Transparency Report For the year ended 30 June 2013
Independent member of Nexia International
Contents
1 Chairman’s Letter
1
2 Who We Are
2
3 Network
3
4 Legal Structure and Ownership
4
5 Governance Structure
5
6 Internal Quality Control System
9
7 Effectiveness of Internal Quality Control System
12
8 External Monitoring
12
9 Public Interest Audit Clients
13
10 Independence
14
11 Continuing Professional Education 15 12 Financial Information
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13 Partner Remuneration
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Chairman’s Letter
It is with pleasure that Nexia Australia provides this 2013 Transparency Report for the benefit of our clients, prospective clients, regulatory bodies and existing partners and staff. Nexia Australia is the national network of 7 independent Chartered Accountancy firms located in Sydney, Melbourne, Canberra, Brisbane, Newcastle, Adelaide and Perth. All firms are members of Nexia International, a global accounting and consulting network whose domicile is located in the Isle of Man. Each of the 7 independent firms in Australia conduct statutory audits through their respective audit entities. Nexia Court & Co, the Sydney member and Nexia Perth Pty Ltd, the Perth member, are required by the Corporations Legislation Amendment (Audit Enhancement) Act 2012 to provide specific information under the Act due to both firms conducting audits of 10 or more significant entities. The remaining 5 members of Nexia Australia have voluntarily included information in this Report in order that the national network is accurately conveyed. The Nexia International network has grown significantly in the last 5 years to be now positioned as the 10th largest accounting and consultancy network in the world. Likewise, Nexia Australia has also grown significantly in this time. In 2009 the combined national fees were $57m compared to 2013 where the combined fees are $86m an increase of 50%. In a period of economic instability, limited growth and tightening of legislative requirements, this growth would not have been achieved without the expansion of our network with similar minded outstanding and high quality firms.
These steps demonstrate our focus and vision in further improving the quality of our audit services and to continue our journey of improvement. This Transparency Report provides an overview on the structure of Nexia Australia and Nexia International and the governance in which we operate. In addition, this Report also outlines our quality control systems and the effectiveness of such systems, our quality control monitoring and our continuing professional education. This 2013 Transparency Report is factual at the time of writing and is based on the results for the year ended 30 June 2013. In concluding, I would like to thank all our Partners and staff who have embraced and exceeded the levels of quality standards and service to meet the needs of our clients.
Ian Stone National Chairman 31 October 2013
Quality is defined as an assessment of how well the delivery of the service conforms to client expectations. In our case, quality service not only must meet this criterion in order to grow and sustain our business but also must meet the quality standards as set by our regulatory bodies and the broader business community. This Transparency Report provides a clear message to all our stakeholders of our commitment to quality and service that is a benchmark of Nexia Australia’s philosophy and success. There is little doubt that the general business community and public demand even higher professional auditing standards in the first instance. It is with this goal, Nexia Australia has over the last 5 years spent considerable time, effort and resources in: a) Increasing technical training to all our audit partners and staff b) Developing a standard Nexia audit methodology c) Conducting internal monitoring and peer reviews d) Establishing a National Accounting & Audit Technical function e) Utilising the results and feedbacks from reviews of our practices and engagement files by the Australian Securities & Investments Commission (ASIC), the Public Company Accounting Oversight Board (PCAOB(US)) and our Institute of Chartered Accountants to instigate improvements.
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2
Who we are
Overview of the Network Each of the 7 network firms in their respective locations are mid-sized firms of accountants and business advisors providing a full range of accounting, auditing, taxation, corporate and specialist business advisory services to our clients.
All partners are supported by a team of enthusiastic and dedicated professionals and support staff with a broad range of qualifications and experience, the majority of whom are involved in the full time provision of client services.
From the beginning our firms recognised that their role was much more than simply providing accounting, auditing and taxation compliance services. Our role was to become trusted business advisors that provide advice and services in many different areas of our client businesses.
Nexia Australia prides itself on being Agile, Accessible and Advancing which is the cornerstone of our service mandate.
We believe in strong business relationships and that is why our clients are guaranteed direct involvement by our partners and directors. This direct involvement ensures that material issues will be identified at an early stage and addressed in a practical and commercial manner.
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Transparency Report 2013
In this Report reference to “Partner� refers to the equity and non-equity owners of Nexia Australia Network Partnerships, as well as the Directors of authorised audit companies and corporate entities in the Nexia Australia Network referred to in Section 3.
