Transparency Report 2018 - EY...Transparency Report 2018: EY Cyprus 5 About us Legal structure,...

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T ransparency Report 2018 EY Cyprus

Transcript of Transparency Report 2018 - EY...Transparency Report 2018: EY Cyprus 5 About us Legal structure,...

TransparencyReport 2018

EY Cyprus

Transparency Report 2018: EY Cyprus 2

ContentsMessage from the Country Managing Partner and the EY Cyprus Assurance Leader ........................................................... 3

About us ...................................................................................................................................................................... 5

Legal structure, ownership and governance ................................................................................................................. 5

Network arrangements .............................................................................................................................................. 6

Commitment to quality .................................................................................................................................................. 8

Infrastructure supporting quality................................................................................................................................. 8

Instilled professional values ........................................................................................................................................ 9

Internal quality control system .................................................................................................................................. 10

Client acceptance and continuance ............................................................................................................................ 11

Performance of audits ............................................................................................................................................. 12

Review and consultation .......................................................................................................................................... 13

Audit partner rotation .............................................................................................................................................. 14

Audit quality reviews ............................................................................................................................................... 14

External quality assurance review ............................................................................................................................. 15

Compliance with legal requirements .......................................................................................................................... 16

Independence practices ............................................................................................................................................... 17

Continuing education of audit professionals .................................................................................................................. 19

Revenue and remuneration .......................................................................................................................................... 20

Financial information ............................................................................................................................................... 20

Partner remuneration .............................................................................................................................................. 20

Appendix 1 ................................................................................................................................................................. 22

Appendix 2 ................................................................................................................................................................. 23

More information about EY can be found at ey.com.

Transparency Report 2018: EY Cyprus 3

Message from the Country Managing Partner and theEY Cyprus Assurance Leader

Welcome to the 2018 Transparency Report of Ernst & Young Cyprus Limited (EY Cyprus). We believe that how we advance auditquality, manage risk and maintain our independence as auditors should be transparent to our stakeholders. We value regulardialogue, and this report is one of the ways in which we advise our stakeholders on what we are doing in each of these areas.

Executing high-quality audits continues to be our top priority and is at the heart of our commitment to serve the public interest.It enables us to grow the global EY network successfully and responsibly, while achieving our purpose of building a better workingworld. Auditors play a vital role in the functioning of capital markets by promoting transparency and supporting investorconfidence. Companies, regulators and other stakeholders count on us to deliver excellence in every engagement.

We are focused on investing in tools to improve what we do, creating the highest-performing teams, and building trust andconfidence in the audits we perform.

EY Cyprus’ reputation is based on and grounded in providing high-quality professional audit services objectively and ethically toevery company we audit.

We continue to embrace the transparency objectives of the European Union’s 8th Company Law Directive and of Regulation (EU)537/2014 of the European Parliament and of the Council of 16 April 2014 (EU 537/2014), which require Cyprus statutoryauditors of public interest entities (PIEs) to publish annual transparency reports.

The 2018 EY Cyprus Transparency Report complies with the Directive and Cypriot laws, and covers the financial year ended 30June 2018. In this report, you can learn more about our internal quality control system: how we instill professional values, howwe perform an audit, our review and consultation processes, our approach to audit quality reviews, and our independencepractices.

EY Cyprus is focused on enhancing audit quality and upholding our independence, informed by several matters including externaland internal inspection results. Continuous improvement of audit quality requires us to challenge approaches to audit execution,and we focus on this by evaluating all inspection findings and taking responsive actions.

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The next twelve months are likely to represent a challenge as the Cyprus economy continues its way back to recovery. Regulardialogue with our stakeholders remains a priority for us. We recognise that our Firm and others have a responsibility to putforward suggestions and ideas on how our profession can assist the road to recovery and how financial reporting and audit canfurther develop to best meet the needs of business, investors, regulators and the society at large.

We encourage all our stakeholders — including our clients and their investors, audit committee members and regulators — tocontinue to engage with us on our strategy as well as any of the matters covered in this report.

Stavros Pantzaris Andreas Avraamides

Country Managing Partner Assurance Leader

Ernst & Young Cyprus Limited Ernst & Young Cyprus Limited

EY’s purpose: building a better working worldEY is committed to doing its part in building a better working world.

