for the year ended 31 March 2018
- Legal structure and ownership of the audit firm
- The Haines Watts Group network
- Internal quality control systems
- Review of independence compliance
- Continuing professional development / education
- Monitoring of quality control at the audit firm
- Public interest entities audited by the audit firm
- Financial information relating to the audit firm
- Partners’ remuneration
Audit registered firms within the Haines Watts Group Network
The implementation of EU Audit Regulation (as defined in The Statutory Auditors and Third Country Auditors Regulations 2016 (SATCAR), Regulation (EU) 537/2014) in June 2016 brought about changes to the requirements for transparency reporting, both in terms of the audit firms caught by the new requirements and the disclosures required.Transparency reports under this new Audit Regulation are initially required in respect of financial years of relevant audit firms commencing on or after 17 June 2016, the date on which the Regulation came into force.
These regulations require a statutory auditor or an audit firm that carries out statutory audits of public-interest entities make public via its website, an annual transparency report at the latest four months after the end of each financial year, and that as a minimum, such reports are to include information about themselves, any network they are members of, and their systems of quality control and independence procedures and practices.
As at 31 March 2018, Haines Watts Birmingham LLP (“the audit firm” or “Birmingham”) is auditor of a public interest entity as defined, and thus this transparency report has been prepared in accordance with the provisions of the above regulations
We set out below how we have addressed those areas as required.
For and on behalf of
Haines Watts Birmingham LLP
12 June 2018
2. Legal structure & ownership of the audit firm
The audit firm is a separate legal limited liability partnership, registered to carry on audit work by the Institute of Chartered Accountants in England & Wales.
2.1. As at 31 March 2018, there were 6 principals in the firm, with 4 being Responsible Individuals for audit purposes as defined by the ICAEW’s Audit Regulations and these act as Senior Statutory Auditor as required by the Companies Act 2006.
2.2. The principal services offered by the audit firm and from their associates from within The Haines Watts Group network (“the Group”)(see “The Haines Watts Group Network” below) include audit and accounting, taxation, corporate finance, financial services, general business services, asset finance, and forensic accounting.
3. The Haines Watts Group network
3.1. “Haines Watts” and “The Haines Watts Group” generally refer to the network of member organisations, each of which is a separate and independent legal entity, either partnerships, limited liability partnerships or limited companies. Each entity has signed a participation agreement with Haines Watts Limited, or is controlled by such a firm. Member organisations are not members of one legal entity and are only liable for their own acts and omissions, and not those of each other.
3.2. Collectively, the Haines Watts Group is one of the top 20 firms of Chartered Accountants in the UK, and has over 50 offices, 158 principals and in excess of 900 employees. Total turnover of the Group for the year ended 31 March 2018 resulting from statutory audits of annual and consolidated financial statements, amounted to £11 million.
3.3. Haines Watts Birmingham LLP is a member of this group.
3.4. As at 31 March 2018, there were 37 firms within the Group that were registered to carry on audit work by the Institute of Chartered Accountants in England & Wales. Each have their registered office or principal place of business within the UK. These firms are listed in Appendix A.
3.5. Although the firms within the Group are separate legal entities, the Board of Haines Watts Limited is charged with co-ordinating various policies and procedures throughout these firms, such as audit and accounting, tax procedures, HR and training, central and local administration, and quality and quality control.
3.6. It is the responsibility of principals of the individual firms within the Group, including Birmingham, especially the local senior principals, to ensure these policies and procedures are adhered to as well as ensuring that local procedures and controls are in line with guidance issued by the Group.
4. Internal quality control systems
4.1. The Group’s system of internal quality control is designed to provide reasonable assurance that the Group, all the constituent firms, principals and staff comply with professional standards and regulatory and legal requirements; work is performed to a consistently high standard; and that reports issued by the various firms, including Birmingham are appropriate.