3
Network
Nexia International Nexia International is a worldwide affiliation of independent auditors, business advisers and consultants. The key to Nexia’s success is simple: its global representation with member firms ranking in the top ten in the world’s major financial and economic centres. This positioning means that Nexia is able to provide a top quality service to its clients with international needs. Currently there are 22,319 Partners and professional staff serving our members in 590 offices in 105 countries. Nexia International is currently ranked as the 10th largest international accounting and consulting affiliation. (International Accounting Bulletin World Survey, December 2012). Nexia International Limited (Nexia International), which is registered in the Isle of Man co-ordinates the activities of the international network. Nexia International does not provide any professional services; these are provided only by the individual, independent member firms. Neither Nexia International nor any of the individual member firms are responsible for each others’ acts or omissions. From its foundation to the present day, one of Nexia’s greatest strengths has been the willingness of its independent firms to share their Partners’ expertise and knowledge on behalf of the affiliation’s clients. Our clients naturally expect the highest standards of professional advice. All of our independent member firms apply strict procedures and standards and are subject to regular quality control reviews which must be met as a condition of continuing membership of Nexia International. All its member firms must belong to their local professional body. In addition, our specialist committees publish several professional publications and manuals – all contributing to the quality and international expertise of our affiliation.
The following firms are the independent member firms of Nexia Australia: n
Duesburys Nexia - Canberra
n
Edwards Marshall - Adelaide
n
Forsythes - Newcastle
n
Nexia Court & Co - Sydney
n
Nexia Melbourne
n
Nexia Perth
n
Pilot Partners - Brisbane.
Nexia Australia currently employs the National Accounting and Tax Technical staff. Other activities of Nexia Australia are undertaken by the member firms and are reimbursed by all offices. There are no other national shared resources. Nexia Australia currently has 75 Partners and approximately 500 staff throughout 7 offices in Australia. The affiliation is managed through the Nexia Australia Board and has 6 sub committees, namely: n
The Audit Committee
n
The Risk and Quality Control Committee
n
The Human Resources Committee
n
The Tax Committee
n
The Business Development Committee
n
The IT Committee.
The following diagram depicts the Network Structure.
Nexia Australia Nexia Australia Pty Limited (Nexia Australia) holds an umbrella licence and membership agreement with Nexia International. The umbrella agreement prohibits Nexia Australia from operating as an accounting and consulting firm in its own right and therefore grants a sub membership agreement to each firm to be a member of Nexia International. Accordingly, Nexia Australia holds the direct agreement with Nexia International and provides limited shared resources to the Australian members firms.
Licence
Sub Licence
The firms which comprise the Australian offices with Nexia Australia are independent firms of each other with regard to their financial, operational, equity and governance matters. Adelaide Brisbane
Perth
Sydney
Newcastle
Canberra Melbourne
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Legal Structure and Ownership
Nexia Australia Pty Ltd
Nexia Court & Co
Nexia Australia Pty Ltd (Nexia Australia) holds the licence with Nexia International and corresponding sub-licences with each member firm.
Nexia Court & Co is a general partnership owned by its equity partners. As at 30 June 2013 there were twelve equity partners and four non equity partners. All audits undertaken by Nexia Court & Co are conducted by the partnership.
Nexia Australia Shareholders are the independent 7 firms which comprise the Australian Network. Nexia Australia does not provide any services or advice to any clients and exists solely to provide shared resources to its members and holds the International licence with Nexia International.
Nexia Perth During the year ended 30 June 2013, Nexia Perth Audit Services Pty Ltd (NPAS) provided audit and related compliance services. The shares in NPAS are owned by Nexia Perth Pty Ltd (Nexia Perth). Nexia Perth is a full service firm and provides Audit, Tax Consulting and other Business Advisory Services to a varied client base. Corporate Finance services are provided by Nexia Perth Corporate Finance Pty Ltd (under its own Australian Financial Services Licence), a wholly owned subsidiary of Nexia Perth.
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Transparency Report 2013
Nexia Court & Co also has a financial planning company arm, Nexia Court Financial Solutions Limited. Nexia Court Financial Solutions Limited is 100% owned by the equity partners of Nexia Court & Co and has a dedicated equity partner that is a registered financial planner and operates under its own Australian Financial Services Licence.
