanceand development needs. It also ensures sta per ormingdetailed, on-site audit work have the appropriatecapabilities and experience or their roles. We are

con ident that these actions, which are led by ourpartners, create an environment where achieving highquality is valued, invested in and rewarded, and thatour per ormance management and reward systemsor partners and sta promote the characteristicsessential to quality auditing.

Partner remunerationThe basis o our partner remuneration is the achievemento individual partner plans that are aligned to irm-wideand business unit objectives. A strong contributionis expected rom all partners in the ollowing areas:

Achieving per ormance and living our cultureas articulated in Signals, personally and in teams

Serving our clients with distinction

Recruiting, motivating, inspiring and developingour people

Developing personal networks that are sharedwith colleagues

Supporting and contributing toward irm-wideinitiatives

Demonstrating a strong commitment to quality, riskmanagement and the stewardship o our reputation.

Our partner per ormance management and remunerationprocess ensures a strong link between audit quality andpartner remuneration.

At Deloitte we all have a tailored career plan that is reviewedtwice a year. This means that each o us can build a careerpath that is designed or us as individuals, to play to ourstrengths, interests and passions.Tim Richards, Western Australia Assurance Leader


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Assurance partners are also prohibited rom earningor receiving compensation, bonuses and other directinancial incentives or selling products or services totheir audit clients.

Deloittes partner appointment process is thoroughand robust. It is based on a detailed business case whichincorporates compliance with the Firms quality and riskmanagement practices as a key consideration. All businesscases or partnership must be endorsed by the ServiceLine Risk Leader and the National Service Line Leaderand be approved by the National Executive.

Both partner remuneration and partner appointmentsare ultimately required to be approved by the CEO andthe Board o Partners to ensure Firm processes have beenollowed, contributions are properly recognised and thatthe Firms values have been maintained.

Pro essional developmentWe seek to ensure that our people enjoy rewardingand challenging careers, and that we maintain a highlycompetent work orce to deliver outstanding serviceand quality to our clients. This is achieved by havinga detailed understanding o the skills and capabilitiesrequired by individuals at particular points in their career,and an innovative and structured approach to learningand development.

Our continuing pro essional development centreson targeted learning programs which incorporate bothtechnical and non-technical curricula. These have beendesigned around a competency ramework and areintended to:

Provide partners and sta with the right skills, at theright time, to provide both quality outcomes or clientsand rewarding career experiences or our people

Keep partners and sta at the ore ront o newdevelopments in the accounting, auditing andregulatory environment

Ensure the irms quality and risk imperative isembedded in the Deloitte culture and its leadership.

Technical trainingAll partners and sta are supported in meeting their ethical,quality, compliance and personal independence obligationsby appropriate induction, ongoing technical and otherlearning programs, as well as by supervision by more seniorteam members and our partner led audit process. Theseare designed so that we comply with regulations andso that we do not accept any assignments that wouldcompromise our integrity or independence.

Newly hired graduates are provided with an extensiverange o learning opportunities during their irst threeyears. These include ormal technical training, on-the-jobcoaching and experiential based learning. Graduates mustalso complete the ICAA Chartered Accountants Program.Completion o the program is monitored and ailure oany part o the program is treated seriously. Success ulcompletion o the program is also a considerationin determining eligibility or promotion. For CharteredAccountants Program exams taken during the year ended31 May 2012 Deloitte candidates had a pass rate o88% versus a national average o 80%. During thisperiod 219 Deloitte candidates success ully completedthe Chartered Accountants Program.

Lateral hires are provided with speci ic technical learningsupport when they join the Firm. Along with all partnersand audit sta , they also participate in mandatory bi-annualaccounting and auditing technical training. Our dedicatedAudit and Accounting Learning Team provides speci iclearning modules that cover new developments.

Assurance partners are required to complete ongoingcompulsory learning modules to maintain their Deloitteaccreditation to sign audit opinions. In the case onon compliance, the Firm does not hesitate in applyinga suspension to the signing rights o an engagementpartner or EQCR. Where partners sign audit opinionsor other jurisdictions (such as the United States), additionalmandatory training is provided.

We are a people business. We seek to empower and trustour people a ter equipping them with the right tools,training and support structures.Margaret Dreyer, Assurance People and Per ormance Leader and Board Member


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We require our assurance pro essionals to obtain aminimum o 20 hours o comprehensive mandatoryaudit learning and development per annum and 120hours in every three-year period (i.e. an average o 40hours per year).

