Issued by the ethics partner. Applies to every partner, employee and contractor of the firm and to every engagement accepted by it. Reviewed annually. Version 41.
This policy gives effect to the ethical standard applicable to the firm in each jurisdiction in which it is admitted to practise. Where the requirements of two jurisdictions differ, the more restrictive applies.
The policy binds:
Independence is required both of the individual and of the firm. The applicable standard distinguishes independence of mind from independence in appearance and requires both. Independence in appearance is evidenced in the engagement file. Independence of mind is evidenced by the annual declaration required under section 4.
Compliance with this policy is a condition of employment and of continued membership of the partnership. It is assessed annually and forms part of the performance evaluation of every individual to whom it applies.
The standard recognises five categories of threat to independence. Each engagement is assessed against all five at acceptance, at planning, and on any change in circumstance. The assessment is performed by the engagement partner and reviewed by the engagement quality reviewer.
| Category | Circumstance | Safeguard applied | Evidenced in |
|---|---|---|---|
| Self-interest | Fee dependence; financial interest; employment prospect | Fee monitoring against threshold; interest register; cooling-off | Section 3 of the engagement file |
| Self-review | Assurance over an output the firm produced | Separation of teams; information barrier; second-partner review | Acceptance memorandum |
| Advocacy | Acting for the client in a dispute or a transaction | Engagement declined, or performed by the advisory practice under barrier | Acceptance memorandum |
| Familiarity | Long association; close personal relationship | Partner rotation at seven years; relationship declaration | Independence register |
| Intimidation | Pressure as to fee, scope, timetable or opinion | Escalation to the ethics partner; documented resolution | Escalation log |
The categories above are those recognised by the standard. This policy does not extend them.
A threat is deemed addressed when the applicable safeguard has been applied and the application has been recorded. No further assessment of that threat is required in the period. Where no safeguard is available, the engagement is declined and the decision is recorded by the ethics partner.
Rotation. The lead engagement partner rotates off an engagement after seven consecutive years and may not return for five. The engagement quality reviewer rotates on the same basis. Rotation applies to the individual holding the role. Continuity of the engagement team, the methodology and the working paper file is maintained across a rotation and is a stated benefit of the arrangement.
Cooling-off. A partner may not accept a key management position with an audited entity within twelve months of last participating in the audit. Below partner grade the period is not prescribed by the standard and the firm does not impose one.
Information barriers. The assurance and advisory practices operate under documented barriers covering physical access, systems access, file permissions and internal correspondence. Individuals may cross the barrier on written approval of the ethics partner. Approval is granted where the crossing is necessary for the delivery of an engagement.
Fee monitoring. The proportion of the firm’s fee income received from one client is monitored against the threshold at which the standard requires an additional safeguard. Where the threshold is exceeded, the additional safeguard is an engagement quality review performed by a partner from another office. That review has been performed in each of the last one hundred and fifteen periods.
Non-audit services. Every non-audit engagement is pre-approved by the audit committee of the entity concerned. Prohibited services are not offered. Permitted services are provided where the audit committee is satisfied that the threat to independence has been addressed. Non-audit fees are capped at seventy per cent of audit fees and currently stand at fifty-nine per cent.
Financial interests. No partner or employee may hold a direct financial interest in an audited entity or in the group of which it forms part. Holdings are declared on joining, on any acquisition, and annually. Prohibited holdings identified on declaration must be disposed of within five business days.
Every individual to whom this policy applies signs an independence declaration annually. Six thousand three hundred and sixty declarations were signed in the current period, being one for each partner and member of staff.
The declaration requires the individual to state:
Declarations are reviewed by the ethics partner, who maintains the independence register and reports to the management committee at each meeting. The ethics partner is a partner of the firm, elected by the partnership, and holds no client-facing role.
The register records the threat identified, the category assigned, the safeguard applied and the date of application. Sufficiency of a safeguard is established by the standard; the register records application.
No declaration in the current or any preceding period has disclosed a threat that the safeguards set out in section 3 could not address.
A suspected breach must be reported to the ethics partner on the day it is identified. The ethics partner determines whether a breach has occurred, records the determination, and where a breach is confirmed notifies those charged with governance at the entity concerned and the relevant regulator in accordance with the applicable rules.
Reports may be made in writing or orally and may be made in confidence. Retaliation against a person making a report in good faith is a disciplinary matter and is treated as gross misconduct.
Nothing in this policy limits a person’s statutory right to make a protected disclosure to a regulator or other prescribed body, and no term of employment or partnership with this firm may be construed as limiting it.