Other Member Firms1 The remaining five firms being independently owned and operated conduct their business through independent entities controlled by their Partners of the respective firms. 1
Edwards Marshall, Forsythes, Duesburys Nexia, Nexia Melbourne & Pilot Partners
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Governance Structure
Nexia International Nexia International is governed by a council in which all member firms are represented. The council elects the Board of Directors. The Board of Directors approve the acceptance of new firms in accordance with its internal guidelines after passing a quality control review. The Board also approves the networks vision and strategy and oversees the numerous operating committees, including their membership. The Board also reviews each member firm’s adherence to the agreed minimum operating and quality standards and if firms do not adhere, the Board has the authority to expel a firm from the network. The current Board comprises: Norbert Neu (Chairman) (Germany) Lawrence Chastang (Deputy Chairman) (USA) Francois Mahe (France) Markus Emmrich (Germany) Henry Tan (Singapore) Jeremy Boadle (UK) Tom Marino (USA) Ian Stone (Australia) Daniel Abelovich (Argentina) Nickolas Kelsey (UK) The Board meets twice a year. Nexia International operates through four regional areas: a) Asia Pacific b) Europe, Middle East and Africa c) North and Central America d) South America. Nexia Australia is a member of the Asia Pacific Region.
Nexia Australia Nexia Australia Pty Ltd is governed by a Board of Directors which is represented by one member from each of the 7 firms. The current Board comprises; Ian Stone (Chairman) (Sydney) Phillip Grant (Melbourne) Jamie Dreckow (Adelaide) Garry Murphy (Canberra) Martin Mathews (Newcastle) Brian McDonald (Brisbane) Mal Di Giulio (Perth)
The Board elects a Chairman whose term is for 3 years. Ian Stone was appointed in 2012.
Nexia Perth Audit and related assurance services are provided via NPAS which is an authorised audit company, regulated by the Australian Securities and Investments Commission (“ASIC”). As at 30 June 2013 NPAS was managed by its partners, all of whom are Registered Company Auditors and experienced Chartered Accountants and are Partners of Nexia Perth. NPAS operates from Nexia Perth’s modern open-plan offices in the Perth CBD located at Level 3, 88 William St, Perth, Western Australia 6000, with a client base principally located in Western Australia. Governance oversight of NPAS is undertaken by the partners who meet regularly to review the company’s financial performance, regulatory compliance and to consider the actions required to maintain audit quality, operational performance and other assurance work performed. Partners and staff of NPAS also actively participate in the management of Nexia Perth with particular responsibilities including quality control and technical representation on a number of Nexia Australia’s technical committees. Exam training of all NPAS students studying the Audit and Financial Reporting units is managed by NPAS. In addition, NPAS avails itself of technical personnel engaged by Nexia Perth to provide staff with both technical and a range of ‘soft skills’ training during their employment. Additional audit training is provided on a national training basis via webinars and attendance at national training conferences. Senior members of Nexia Perth are actively involved in the development of the accountancy profession through their involvement with the Institute of Chartered Accountants in Australia and through other external engagements. NPAS has access to the Nexia Perth’s resources including administration and human resources. In addition, Nexia Australia’s national technical resource provides support to NPAS in respect of audit, financial reporting and certain ethical matters. Nexia Australia’s technical resource does not maintain an audit client portfolio and hence is committed to providing research and advice which is available to all audit staff. In conjunction with Nexia Australia’s technical resource, NPAS directors are responsible for liaising with ASIC on regulatory matters. No claims (threatened or actual) have been received by NPAS and hence no matters are currently under investigation.
The Board meets at least four times a year. Its role is to set the vision and direction of Nexia Australia and to ensure all firms implement and adhere to the quality standards set by the Board and the professional sub committees.
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Governance Structure
Nexia Court & Co
Other Member Firms2
The Partners are responsible for determining the firm’s operating and reporting structure. In addition, the firm will designate from among themselves or other qualified staff, on an annual or other periodic basis, the person(s) responsible for leadership of various parts of the firms operations.
All other firms within the network operate in a similar manner, whereby the Partners appoint a Managing Partner to be the head representative of the firm. The Partners of each firm are responsible for setting the goals and vision of each firm and in turn elect a management team to assist in its implementation and operations.
Partners meet every second month to consider all matters relating to the operations of the firm and to make strategic decisions in line with our vision and goals. The Partners meet twice a year to set goals.
2
Edwards Marshall, Forsythes, Duesburys Nexia, Nexia Melbourne & Pilot Partners
The Partners elect a Managing Partner as the head representative of the firm. The Managing Partner is responsible for supervising the activities of the practice, as directed and authorised by the Partnership. This position also carries the responsibility for all matters relating to the scope and conduct of the professional practice and for practice development and public relations; and to relations with the accounting bodies and other professionals or groups. The Managing Partner maintains an ongoing dialogue with the wider firm through regular updates on strategy and development to all partners and employees as well as periodic engagement sessions, giving individuals at all levels the opportunity to raise questions and issues directly with the Managing Partner. The Partners also appoint the firm’s Leadership Team. The Leadership Team provides operational leadership to the firm. It meets at least twice per month. The leadership team consists of: n
Ian Stone – Managing Partner
n
Andrew Hoffmann – Audit Partner
n
Paul Lenton – Business Advisory Partner
n
Michael Potts – Practice Director
n
Kiri Brain – HR and Marketing Director
n
Vince Scullino – IT Manager
n
Darren Puckett – Practice Accountant
The audit division within the partnership is subject to same governance oversight by the partners and represents one division of the boarder operations of the firm. Other Divisions including: n
Taxation Consulting
n
Taxation Compliance
n
Superannuation Services
n
Financial Services
n
Business Advisory
n
Business Mechanics.