Over and above this comprehensive mandatory auditlearning and development syllabus or our partners

and sta , we provide regular technical updates,industry-speci ic training, e-learning modules andwebinars to allow partners and sta to access relevanttraining on demand. So t skills trainingThe Firm supports a comprehensive, non-technicaldevelopment ramework and curriculum based on adetailed competency ramework. This is designed toprovide the critical skills necessary or both individualand business success through structured point-in-timepro essional development programs, as well as a rangeo development options that may be tailored to meetindividual development needs.

Further avenues or pro essional development areprovided to sta through a irm wide mentoring program.More than 1,000 people in the Firm signed up or thismentoring program in 2012. This is in addition to on-the-

job coaching, which is heavily embedded within auditengagement management.

DiversityWe pride ourselves on having high levels o diversitywithin the irm and believe that having a diverse rangeo viewpoints among our team assists in the deliveryo high quality services and unique insights.

Among the Big Four accounting irms in Australia,Deloitte is the only one to have a emale national

Assurance Practice leader (Cindy Hook). Twenty-twopercent o Deloitte Assurance Practice partners arewomen and 21% o the new Assurance partners whowere appointed in 2012 were women.

Our commitment to diversity was re lected in Deloittewinning the Inclusive Workplace o the Year award atthe 2012 Australian Human Resources Institute DiversityAwards. This award recognises organisations that havedemonstrated they have prioritised diversity and recognisethe value o an inclusive workplace or all individuals andthe broader organisation. Deloittes Inspiring Womenprogram and its culture and belie s were key drivers othis success. In 2012, Deloitte Australia was also recognised as anEmployer o Choice or Women or the 11th successiveyear by the Federal Governments Equal Opportunityor Women in the Workplace Agency.


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A strong commitment to ensuring that our peopleoperate within strong ethical and independencerameworks underpins the integrity o our work.

EthicsOur expectations o partners and sta are documentedin our Ethical Code of Conduct (the Code), whichcaptures how our vision, values and conduct worktogether. The Code reminds our people that certain skills

are undamental to ethical decision making, and thateach o us is personally responsible or our decisionsand actions. Together, the values and principles set outin our Signals and the Code de ine Deloitte.

The Firm rein orces its commitment to ethics and integritythrough communication tools, learning programs,compliance processes and measurement systems.

Deloitte also has an Ethics O icer who promotes theimportance o ethical behaviours and who is supportedby Ethics Advocacy O icers in each o ice. The Ethics

O icer is an experienced partner who has direct accessto the CEO and the Board.

Further, we have an ethics helpline, Sa etyNet, which iscon idential and anonymous. This o ers a con identialway or individuals to raise issues or concerns.

A December 2011 sta survey con irmed that morethan 90% o the respondents were aware the Firm hadan Ethics O icer and o our ethical principles. Further,91.3% o respondents were aware o our ethics hotlineSa etyNet. The Firm requires all partners, pro essionalsta and support sta to con irm annually that theyhave read and understood the Code and understandthat it is their responsibility to comply with the Code.

6 Ethics and independence

Deloittes Ethical Principles Honesty and integrity we act with honesty

and integrity Pro essional behaviour we operate within

the letter and the spirit o applicable laws Competence we bring appropriate skills

and capabilities to every client assignment Objectivity we are objective in orming our

pro essional opinions and the advice we give Con identiality we respect the con identiality

o in ormation Fair business practices we are committed to

air business practices Responsibility to society we recognise and

respect the impact we have on the world around us Respect and air treatment we treat all o our

colleagues with respect, courtesy and airness Accountability and decision-making we

lead by example, using our shared values asour oundation.

We see doing the right thing as being a principlethat is undamental, not just to the public interestand the interest o our clients, but also the reputationo our Firm, partners and people.


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IndependenceDeloittes commitment to independence and objectivityis the essence o our brand and the oundation on whichwe have built our reputation or integrity and quality.

We satis y ourselves on independence issues witheach client and on each engagement. Our commitment

to independence is demonstrated by the tone set byour leaders and is ollowed by care ul and consistentimplementation and monitoring o comprehensiveindependence policies and procedures.