4.2. The system of internal quality control can be split into the following elements:
- leadership responsibilities for quality within the firms,
- ethical requirements,
- human resources,
- acceptance and continuance of client relationships and specific engagements,
- engagement performance,
4.3. Each element, along with relevant policies and procedural guides, is specifically addressed in detail on the Group’s intranet site, which is available to all personnel with the Group, with the requirement that all relevant persons need to acknowledge their awareness and reading of updates to these policies and procedural guides.
Leadership responsibilities for quality
4.4. The overall responsibility for quality within the Group rests with the Haines Watts Limited Board, specifically the Group Chairman and the Group Managing Director, with the Group Chairman is specifically responsible for Audit and assurance and Quality matters.
4.5. There are specific National Quality Control personnel, who are under the direct control of, and report directly to the Group Chairman in his role as main Board director responsible for Audit and Quality. These individuals are totally independent of the constituent firms, principals and staff.
4.6. Further, there is a committed internal culture based on the recognition that quality control is essential in performing engagements. Such policies and procedures require each firm’s managing or senior principal, or equivalent, to assume ultimate responsibility for each firm’s own systems of quality control, although this can be delegated to a person with sufficient and appropriate experience and ability and the necessary authority to assume that responsibility.
4.7. The responsibility for specific audit assignments rests with individual audit engagement principals / senior statutory auditors, who are responsible for ensuring that relevant auditing and ethical standards, and other regulatory requirements are complied with on their individual assignments.
4.8. The policies and procedures ensure that the engagement principals have the necessary competence, are aware of their responsibilities, and have sufficient time and support to perform their role effectively.
4.9. When audit work is assigned to personnel, the audit engagement principal must consider the level of technical training and proficiency required by the personnel in order for the assignment to be carried out competently. Appropriate personnel are then assigned having regard to their previous experience and technical training.
4.10. The audit engagement principal must ensure that delegated work meets the firm’s standards of quality. This is achieved by providing direction to the audit work by way of the audit plan; ensuring there is sufficient supervision of the audit work being carried out; and establishing procedures so that all audit work is properly reviewed.
4.11. The Group has established policies, procedures and guidance designed to provide reasonable assurance that each firm, principals and staff comply with relevant ethical requirements and standards to ensure that professional objectivity and independence is maintained. The relevant ethical requirements are the ICAEW’s Code of Ethics, which set out fundamental principles for all professional accountants to follow, and the Financial Reporting Council (FRC) Ethical Standard, which applies in the audits of financial statements and other public interest assurance engagements.
4.12. The ethical guidance is available to all staff on the Group’s intranet. Annual declarations are made by all principals and staff to confirm awareness of and compliance with relevant ethical requirements and compliance with ethical issues is addressed within quality control monitoring undertaken throughout the Group each year – see below.
4.13. Each firm within the Group has established policies and procedures to ensure it has sufficient personnel with the capabilities, competence, and commitment to ethical principles necessary to perform its engagements in accordance with professional standards and regulatory and legal requirements. These policies and procedures are set out in the Group’s Intranet and include recruitment; performance evaluation; and capabilities and competence.
4.14. Recruitment – Policies and procedures for recruitment are designed to provide reasonable assurance that those employed possess the appropriate characteristics to enable them to deliver a high quality service and perform their duties with professional competence.
4.15. Performance evaluation – All staff members are subject to formal performance appraisal, review and counselling on a regular basis, in order to evaluate the level of competence, monitor training and their training needs to help them reach their full potential.
4.16. Capabilities and competence – Policies and procedures for assigning staff to engagements are designed such that only those persons having adequate technical proficiency and competence will perform the work, taking into account its size, nature and complexity in accordance with professional standards and regulatory and legal requirements, and to enable the firm or engagement principals to issue reports that are appropriate in the circumstances.