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systems 8
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Internal Quality Control System
Leadership Responsibilities for Quality within the Firm Nexia Australia has an overriding commitment to quality. It is the ultimate responsibility of the Managing Partner of each firm to ensure that the quality assurance policies and procedures as outlined in the Quality Control Manual are adhered to. The firm’s Partners decide on all key matters regarding the firm and its professional practice. The Partners of each firm accept responsibility for leading and promoting a quality assurance culture within their firm and for providing and maintaining the Quality Control Manual and all other necessary practical aids and guidance to support engagement quality. Nexia Australia recognises the importance of quality in performing all client engagements. The mandatory status of ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements and APES 320 Quality Control for Firms is acknowledged and each firm affirms their intention to operate in a climate of quality, complying with ASQC 1 and APES 320. Specifically: n
All Partners and staff are expected to maintain a high level of quality in all assigned tasks and be fully conversant with the requirements of APES 110
n
Quality will not be compromised by commercial considerations on assignments
n
All staff members will consistently follow adopted procedures
n
Training is recognised as the key component to ensuring quality is maintained
n
Staff members are required to attend training relevant to their roles
Ethical Requirements All Partners and staff of the firms of Nexia Australia are required to adhere to the fundamental principles of professional ethics as outlined in the By-laws, Regulations, APES 110, miscellaneous professional statements (APS) and other standards issued by the Accounting Professional and Ethical Standards Board (APESB). All Partners and staff must maintain a high standard of personal conduct to avoid any possible damage to their personal reputation, Nexia Australia’s reputation or that of the professional accounting body of which they are a member. Staff members are expected to be fully conversant with APES 110 and other mandatory ethical requirements. All staff members are responsible for Nexia Australia’s adherence to the ethical principles. If any staff members are concerned with a matter relating to non-adherence to Nexia Australia’s ethical principles, they are required to communicate these concerns to the Engagement Partner, Risk and Quality Control Partner or Managing Partner, as that staff member considers appropriate in the circumstances.
Acceptance and Continuance of Client Relationships and Specific Engagements Nexia Australia acknowledges that client integrity and the ability of each firm to conduct the engagement competently and ethically are essential components of Nexia Australia’s quality control system. Each firm and its Partners and staff shall accept new engagements and client relationships only after the Engagement Partner, based on a review process conducted by the (prospective) engagement team, has approved the acceptance of the engagement, in accordance with the firms’ policies and procedures.
n
Each firm devotes sufficient resources for the development, documentation and support of its quality control policies and procedures
All firms use established procedures to provide it with reasonable assurance that it identifies and assesses the potential sources of risk associated with a new client relationship or a specific engagement.
n
Staff members’ annual performance reviews will include an appraisal of their demonstrated commitment to quality and ethics, their level of continuing professional development, adherence to the policies and procedures of the firm and the level of competence of the team member
Each firm will only tender for or accept new clients after completing the appropriate documentation, including sending an ethical letter to the previous accountant, and assessing the acceptability of the client. The factors the firm will take into account include:
n
Career reviews are carried out in accordance with each firm’s policy statement on Human Resources.
n
the actual and/or perceived integrity of the client
n
the cultural fit of the client within the firm’s practice areas
n
the competence and capability of the firm to complete the engagement within the required timeframe
n
ethical issues, with particular reference to any perceived independence and conflict of interest threats.
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Internal Quality Control System
Human Resources
Engagement Performance
Human Resources is recognised as a critical success area for each of the firms. Accordingly, all Partners accept the ultimate responsibility for the quality of the work performed by personnel of the firm so as to be able to issue reports that are appropriate in the circumstances. Management of, and communication with, staff members is one of the major roles of Partners.
Through established policies and procedures and its quality control system, Nexia Australia requires that engagements be performed according to professional standards and applicable regulatory and legal requirements.