Our Independence and Con licts Partner leads a nationalIndependence Group, which comprises experienced anddedicated independence specialists. The IndependenceGroup is responsible or communicating independencepolicies and procedures, providing consultation support,implementing and monitoring independence qualitycontrols, designing and conducting independencetraining and monitoring compliance with independencerequirements.

All pro essionals are encouraged to consult withthe Independence Group on:

Independence issues that arise in the course o servingour clients

Questions on personal inancial interests

Guidance on the provision o non-audit servicesand business relationships

Reviews o proposals and engagement letters toensure compliance with independence policies.

Independence policiesTo establish clear guidance or partners and sta ,Deloittes independence policies include the auditorindependence requirements o the CorporationsAct 2001 , APES 110Code of Ethics for Professional

Accountants and, where applicable, the independencerules o the US Public Company Accounting Oversight

Board and US Securities and Exchange Commission.In some areas, Deloittes independence policies imposemore stringent restrictions than those required byregulation and pro essional standards, such as arestriction on all partners and their immediate amilymembers rom having shares in any DTTL member irmlisted audit client.

Deloittes independence policies apply to all partnersand employees, regardless o role or level. The policiesalso apply to the immediate amily members o thoseindividuals and, in certain instances, to other closerelatives. The policies include restrictions on the inancial,employment or business relationships that can be enteredinto with audit clients, as well as guidance on the non-audit services and ee arrangements that, i providedto audit clients, may impair independence.

The independence policies and related guidance weresigni icantly revised in January 2011 to take into accountchanges to the International Ethics Standards Board orAccountants (IESBA)Code of Ethics, and are available toall o our partners and employees on Deloittes intranet.

Annually, Deloitte reports to DTTL that it has carried out

appropriate procedures to conclude that the memberirm and its pro essionals have complied with theindependence policies.

Auditor independence is an essential componento public trust in the audit pro ession and at the coreo our ability to deliver quality audit and assuranceservices. I am proud to say that all our people take their

responsibilities or maintaining independence seriously,both real and perceived.Marisa Orbea, National Quality and Risk Partner, and Independence and Con licts Partner


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Restricted entity list and monitoring o nancialinterestsDeloitte maintains a restricted entity list that includesentities which, due to local or global audit relationships,are restricted or pro essionals and their immediateamily members or the purpose o acquiring investmentsor other inancial products. The list includes DeloitteNetwork audit clients that are listed companies, registered

schemes, retail superannuation unds and otherorganisations such as inancial institutions that o erinancial products to the general public. Pro essionalsare required to search the restricted entity list be oreacquiring a inancial interest or other inancial product.

To ensure compliance with the inancial and investmentrestrictions placed on our pro essionals, we use anautomated independence monitoring system to trackpersonal inancial holdings. All Deloitte partners andmanagement-level client service pro essionals are requiredto record and update their investments and thoseo their immediate amily, in their individual accountsin the monitoring system.

To allow timely resolution o any potential independenceissues, the monitoring system is linked to the restrictedentity list, so the system can automatically email userswhen a potential exception may need to be addressed dueto a change in restriction. System generated noti icationsrelated to investments in restricted entities are monitoredand ollowed up by the Independence Group.

Independence trainingAll partners and pro essional employees are required

to complete training on the independence policies whenthey join Deloitte. This training is generally completedwithin two weeks o employment, and new partnersand employees are subsequently required to submit awritten con irmation stating that they understand andwill comply with the independence policies. They arealso provided with personal independence summaries,and a brie introduction to other independence systemsand policies.

The training is designed to help our pro essionals becomeamiliar with independence requirements, emphasise theimportance o complying with independence policiesand in orm them o the specialists available to help themresolve potential independence issues.

Ongoing training incorporates updates to theindependence policies and more ocused case studies.

Deloittes Independence Group and the DeloitteNetwork Global Independence Group issue regularpolicy updates and independence alerts to ensure thatchanges in the global regulatory landscape and newpolicies or interpretations are promptly communicatedto all o our people.

Independence con rmations and internal monitoringAll our people, including administrative employees,are required to submit an annual written con irmationthat they have read, understood and complied withDeloittes independence policies. The IndependenceGroup care ully monitors the con irmation process andensures that any potential issues that may be disclosedin the con irmations are evaluated and resolved.