Audit appointment / re-appointment
4.17. Robust client and engagement acceptance procedures ensure each firm has formal procedures for assessing whether the firm should accept appointment and re-appointment. The factors considered relate primarily to independence and assignment risk management, but also include fit and proper status and the integrity of the client, plus the adequacy of competence and resources within each firm. The acceptance of clients requires an approval process that is appropriate to the perceived risk, with some, depending upon laid down circumstances, requiring approval by the local senior principal through to the directors of Haines Watts Limited.
4.18. The general procedures in relation to appointments and re-appointments also include undertaking Client Due Diligence; obtaining client identity checks, and complying with ICAEW’s Code of Ethics and the FRC Ethical Standard in relation to changes in appointment, issuing the required engagement letter, and agreeing fee budgets. These considerations are re-iterated during the planning of the actual assignment and for continuing audit assignments, also at the conclusion as the authority to accept reappointment.
4.19. Each firm within the Group adhere to the FRC Ethical Standard as regards rotation of key audit partners and engagement partners, specifically they cease their participation in the statutory audit of a public interest entity not later than five years from the date of their appointment.
Audit engagement performance
4.20. The Group’s and individual audit firms’ policies and procedures are designed to ensure that audits meet all applicable professional standards, regulatory requirements and that each firm, and where applicable the Senior Statutory Auditor, issues reports that are appropriate in the circumstances. To achieve this and to ensure consistency in the approach, the Group and the individual firms subscribe to audit manuals plus working papers packs supplied by or following the methodology used by Mercia Group Limited, one of the UK’s largest providers of training and support services to the accountancy profession, along with other leading technical publications and literature. The methodology provided is fully compliant with the Audit Regulations and the Code of Ethics as issued by the ICAEW, and the Ethical Standard, the International Auditing Standards and other relevant pronouncements issued by the FRC.
4.21. There are also policy and procedures regarding consultation, differences of opinion and hot quality control reviews, with all work on individual audit assignments, unless the audit engagement principal generates the original, requiring review by at least one other person to ensure such policies and procedures have been followed.
4.22. In addition to any consultation that may be considered necessary, hot reviews are undertaken by experienced audit principals outside of the office performing the audit, on a selection of each audit engagement principal’s audits every year, especially including public interest entities and other higher risk engagements. The completion of these “external” hot reviews is monitored by the independent National Quality Control personnel – see 4.5 above.
4.23. The Group’s quality monitoring policies and procedures are designed to give the Group and the individual firms’ reasonable assurance that the internal quality control procedures are operating effectively and being complied with in practice.
4.24. The Group’s National Quality Control personnel, who are independent of the individual audit firms, undertake annual quality control reviews, which in their simplest form are in two parts. The first part covers a firm’s obligations under the audit regulations such as independence; fit and proper status; competence; appointment and reappointment; professional indemnity insurance; and continuing eligibility. The second deals with “cold” reviews of a selection of audit files to monitor compliance with Audit Regulations and the Code of Ethics as issued by the ICAEW, and the Ethical Standard, the International Auditing Standards and other relevant pronouncements issued by the FRC, and the Group’s own policies and procedures, and to ensure that the work done to arrive at an opinion, or to support advice that has been given, is both adequate and properly documented. The sample is selected to ensure that at least one file for each audit engagement principal is subject to review every year.
4.25. The local senior principal is required to report back to the National Quality Control personnel on the draft findings discussed, and these findings and responses form the basis of a Quality Control Report issued formally to the local firm, with a copy being sent to the relevant Haines Watts Limited director responsible for that firm and / or the Group Chairman in his role as the main Board director responsible for quality. A meeting of the local principals / staff is then required within three months of the visit date in order to report back to the National Quality Control personnel that any necessary improvements have been followed up and actioned. Such confirmations have been made following the last annual quality control review visit made to Birmingham – see 7.1 below.
4.26. The independent National Quality Control personnel meet with the Group Chairman in his role as the main Board director responsible for audit and for quality on a regular basis, to discuss issues and consider whether changes are required to Group policies and procedures.