On an ongoing basis, each firm monitors their needs to ensure that the level of staff enables them to maintain current client levels and anticipated growth, turnover of personnel and retirements. An appropriate Partner is allocated responsibility for all human resource issues. Human Resources leaders have the responsibility for: n
maintenance of human resource policies
n
identifying required policy changes resulting from labour laws and regulations, and to remain competitive in the marketplace
n
providing guidance and consultation on human resource related matters
n
maintenance of performance evaluation appraisal systems
n
as requested, recommending specific actions or procedures appropriate to the circumstance (that is, discipline, recruitment)
n
scheduling of in-house professional development
n
maintenance of personnel files (including annual declarations of independence, acknowledgement of confidentiality, and continuing professional development reports)
n
development and delivery of induction training.
The Partners of each firm will monitor the effectiveness of the recruitment program to ensure that the policies and procedures are being followed and that personnel needs are being met. All firms are committed to ethical principles. Accordingly, adherence to ethical principles is an important component of all Human Resources procedures, including performance evaluation, promotion, and remuneration. Any personnel not adhering to the ethical principles will be counselled and where appropriate may be subject to disciplinary action.
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Nexia Australia’s overall systems are designed to provide reasonable assurance that the firm and its Partners and staff adequately and properly plan, supervise, and review engagements and produce engagement reports that are appropriate in the circumstances. To facilitate Partner and staff performance on engagements is consistent and according to professional standards and regulatory and legal requirements, Nexia Australia provides sample working paper templates for documenting the engagement process for clients. These templates are updated as required to reflect any changes in professional standards. Staff use these templates to document key facts, risks, and assessments related to acceptance or continuation of each engagement. Staff are encouraged to exercise professional judgment when modifying such templates to ensure that such matters are appropriately documented and assessed for each engagement in accordance with professional standards and each firm’s policies. Also available are research tools and reference materials; a quality control system, and manual; appropriate industrystandard software and hardware tools, including data and system access security; and guidance, training, and education policies and programs, including support for compliance with the professional development requirements of the accounting bodies in Australia. When performing any engagement, all Partners and staff are required to: n
follow and adhere to their firms planning, supervision, and review policies
n
use the firm’s templates for file preparation, documentation, and correspondence, as well as its software, research tools, and the signing and release procedures appropriate for the engagement
n
follow and adhere to the ethical policies of the profession and the firm
n
perform their work to professional and firm standards with due care and attention
n
document their work, analysis, consultations, and conclusions sufficiently and appropriately
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Internal Quality Control System
n
complete their work with objectivity and appropriate independence, on a timely and efficient basis, and document the work in an organised, systematic, complete, and legible manner
The system has been designed to provide Nexia Australia with reasonable assurance that significant and sustained breaches of policy and quality control are unlikely to occur or go undetected.
n
ensure that all working papers, file documents and memoranda are initialled, properly cross-referenced and dated, with appropriate consultation on difficult or contentious matters
n
ensure that appropriate client communications, representations, reviews, and responsibilities are clearly established and documented
All Partners and staff must co-operate with the Reviewer, recognising that this individual is an essential part of the quality control system. Support of the Partners and Managers of the process and to reinforce the Reviewers comments and findings is of particular importance. Disagreement, noncompliance with, or disregard for the Reviewers findings is resolved through the Nexia Australia’s dispute resolution process.
n
ensure that the engagement report reflects the work performed and its intended purpose and is issued soon after the fieldwork is complete.
Engagement Quality Reviews Process Monitoring consists primarily of understanding the quality control system and determining — through interviews, walk-through tests, and file inspections — whether, and to what extent, this control system is operating effectively. It also includes developing recommendations to improve the system, especially if weaknesses are detected or if professional standards and practices have changed. The overall objective of the monitoring process is to help improve the quality of engagements and in doing so, aims to enhance the credibility and integrity of Nexia Australia’s brand. Nexia Australia relies on every Partner and staff member at all levels to informally monitor and enforce quality, ethics, and professional and firm standards. This monitoring shall be inherent in every aspect of professional work. Partners and staff who are in a position to make decisions or oversee the work of others have a greater level of responsibility. Nexia Australia will also consider any feedback received from the Institute of Chartered Accountants in Australia (ICAA)’s practice inspection and licensing regime. However, this is not a substitute for the firm’s own internal monitoring program. The Nexia International Technical Director may also elect to review the firm’s quality control policies and procedures. Each firm is supportive of the potential reviews undertaken by Nexia International, the professional accounting bodies, the regulator and the National Accounting & Audit Technical Director and peer review program. The purpose of the monitoring program is to assist the firm in obtaining reasonable assurance that its policies and procedures relating to the system of quality control are relevant and operating effectively. The program shall also help ensure compliance with practice and regulatory review requirements.