In addition, all pro essionals who are assigned toprovide services as part o a inancial statement auditengagement are required to con irm their independenceo the audit client.

Deloitte has implemented an ongoing program totest the accuracy and completeness o the independencecon irmations and the inancial in ormation in theautomated independence monitoring system.

This involves periodically selecting a sample opro essionals and reviewing their personal inancialin ormation and that o their immediate amily to testcompliance with the independence policies.

During calendar year 2011, 26% o partners wereselected or independence compliance testing.


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Disciplinary processDeloittes leaders take a zero-tolerance approachto non-compliance with the independence policies.Our partners and employees are subject to disciplinaryaction i they violate our policies. Depending upon theseverity o the violation, sanctions may include writtenwarnings, inancial penalties and potentially terminationo employment or removal rom the partnership.

Scope o services or audit clientsDeloitte engagement acceptance policies requirethe partner leading a potential engagement to supervisea process designed to identi y entities or which wemust maintain independence. This includes determiningwhether Deloitte has an audit relationship with thepotential client or any o its a iliates and, i so,determining whether the services can be providedwithout impairing auditor independence.

Our policies require approval rom the lead clientservice partner to be obtained and documented prior toacceptance o all new engagements, even i that partneris located in a Deloitte Network irm in another country.

Each year, the Independence Group conducts reviewso a sample o engagements to test compliance withrelevant policies.

Business relationships and alliancesBusiness relationships and alliances with third partiescan impair auditor independence. The Firm haspolicies and training programs which are speci icallyocused on educating our people about these

arrangements. In addition, all proposed marketplacebusiness relationships require evaluation and approvalby the Independence Group and are then maintained andmonitored in a central database o approved relationships.

Deloitte recently updated its processes and procedures orengaging independent contractors, including centralisingthe management o contractors through a single third-party service provider. This was done to ensure potentialindependence issues are identi ied and assessed priorto arrangements being entered into.

Potential independent contractors are required to provide

details o relationships such as their directorships andother employment arrangements, which must beevaluated and approved by the Independence Groupbe ore a contract can be agreed.

Fee dependencyIntimidation and sel -interest threats to independencemay be created rom the relative size o ees generatedrom an individual audit client or audit client group.We monitor signi icant clients and evaluate total eesrom our audit clients as a proportion o the total eeso the Firm to identi y potential threats to objectivity andindependence. As the revenue received rom our largestaudit client is less than 1% o the Firms total revenue,we have not identi ied any potential threats arising romeconomic dependence on any clients.

Review o independence practices and monitoringThe Firm per orms an annual internal review o theindependence quality controls, which is overseen byan individual nominated by the Deloitte Network.At least every three years, an external review o ourindependence quality controls is undertaken. The resultso these reviews are communicated to the CEO.

The most recent review was an external reviewundertaken during March 2012.


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7 Continuous improvement

In a rapidly evolving, technologically-driven businessenvironment, agility and adaptability o skills andthe capacity to deal e ectively with complexitywill be seen as increasingly important dimensionso audit e ectiveness.

We strive to continuously improve audit quality. This isachieved by monitoring our per ormance then makingany changes required to urther build con idence in ourwork and the companies and inancial markets weoperate in.

Internal monitoring o quality control policies

and proceduresTo complement our policies, procedures, tools andbehaviours that drive audit quality, we pursue monitoringinitiatives to enable us to achieve continuous improvement.Our quality control system is designed so that we canassess quality as we work as well as through a more ormalannual review program.

Our annual Practice Review Program is a key componento the irms overall quality control system. I t is aninspection and monitoring mechanism designed toprovide evidence o compliance with, and consistencyin, the application o the Deloitte Network policies andmethodologies. The Practice Review Program assuresthe Firms leadership that our quality control systemsare operating e ectively.

The indings and recommendations resulting romthe practice reviews are presented to the Firms CEO.The purpose is to provide suggestions or improvementin response to indings noted. This includes a detailedaction plan setting out the action to be taken, theperson(s) responsible and the timing to implementthe recommendations.

Each year, the Firm also communicates the results othe practice review and ongoing consideration andevaluation o its system o quality control to its partnersand other appropriate individuals within the Firm.

When responding to indings rom the practice reviewsor regulatory inspections (re er to section 8), we seekto understand the root cause o the inding so that wecan develop a response that is most likely to reduce theoccurrence o the inding in the uture.