The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the worldover. We develop outstanding leaders who team to deliver on our promises to stakeholders. In so doing, we play a critical rolein building a better working world for our people, our clients and our communities.

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About usLegal structure, ownership andgovernanceIn Cyprus, Ernst & Young Cyprus Limited is a limited liabilitycompany organized in Cyprus and is a member firm of Ernst& Young Global Limited, a UK company limited by guarantee(EYG). In this report, we refer to ourselves as“EY Cyprus,” “we,” “us” or “our.” EY refers collectively tothe global organization of the member firms of EYG.

Ernst & Young Cyprus Limited is owned by Ernst & Young, apartnership registered in Cyprus and having as partners thelocal partners of Ernst & Young and a Cyprus registeredentity ultimately owned by Ernst & Young Europe LLP.

EY Cyprus operated from two offices, one in Nicosia andone in Limassol. EY Cyprus’ Service Line Leaders are :

Stavros Pantzaris – Country Managing Partner

Andreas Avraamides - Head of Assurance Services (as from1 September 2018)

Philippos Raptopoulos – Head of Tax Services

Stelios Demetriou – Head of Transaction Advisory Services

Charalambos Constantinou – Head of Advisory Services

EYG member firms are grouped into four geographic Areas:Americas; Asia-Pacific; Europe, Middle East, India andAfrica (EMEIA); and Japan. The Areas comprise a number ofRegions, which consist of member firms or sections ofthose firms.

EY Cyprus is part of the EMEIA Area, which comprises EYGmember firms in 98 countries in Europe, theMiddle East, India and Africa. Within the EMEIA Area,there were 11 Regions, and from 1 July 2018 the numberhas reduced to 10. EY Cyprus is part of the CESA Region.

Ernst & Young (EMEIA) Limited (“EMEIA Limited”), anEnglish company limited by guarantee, is the principalcoordinating entity for the EYG member firms in the EMEIAArea. EMEIA Limited facilitates the coordination of thesefirms and cooperation between them, but it does notcontrol them. EMEIA Limited is a member firm of EYG, has

no financial operations and does not provide anyprofessional services.

Each Region elects a Regional Partner Forum (RPF), whoserepresentatives advise and act as a sounding board toRegional leadership. The partner elected as PresidingPartner of the RPF also serves as the Region’srepresentative on the Global Governance Council(see page 6).

In Europe, a holding entity, Ernst & Young Europe LLP (“EYEurope”), was formed in conjunction with EMEIA Limited.EY Europe is an English limited liability partnership, ownedby partners of the EYG member firms operating in Europe.It is an audit firm registered with the Institute of CharteredAccountants in England and Wales (ICAEW), but it does notcarry out audits or provide any professional services. To theextent permitted by local legal and regulatory requirements,EY Europe has acquired or will acquire voting control of theEYG member firms operating in Europe. EY Europe is amember firm of both EYG and EMEIA Limited.

EY Europe acquired voting control of EY Cyprus as of 6November 2010.

EY Europe’s principal governing bodies are:

Europe Operating ExecutiveThe Europe Operating Executive (EOE) operates as theboard of EY Europe. It has authority and accountability forstrategy execution and management of EY Europe’soperations. The EOE comprises: the Europe ManagingPartner; the leaders for Accounts, Talent and RiskManagement; the service line leaders for Assurance,Advisory, Transaction Advisory Services and Tax; and allEuropean Regional Managing Partners.

Europe Governance Sub-CommitteeEY Europe has the Europe Governance Sub-Committee,which includes one representative from each Region inEurope. It serves in an advisory role to the EOE on policies,strategies and other matters, and its approval is requiredfor a number of significant matters, such as theappointment of the Europe Managing Partner, approval ofthe financial reports of EY Europe and materialtransactions.

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Network arrangementsEY is a global leader in assurance, tax, transaction and advisory services. Worldwide, over 250,000 people in member firms in more than 150 countries share a commitment to building a better working world, united by shared values and an unwavering commitment to quality, integrity and professional skepticism. In today’s global market, the integrated EY approach is particularly important in the delivery of high-quality multinational audits, which can span nearly every country in the world.This integrated approach enables EY member firms to develop and draw upon the range and depth of experience required to perform such diverse and complex audits.