Nexia Australia shall conduct compliance monitoring on a selection of individual engagements, which may be chosen without prior notification to the engagement team. Although it is desirable to select one or more completed and released engagements, for each Engagement Partner at each inspection, the firm may choose to inspect a number of engagements annually, but will ensure that each Partner’s files are selected on at least a cyclical basis. The inspection cycle will span a two-year period.
Risk and Quality Control Committee The Nexia Australia member firms have established a Risk and Quality Control Committee, which include representatives of all Nexia Australia member firms and representatives of all divisions within Nexia Australia member firms. The main responsibilities of this Quality Control Committee are to: n
develop, and annually update, the Nexia Australia Quality Control Manual
n
monitor compliance with the approved Nexia Australia Quality Control Manual.
The Quality Control Committee reports to the Nexia Australia Board (representatives of all member firms). The monitoring process consists of three parts, namely: n
risk management and quality control for firms, including independence policies and procedures, as outlined in the Nexia Australia Risk Management Framework and the Nexia Australia Quality Control Manual
n
quality control at the audit and assurance engagement level
n
quality control at the non-assurance engagement level.
The Nexia Australia Risk and Quality Control Committee has implemented monitoring and inspection processes to ensure selected engagements comply with applicable professional standards and legal obligations.
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Effectiveness of Internal Quality Control System
The Nexia Australia Board considers the appropriateness and effectiveness of the internal quality control policies and procedures in place based on information provided to it including the findings from quality monitoring reviews and external reviews. As Nexia Australia has a commitment to continuous improvement, in any one year, some albeit relatively minor, changes in procedures are inevitable but in the current year none of the findings from reviews have required any major change in procedures. The Board confirms that, whilst recognising that no system can provide an absolute guarantee, the Board is satisfied with the operation and effectiveness of its internal control system.
Ian Stone National Chairman 31 October 2013
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External Monitoring
The firms of Nexia Australia are subject to a comprehensive program of scheduled internal and external monitoring of audit quality and independence compliance. The following table outlines the external monitoring under Australia’s co-regulatory framework: Date of Last Inspection Australian Securities and Investments Commission (ASIC)
PCAOB
Institute of Chartered Accountants in Australia (ICAA)
Duesburys Nexia
2013 #
N.A.
2008
Nexia Melbourne
2013 #
N.A.
2003
Nexia Perth
2013 #
N.A.
2011
Nexia Court & Co
2013 #
2011
2003
Edwards Marshall
2013 #
N.A.
2009
Forsythes
2013 #
N.A.
Pre 2005
2012
N.A.
Pre 2008
Firm
Pilot Partners
# inspected as part of the Nexia Australia Network ASIC inspection. Regular external monitoring of audit quality is required by legislation and professional requirements. Other than as described in this Transparency Report, users of this Report should not make any assumptions about the scope of, or findings from, any external inspections.
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Public Interest Audit Clients
The following is a list of public interest entities where we are currently appointed as auditors.
Nexia Perth
Nexia Court & Co
Other Member Firms3
n
Aruma Resources Limited
n
n
Invigor Limited
n
Blina Minerals NL
South American Iron & Steel Corporation Limited
n
Predictive Discovery Limited
n
I-Cash Payment Systems Limited
n
Phileo Australia Limited
n
Empire Energy Group Limited
n
Narhex Life Sciences Limited
n
La Trobe Magnesium Limited
n
Reedy Lagoon Limited
n
Rawson Resources Limited
n
Syngas Limited
n
Winpar Holdings Limited
n
Hamilton Securities Limited
n
KeyInvest Limited
n
Academies Australasia Group Limited
n n n
BPH Energy Limited Breakaway Resources Ltd Conico Limited (formerly Fission Energy Limited)
n
Doray Minerals Limited
n
Cabral Resources Limited
n
Eden Energy Limited
n
World.Net Services Limited
n
Grandbridge Limited
n
Queensland Bauxite Limited
n
Hodges Resources Limited
n
n
Matsa Resources Limited
Kip McGrath Education Centres Limited
n
MEC Resources Limited
n
Condor Blanco Mines Limited
n
Nexus Minerals Limited
n
Intermoco Limited
n
Northern Minerals Limited
n
Flat Glass Industries Limited
n
Potash Minerals Limited
n
Ultimate Power and Energy Limited
n
Radar Iron Limited
n
Florin Mining Limited
n
Sprint Energy Limited
n
Illuminator Investments Company Limited
n
Strategic Elements Limited
n
Pritchard Equity Limited
n
Tasman Resources Limited
n
Blaxland Vineyards Limited
n
Triton Minerals Limited
n
GP Mortgage Corporation Limited
3 Edwards Marshall, Forsythes, Duesburys Nexia, Nexia Melbourne & Pilot Partners
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Independence
The Partners and staff must be independent both in mind and appearance of their assurance clients and engagements. Independence shall be maintained throughout the engagement period for all assurance engagements, as set forth in and by: n
APES 110 Code of Ethics for Professional Accountants, specifically sections 290 and 291
n the
Corporations Act 2001
n
ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and other Financial Information, and other Assurance Engagements
n
ASA 220 Quality Control for an Audit of Financial Statements.