Continually grow and improve is one o our sevenSignals. We are not complacent but rather continuallystrive to do better.Kristen Wydell, Assurance Risk Leader


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Deloittes Client Service Assessment ProgramDeloitte is committed to providing a high level o clientservice. An essential part o delivering, sustaining andimproving our service is to gather regular and structuredeedback rom our clients.

At the end o engagements, Deloitte partners whoare independent o the engagement and/or client

relationships conduct structured ace-to- ace interviewswith key contacts at the client organisation. In iscal2012 the Assurance Practice completed 495 interviewso our clients executives and directors to obtain theireedback on the per ormance o our team. Followingthese interviews the engagement team is given speci iceedback and takes action to continuously improve ourservice delivery to clients.

This process is designed to enable us to benchmark servicelevels, highlight any issues or areas or improvement ortraining, and to identi y best practices via standardquestions. It also gives the client an opportunity to speakreely in a con idential environment.

ComplaintsTo ensure the Firm retains its strong reputation,we have a publicly available Complaints Handling Policy.This is designed to provide guidance on the mannerin which Deloitte receives and manages complaintsmade against the Firm, its partners and its employees.The policy is supported by a procedures manual to helpsta resolve complaints in an e icient, e ective andpro essional manner.

Our process includes appointing a Complaints O icerand designating communication channels to managecomplaints. Complaints are documented and analysedby the Complaints O icer to determine i any actions,including changes to the systems o quality control,should be taken to address speci ic problems.

Key eatures o the Practice Review Program

The program is led by the Firms Practice ReviewDirector, who is responsible or the generalcoordination and administration o the practicereview activities in the member irm

The practice review plan, process and results arereviewed and concurred by a partner rom anotherDTTL Network irm

Every audit partner is reviewed at least once everythree years. Engagement iles o 46% o ourAssurance Practice partners were subject to reviewin iscal year 2012

Templates are used by reviewers or consistencyand are supplemented with country-speci icocus areas

Engagements selected or review includenational engagements and inbound/outboundtransnational engagements (audits o inancialstatements that are or may be used across nationalborders), public interest entities, as well asa number o high risk audit engagements.Some sensitive and complex engagements are alsoselected. All major industries served by the Firmor practice o ice are considered

Reviewers are chosen rom regional or internationalpools or rom other practice o ices or clusterswithin the Firm. The assignment o reviewersis based on skill level, industry knowledge andexperience

The reviews o individual engagements consisto discussions with the partner and/or directoror manager responsible or the engagementand a review o related reports, working papersand, where appropriate, correspondence iles

Partners receiving ratings below a certain levelhave additional engagements selected or reviewand are automatically reviewed the ollowing year

Findings are incorporated into partnerper ormance assessments.


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8 External monitoringand contributions

Given the important role o auditors in theinancial markets, our pro ession and Deloitteare subject to external oversight by the AustralianSecurities & Investments Commission (ASIC) andoverseas regulators where applicable. We see thisoversight as an opportunity to gain independenteedback on our Assurance Practice to complementour internal review program.

External monitoring and regulationAustralian Securities & Investments CommissionASIC has responsibility or oversight o auditors inAustralia, including Deloitte. ASIC monitors compliancewith the auditor independence and audit qualityprovisions in the Corporations Act 2001, and conductedits last inspection o Deloitte in November 2011.Inspection indings are reported by ASIC in a privatereport to each individual irm. Periodically, ASICpublishes a public report on its audit inspection programsummarising the scope and overall indings o inspections.Re er to www.asic.gov.au or ASICs latest report.

We recognise the importance o ASICs role in promotinghigh quality external audits o inancial reports o listed andother public interest entities, so that users can have greatercon idence in these inancial reports and Australias capitalmarkets. We participate in an open and ongoing dialoguewith ASIC, recognising that our obligations are continuingand not limited to inspection periods.

Matters raised by ASIC are analysed with a view todetermining root causes, and developing strategiesthat seek to recti y the concerns raised in uture periods.

In addition, we are attentive to general indingsreported by ASIC in its public report as they mayprovide opportunities to improve our processes.

Public Company Accounting Oversight Board (US)Deloitte is registered with the Public Company AccountingOversight Board (PCAOB) in the US, as we play a substantialrole in the audits o a number o issuers in the US.