5. Review of independence compliance
5.1. Compliance with the FRS Ethical Standard and the ICAEW’s Code of Ethics, is checked via annual declarations sought and obtained from all principals and staff and assessing the results from client take-on procedures, both of which are monitoring within the annual quality control review visits as is the examining for compliance and quality at least one audit file per audit engagement principal.
5.2. Compliance at Birmingham was confirmed to be adequate at the annual quality control visit noted below.
6. Continuing professional development / education
6.1. The Group’s and individual firms’ procedures are designed to ensure that principals and staff appear to be competent on recruitment or appointment; are competent in practice, and remain so in that they are adequately trained and updated in the skills and competence necessary, and the policies and procedures are available to all on the Group’s Intranet.
6.2. All principals and audit staff, attend regular technical update courses, in addition to “on the job” training. All are personally responsible for keeping up to date with the knowledge and skills which they need to successfully carry out the roles to which they are assigned. Intranet updates and a quarterly circular which provides a summary of important technical changes, plus on-line technical information by Mercia Group Limited are also provided to assist principals and staff.
6.3. As part of an individual’s performance appraisal, professional development needs are assessed and courses or other training opportunities are identified. The individual firms require participation in appropriate continuing professional development programmes and monitor the fulfilment of programme obligations.
6.4. Individuals involved in audit work are requested to complete and submit CPD / training records each year. These are reviewed for adequacy of training by the staff / training / audit compliance principal and are also considered within the annual quality control reviews undertaken by the Group’s Senior Manager Audit Compliance and Quality Control.
6.5. Compliance at Birmingham was confirmed to be adequate at the annual quality control visit noted below.
7. Monitoring of quality control at the audit firm
7.1. The last annual Quality Control Review undertaken by the Group’s National Quality Control personnel to Birmingham was in May 2018, and by the ICAEW’s Quality Assurance Department’s visit as part of its regular monitoring of firms, was in August 2015. Satisfactory conclusions were reached and confirmed from both these reviews.
8. Public interest entities audited by the audit firm
8.1. The public interest entity for which Birmingham carried out statutory audits during the preceding financial year is BIRA BANK LIMITED
9. Financial information relating to the audit firm
|Year ended||Year ended|
|31 March 2018
|31 March 2017
|Including income from regulated audit work||819||900|
10. Partners’ remuneration
10.1. Some principals are equity principals and share in profits in accordance with specific partnership or other agreements and others are fixed income principals.
10.2. Where applicable, audit principals are not specifically remunerated by reference to sale of non-audit services to audit clients, but based on the profit sharing arrangements agreed internally between themselves. Typically remuneration will vary dependent upon seniority, capital commitment, portfolio and other matters prevailing.
Appendix A – Audit registered firms within the Haines Watts network as at March 2018
Haines Watts Aylesbury Ltd
HW East Midlands Audit LLP
Haines Watts (Berkhamsted Holdings) Ltd
Haines Watts Berkhamsted Ltd
Haines Watts Birmingham LLP
Haines Watts Bristol Ltd
Haines Watts Bristol (Holdings) Ltd
Haines Watts Partnership (Bristol) Ltd
Haines Watts Bromley LLP
Haines Watts Wales LLP
Haines Watts Colchester Ltd
Haines Watts (East Midlands) Ltd
Haines Watts East Anglia Ltd
Haines Watts Kingston LLP
Haines Watts Exeter LLP
Haines Watts Farnborough LLP
Haines Watts High Wycombe Ltd
Haines Watts Essex LLP
Haines Watts Leeds LLP
Haines Watts Leicester LLP
Haines Watts Liverpool Ltd
Haines Watts Liverpool Holdings Ltd
Haines Watts London LLP
Haines Watts North London LLP
Haines Watts Kent LLP
Haines Watts Manchester Ltd
Haines Watts South Midlands Audit LLP
Haines Watts Oxford LLP
Haines Watts Slough LLP