If threats to independence cannot be eliminated or reduced to an acceptable level by applying appropriate safeguards, each firm shall eliminate the activity, interest, or relationship that is creating the threat, or refuse to accept or continue the engagement (where withdrawal is not prohibited by law or regulation). Instances of non-compliance with the independence requirements shall be reported to the Risk and Quality Control Partner. Nexia Australia and each of the firms are responsible for the development, implementation, monitoring, and enforcement of policies and procedures designed to assist all Partners and staff in understanding, identifying, documenting, and managing independence threats and for the resolution of independence issues that arise prior to or during engagements. The most recent internal review of independence compliance was conducted as at 31 December 2012.
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Independence Partner The Independence Partner at each firm is the person delegated by the Managing Partner and/or firm Partners to be responsible for the independence processes and procedures with respect to: n
independence for assurance engagements
n
conflict of interest for all engagements.
The Independence Partner is required to consult and respond on all matters related to ethics, including independence, conflict of interest, and privacy and confidentiality. The Independence Partner is responsible for, and must ensure an appropriate resolution of, independence threats that the Engagement Partner has not adequately resolved or reduced to an acceptable level. The Independence Partner is also responsible for ensuring that the Firm Risk Manager has performed all independence procedures required by the firm.
All Partners and Staff All Partners and staff are required to review their specific circumstances for any independence threats or potential independence threats, and to inform the Firm Risk Manager of any such threats identified. All staff members and Partners are responsible for reporting potential threats to independence and conflicts of interest by: n
responding to the conflict and independence e-mails from the Firm Risk Manager
n
ensuring that all relationships and interests with audit and other assurance clients in their office have been provided to the Firm Risk Manager to record in the independence registers
n
completing annual independence declarations.
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Continuing Professional Education
Our Partners and staff are our greatest assets, and we are a ‘learning organisation’, so continued professional education is actively encouraged.
Professional Accounting Bodies All Partners and staff members who are members of professional accounting bodies are encouraged and supported to meet the training and development requirements of their professional bodies. All firms are required to monitor and review compliance with the relevant minimum professional education requirements.
Learning and Development Framework A national Learning and Development Framework has been designed to outline skills, knowledge and competencies required for staff to perform their role effectively for their experience level. The framework covers seven key excellence competencies which Nexia believes are fundamental skills and behaviours staff should demonstrate. They are client excellence, self development, achieving results, solution solving, team engagement, leadership and business growth. The skills and behaviours that staff develop within the framework can form part of the structure for performance review discussions and can be used to set goals and objectives. The framework outlines the appropriate learning and development that Nexia provides both internally and externally for the 7 key excellence competencies. Each competency has an outcome.
We also similarly encourage the attainment of higher qualifications or course participation for all other Staff members - be it an IT course, advanced courses in Word, receptionist skills, etc., and will actively support their endeavours as we do those of our accountants.
Structured In-house Training This policy encapsulates technical training, management training, independence training and mentoring for all professional and administration staff. Technical training is a mixture of Webinar and in-house sessions delivered by Partners, the Accounting and Audit Technical Director and senior staff and, where appropriate, sessions delivered by external presenters. Management/business skills training will consist primarily of external courses. Independence updates are provided for Partners and staff who are required to be independent.
Unstructured Training As part of Nexia Australia’s commitment to staff development, we offer training to help staff achieve professional and personal growth and greater job satisfaction. The firm provides unstructured training to staff through a number of different avenues: n
periodic peer group meetings take place that contain an element of training
n
coaching and on-the-job training occurs while gaining experience from completing work
n
practical issues identified while completing assignments are incorporated into on-the-job training.
Study Policy All firms support the undertaking of both the CA and CPA study programs for staff. Whilst we do not insist on the successful completion of either of these qualification programs as a pre-requisite for ongoing employment, we encourage their completion as they provide further professional development for the participant and we believe they are essential qualifications to hold for long-term career advancement. We also support any employee who wishes to undertake any course of study that will provide them with knowledge and experience that will benefit them and us.