EYG coordinates the member firms and promotes cooperation among them. EYG does not provide services, but its objectives include the promotion of exceptional high-quality client service by member firms worldwide.

Each member firm is a legally distinct entity. Their obligations and responsibilities as members of EYG are governed by the regulations of EYG and various other agreements.

The structure and principal bodies of the global organization during the year ended 30 June 2018 are described below. They reflect the principle that EY, as a global organization, has a common shared strategy.

The Executive includes the Global Executive (GE), its committees and teams, and the leadership of the four Areas. At the same time, the network operates on a Regional level within the Areas. This operating model allows for greater stakeholder focus in the 27 Regions, permitting member firms to build stronger relationships with clients and others in each country, and be more responsive to local needs.

Global Governance CouncilThe Global Governance Council (GGC) is the main oversight body of EYG. It comprises one or more representatives from each Region, other member firm partners as at-large representatives and up to six independent non-executives (INEs). The Regional representatives, who otherwise do not hold senior management roles, are elected by their RPFs for a three-year term, with provision for one successive reappointment. The GGC advises EYG on policies, strategies and the public interest aspects of its decision—making. The approval of the GGC is required for a number of significant matters that could affect EY.

Independent Non-Executives Up to six Independent Non-Executives (INEs) are appointed from outside EY. The INEs are senior leaders from both the public and private sectors, and reflect diverse geographic and professional backgrounds. They bring to the global organization, and the GGC, the significant benefit of their varied perspectives and depth of knowledge. The INEs also form a majority of the Public Interest Sub-Committee of the GGC, which addresses public interest matters, including public interest aspects of decision-making, issues raised under whistleblowing policies and procedures, perspectives on stakeholder views and engagement in quality and risk management discussions. The INEs are nominated by a dedicated committee.

Global ExecutiveThe Global Executive (GE) brings together EY’s leadership functions, services and geographies. It is chaired by the Chairman and CEO of EYG, and includes its Global Managing Partners of Client Service and Business Enablement; the Area Managing Partners; the global functional leadership for Talent and Finance; the leaders of the global service

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lines — Assurance, Advisory, Tax and Transaction AdvisoryServices; the Global Leader for Public Policy; and one EYGmember firm partner on rotation.

The GE also includes the Chair of the Global AccountsCommittee and the Chair of the Emerging MarketsCommittee, as well as a representative from the EmergingMarkets practices.

The GE and the GGC approve nominations for the Chairmanand CEO of EYG, and ratify appointments of the GlobalManaging Partners. The GE also approves appointments ofGlobal Vice Chairs. The GGC ratifies the appointments ofany Global Vice Chair who serves as a member of the GE.

The GE’s responsibilities include the promotion of globalobjectives and the development, approval, and, whererelevant, implementation of:

• Global strategies and plans• Common standards, methodologies and policies to be

promoted within member firms• People initiatives, including criteria and processes for

admission, evaluation, development, reward andretirement of partners

• Quality improvement and protection programs• Proposals regarding regulatory matters and• public policy• Policies and guidance relating to member firms’ service

of international clients, business development, marketsand branding

• EY’s development funds and investment priorities• EYG’s annual financial reports and budgets• GGC recommendations

The GE also has the power to mediate and adjudicatedisputes between member firms.

GE committeesEstablished by the GE and bringing together representativesfrom the four Areas, the GE committees are responsible formaking recommendations to the GE. In addition to theGlobal Audit Committee, there are committees for GlobalMarkets and Investments, Global Accounts, EmergingMarkets, Talent, Risk Management, Assurance, Advisory,Tax, and Transaction Advisory Services.

Global Practice GroupThis group brings together the members of the GE, GEcommittees, Regional leaders and sector leaders. TheGlobal Practice Group seeks to promote a commonunderstanding of EY’s strategic objectives and helps driveconsistency of execution across the organization.

EYG member firmsUnder the regulations of EYG, member firms committhemselves to pursue EY’s objectives, such as the provisionof high-quality service worldwide. To that end, the memberfirms undertake the implementation of global strategies andplans, and work to maintain the prescribed scope of servicecapability. They are required to comply with commonstandards, methodologies and policies, including thoseregarding audit methodology, quality and risk management,independence, knowledge sharing, human resources, andtechnology.