The Sarbanes-Oxley Act o 2002 authorises the PCAOBto inspect registered irms or the purpose o assessingcompliance with certain laws, rules, and pro essionalstandards in connection with a irms audit work orclients that are issuers as de ined in the Sarbanes-OxleyAct o 2002. In general, the PCAOB inspects each irmin this category either annually or triennially, dependingupon whether the irm provides audit reports or more

than 100 issuers (annual inspection) or 100 or ewerissuers (triennial inspection). Deloitte alls into a triennialinspection time rame.

The PCAOB conducted its last inspection o Deloittein November 2011. The PCAOB publishes a report onits website in relation to each irm inspected. Re er towww.pcaobus.org or PCAOB reports.

Canadian Public Accountability BoardDeloitte is registered with the Canadian PublicAccountability Board (CPAB) in Canada, as we audita number o Canadian reporting issuers. These arecompanies that have raised unds rom the Canadianinvesting public and must ile inancial statements withone or more provincial securities commissions.

CPAB oversees auditors o Canadian reporting issuersand under Canadian Securities Administrators Rule52108, accounting irms that audit reporting issuersmust be participants in CPABs oversight program.CPAB has not inspected Deloitte to date.

Financial Reporting Council (UK)Deloitte is registered with the United Kingdoms (UK)

Financial Reporting Council (FRC) because we auditcompanies that have issued securities admitted totrading on UK-regulated markets. The FRC is the UKsindependent regulator responsible or promoting highquality corporate governance and reporting.

In January 2011, the European Commission grantedAustralia equivalent status. This means that the systemso regulation o auditors o public interest entitiesin Australia have been judged as equivalent to thoserequired within the European Union by the StatutoryAudit Directive. The FRC has advised Deloitte that itwill not be conducting a separate inspection o Deloitteas it will be relying on ASICs inspection program.


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Institute o Chartered Accountants in Australia (ICAA)The ICAA has a quality assurance process to monitorwhether its members have quality control policiesand procedures in place to comply with pro essionalstandards and legal requirements. The ICAA is in theprocess o implementing a new approach or the largeirms, including Deloitte, ocused on the drivers o auditquality across the audit practice to establish whetherthe audit unction is conducted within an appropriatecontrol environment, and relying on the detailed ASICinspections and internal reviews o the irms, rather thanreviewing individual audit engagements.

External contributionWe are proud o the act that our irm is actively involvedin shaping the uture o accounting and auditing throughinvolvement by our partners with government, standards-setting bodies and pro essional associations. The ollowingpartners contribute to the accounting and auditinglandscape:

Caithlin McCabe (National Quality & Risk Partner)is a member o the International Auditing andAssurance Standards Board and a member o theAustralian Public Policy Committee

Marisa Orbea (National Quality & Risk Partnerand Independence and Con licts Partner) is amember o the International Ethics Standards Boardor Accountants

Kristen Wydell (Assurance Risk Leader) is a membero the Audit Advisory Committee o the ICAA, is amember o the Australian Auditing Standards and amember o the Australian Public Policy Committee

Anna Craw ord (Lead Partner AccountingTechnical) is a member o the Australian AccountingStandards Board

Tim Gulli er (Partner) is the Deputy Presidento the ICAA.

Figure 13: Australian and international regulators with oversight o Deloitte

Regulator Inspection Firm reporting

ASIC Inspected six times between 2005 and 2011.The last inspection was in November 2011.

Private reporting.

PCAOB Inspected twice since 2005. The last inspectionwas in November 2011.

Public Report Report on 2011inspection not yet issued. Previousinspection report available at

www.pcaobus.orgCPAB Not inspected to date. Not applicable.

FRC Reliance on ASIC inspection program. Not applicable.


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Appendix 1 Deloitte audit clients

Companies and organisationsDeloitte completed statutory audits for the followinglisted companies during the year to 31 May 2012.

Aberdeen Leaders LimitedAdelaide Resources LimitedADG Global Supply LimitedAGL Energy LimitedAguia Resources Limited

Alpha Financial Products LimitedAmbition Group LimitedAngas Securities LimitedAP Eagers LimitedAPA Group (Australian Pipeline Trust and APTInvestment Trust)APN European Retail Property Group (APN EuropeanRetail Property Holding Trust and APN European Ret

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Deloitte Australia Transparency Report 2012

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