External Courses and Seminars As part of our performance appraisal process, we evaluate the training and development needs of all Partners and staff and encourage professional and administration staff to attend approved external courses if their training and development needs are not addressed in our in-house training courses. The training focus for professionals will, of course, be different from administration staff.
In addition, we support the completion of part-time studies by staff members for a degree, post-graduate degree course or MBA etc., by allowing flexibility in work hours to accommodate lecture times, study, exams, and also by way of assistance with fees. However this is reviewed on a case by case basis.
Transparency Report 2013
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12
Financial Information – year ended 30 June 2013
Nexia Perth $
Nexia Court & Co $
Other Member Firms $
Nexia Australia $
Revenue relating to audits of financial statements
2.3m
5.0m
8.4m
15.7m
Revenue relating to non-audit services to audit clients
1.0m
1.6m
3.3m
5.9m
Revenue relating to non-audit services to non-audit clients
9.1m
11.7m
43.7m
64.5m
12.4m
18.3m
55.4m
86.1m
Nexia Perth
Nexia Court & Co
Other Member Firms
Nexia Australia
Number of Partners
10
16
49
75
Number of Professional Staff (full time equivalents)
57
68
213
338
Number of Non-professional Staff (full time equivalents)
11
21
57
89
Total
78
105
319
502
Nexia Perth
Nexia Court & Co
Other Member Firms
Nexia Australia
Number of Partners
3
5
11
19
Number of Professional Staff (full time equivalents)
14
16
51
81
Total
17
21
62
100
Description
Total Revenue
Other information – as at 30 June 2013 Description
Audit
16
Transparency Report 2013
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Basis of Remuneration
Nexia Perth The basis for remuneration of the authorised audit company’s Partners are as follows: n
Those audit Partners that hold an equity interest in Nexia Perth receive a market-based salary, together with a share of the Nexia Perth’s profit from all divisions which is distributed on a percentage of equity held.
n
Those audit Partners that do not hold an equity interest in Nexia Perth receive a market-based salary only.
Nexia Court & Co Profits of the firm are shared based on the equity share held by each Partner. Nexia Court & Co is an equal remuneration partnership and therefore all Partners receive the same profit share once they achieve equity equality. Bonuses, commissions or other performance adjustments are not paid to any Partner. Because Nexia Court & Co is an equal partnership, there is no benefit derived by a Partner to simply retain a client on their client list where the work could be better handled by another specifically experienced partner who knows the industry of the client. In this case the client receives the highest quality services from the most appropriate Partner.
Other Member Firms4 Remuneration in the other member firms is based on either the equity share that the Partner holds or a market salary for non equity Partners. Equity holdings will vary from firm to firm. Short term incentives, such as bonuses, and other performance adjustments are made; however, this will also vary between the firms. 4
Edwards Marshall, Forsythes, Duesburys Nexia, Nexia Melbourne & Pilot Partners
Transparency Report 2013
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Australia Adelaide Office Level 3, 153 Flinders Street Adelaide SA 5000 GPO Box 2163, Adelaide SA 5001 p +61 8 8139 1111, f +61 8 8139 1100 info@edwardsmarshall.com.au www.edwardsmarshall.com.au Brisbane Office Level 10, Waterfront Place ,1 Eagle Street Brisbane QLD 4000 PO Box 7095, Brisbane QLD 4001 p +61 7 3023 1300, f +61 7 3229 1227 info@pilotpartners.com.au, www.pilotpartners.com.au Canberra Office Level 7, St George Centre, 60 Marcus Clarke Street GPO Box 500, Canberra ACT 2601 p +61 2 6279 5400, f +61 2 6279 5444 mail@dnexia.com.au, www.nexia.com.au Melbourne Office Level 18, 530 Collins Street, Melbourne VIC 3000 p +61 3 9608 0100, f +61 3 9608 0192 info@nexiamelbourne.com.au, www.nexia.com.au Newcastle Office Level 4, 175 Scott Street Newcastle NSW 2300 p +61 2 4929 2699, f +61 2 4929 1435 forsythes@forsythes.com.au, www.forsythes.com.au Perth Office Level 3, 88 William Street, Perth WA 6000 GPO Box 2570, Perth WA 6001 p +61 8 9463 2463, f +61 8 9463 2499 info@nexiaperth.com.au, www.nexia.com.au Sydney Office Level 16, 1 Market Street, Sydney NSW 2000 PO Box H195, Australia Square, NSW 1215 p +61 2 9251 4600, f +61 2 9251 7138 info@nexiacourt.com.au, www.nexia.com.au
Independent member of Nexia International