31 March 2018
This report by Gerald Edelman has been prepared to meet the requirements of the Statutory Auditors (Transparency) Instrument 2008 (the “transparency regulations”) for the year ended 31 March 2018. This is the first transparency report prepared by the firm.
1. Legal structure and ownership
Gerald Edelman (“the Firm”) is a partnership which is made up of 16 LLP partners, each of which has two or more members. The Firm operates from two offices, based in Central and North London.
The Firm is a member of XLNC, an international alliance of independent accounting firms in 22 countries.
There is no common control, ownership or strategy across the XLNC member firms, and XLNC is not aimed at cost or profit sharing across its members. Therefore, XLNC is not a ‘network’ as defined in the Statutory Auditors (Transparency) Instrument 2008.
The Partners are collectively responsible for setting the firm’s strategy and protecting the interests of its partners. The partners meet formally each quarter.
The Managing Partner (CEO) together with the Executive Board are responsible for the day-to-day management of the firm to ensure that the agreed strategy is implemented. The Executive Board is supported by the heads of service groups.
The Partnership monitors developments in corporate governance and where appropriate, assesses the firm’s performance against them. In addition, the firm operates best practice in a way that is relevant to its activities, the risk environment it faces and the needs of its clients and people.
In order to monitor and control risk, the Firm has a risk committee. The committee members are two partners of the Firm, who report to the Managing Partner. The committee carries out periodic reviews to ensure that all significant areas of the Firm’s policies and procedures are being adopted. The findings of these reviews are presented to the partners.
4. Quality control systems
In respect to its audit services, the Firm has implemented a number of internal quality control systems to ensure that our high standards are maintained.
The Firm’s Audit Compliance Partner (“ACP”) (for the purposes of complying with Institute of Chartered Accountants in England & Wales (ICAEW) regulations) is required to ensure that the Firm complies with audit regulations. He is also the first point of contact with the ICAEW.
Technical and Training Committee
In order to ensure that the standard of audit, accounting and other technical areas are maintained at a high level and kept up to date, the Firm has a Technical and Training Committee (“TTC”). The TTC has a number of members made up of partners and managers. The TTC monitors the level of skill and knowledge, and where relevant arranges appropriate training. The TTC meets up to four times a year and reports their findings to the partners.
All audit files are reviewed by a manager and/or the Senior Statutory Auditor (SSA)/Responsible Individual (RI) at both the planning and the completion stages.
An Engagement Quality Control Review (‘EQCR’) is required for certain assignments, including audits of public interest entities and audits where such a review is required by laws or regulations.
EQCR reviews must be completed before approval of the audit report.
Cold file reviews of the Firm’s audit clients are performed on a six monthly basis, ensuring that each RI’s and manager’s work is reviewed. These cold file reviews are performed by an independent external consultant. Detailed reports are provided to the ACP and follow-up and training is undertaken if necessary.
Statement on the effectiveness of the internal quality control system
The Firm’s management considers that the internal quality control system is functioning effectively, to enable us to maintain our internal quality standards, and comply with our professional and legal requirements.
5. External monitoring
The Firm is subject to regular external monitoring by the Quality Assurance Directorate (“QAD”) of the ICAEW. The Firm’s last audit review by the QAD took place in October 2017 and Practice Assurance review in November 2015.
6. Independence procedures
The Financial Reporting Council (FRC) publishes Ethical Standards which provide regulations and guidance on possible threats to integrity, objectivity and independence in the conduct of audit engagements as well as on potential safeguards which may be instituted to counteract those threats.
In respect to its responsibility as regulatory body for auditors and with the Institute of Chartered Accountants in Ireland, the ICAEW publishes rules under which auditors will be regulated - the Audit Regulations. The Firm’s policies are consistent with these requirements and, in respect of audit services, are contained in the Firm’s Audit Compliance Manual which all audit staff must follow.
Within Gerald Edelman
Within the Firm, overall responsibility for compliance with the Audit Regulations rests with a partner designated as Audit Compliance Partner as described above. In accordance with the Ethical Standards, an Ethics Partner has also been appointed and in accordance with Money laundering regulations, a Money Laundering Reporting Officer has been appointed.
Members of staff are made aware of ethical and money laundering considerations on commencement of their employment and on updates which are provided both internally and externally.
All partners and staff complete an annual declaration of their independence and must notify the Firm of any circumstances which may affect their independence, or of any potential or actual conflicts of interest.
Acceptance and continuance of clients and engagements
Before accepting a new appointment, the SSA/RI must consider and justify the decision to accept the appointment. In doing so the SSA/RI will consider (amongst other areas) independence, ethics and risk issues, the Firm’s expertise and resources, its ability to carry out the work and the Firm’s money laundering procedures.
An internal review of independence practices is included in the Annual Compliance Review which is conducted by the Firm’s external independent consultant. The Annual Compliance Review is conducted each September, the last being in September 2017. A formal report is made to the Firm’s Practice Assurance Partner and any issues arising are the subject of action points.
7. Continuing professional development
All SSA/RIs in the Firm are members of the Institute of Chartered Accountants in England and Wales (ICAEW) or the Association of Chartered Certified Accountants (ACCA). All members must undertake Continuing Professional Development (CPD) to ensure that they continue to maintain their skills and knowledge and satisfy the requirements of International Education Standard (IES) 8, Professional Competence for Engagement Partners Responsible for Audits of Financial Statements (Revised).
Close monitoring of Continuing Professional Development is performed by the Firm for all qualified members of staff. This ensures that all persons in the Firm eligible to be appointed as an SSA continue to maintain their theoretical knowledge, professional skills and values at a sufficiently high level.
8. Financial information
The transparency regulations require financial information to be provided which shows the importance of statutory audit work to the Firm.
Year ended 31 March 2018
Year ended 31 March 2017
The Firm’s revenues from non-audit services includes accounts preparation work for unlisted clients, corporation tax work, personal tax work, tax planning, payroll services, company secretarial services and general business advice.
When undertaking non-audit work for an audit client, the requirements of the Ethical Standards for Auditors and the Firm’s acceptance procedures described above are applied before the work is accepted.
9. Partner remuneration
Partners are remunerated according to a number of factors. Salaried partner’s remuneration is based on a minimum salary, equity partners are remunerated based on a points system.
Discretionary amounts are payable to salaried and equity partners based on the recommendations of the Remuneration committee.
The Firm considers that no partner remuneration is contingent upon any basis that would compromise the independence of any audit, including the sale of non-audit services.
Public interest audit clients
Public interest entities for whom the Firm carried out a statutory audit during the year ended 31 March 2018 are listed below. Where an audit client is a parent undertaking, the list excludes any of its subsidiaries:
Wellington Pub Company Plc
Positive Healthcare Plc