Above all, EYG member firms commit to conducting theirprofessional practices in accordance with applicableprofessional and ethical standards, and all applicablerequirements of law. This commitment to integrity anddoing the right thing is underpinned by the EY Global Codeof Conduct and EY values (see page 10).

Besides adopting the regulations of EYG, member firmsenter into several other agreements covering aspects oftheir membership in the EY organization, such as the rightand obligation to use the EY name, and the sharingof knowledge.

Member firms are subject to reviews that evaluate theiradherence to EYG requirements and policies governingissues such as independence, quality and risk management,audit methodology, and human resources. Member firmsunable to meet the quality commitments and other EYGmembership requirements may be subject to separationfrom the EY organization.

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Commitment to qualityInfrastructure supportingqualityQuality in our service linesVision 2020+, which sets out EY’s purpose, ambition andstrategy, calls for EYG member firms to provide exceptionalclient service worldwide. This is supported by anunwavering commitment to quality and service that isprofessionally and globally consistent, and means servicethat is based on objectivity, professional skepticism, andadherence to EY and professional standards.

EYG member firms and their service lines are accountablefor delivering quality engagements. EY service linesmanage the overall process for quality reviews of completedengagements and input for the quality of in-processengagements, which helps achieve compliance withprofessional standards and EY policies.

Vision 2020+ has reinforced the ownership of qualityby the service lines, including audit. It has alsoresulted in increased clarity around the role of riskmanagement in policies and practices that support andimprove audit quality.

The Global Vice Chair of Assurance coordinates memberfirms’ compliance with EY policies and procedures forassurance services.

Professional PracticeThe Global Vice Chair of Professional Practice, referred toas the Global Professional Practice Director (PPD), isoverseen by the Global Vice Chair of Assurance and worksto establish global audit quality control policies andprocedures. Each of the Area PPDs is overseen by theGlobal PPD and the related Area Assurance Leader. Thishelps provide greater assurance as to the objectivity ofaudit quality and consultation processes.

The Global PPD also leads and oversees the GlobalProfessional Practice group. This is a global network oftechnical subject matter specialists in accounting andauditing standards, who consult on accounting, auditingand financial reporting matters, and perform variouspractice monitoring and risk management activities.

In Cyprus, the local PPD is overseen by the Regional PPDwhich is in turn overseen by the Area PPD.

The Global PPD oversees development of the EY GlobalAudit Methodology (EY GAM) and related technologies sothat they are consistent with relevant professionalstandards and regulatory requirements. The GlobalProfessional Practice group also oversees the developmentof the guidance, training and monitoring programs andprocesses used by member firm professionals to executeaudits consistently and effectively. The Global, Area andRegion PPDs, together with other professionals who workwith them in each member firm, are knowledgeable aboutEY people, clients and processes, and they are readilyaccessible for consultation with audit engagement teams.

Additional resources often augment the Global ProfessionalPractice group, including networks of professionalsfocused on:

• Internal—control reporting and related aspects of theEY audit methodology

• Accounting, auditing and risk issues for specificindustries and sectors

• Event-specific issues involving areas of civil andpolitical unrest; or sovereign debt and relatedaccounting, auditing, reporting and disclosureimplications

• General engagement issues and how to work effectivelywith audit committees

Risk managementResponsibility for high-quality service and ownership of therisks associated with quality is placed with the memberfirms and their service lines. Among other things, theGlobal Risk Management Leader helps oversee themanagement of these risks by the member firms, as well asother risks across the organization as part of the broaderEnterprise Risk Management framework.

Member firm partners are appointed to lead riskmanagement initiatives in both the service lines andmember firms, supported by other staff and professionals.The Global Risk Management Leader is responsible forestablishing globally consistent risk management executionpriorities and enterprise—wide risk management.These priorities cascade to member firms, and theirexecution is monitored through an Enterprise RiskManagement program.

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Global confidentiality policyProtecting confidential information is ingrained in theeveryday activities of EYG member firms. Respect forintellectual capital and all other sensitive and restrictedinformation is required by the EY Global Code of Conduct,which provides a clear set of principles to guide thebehaviors expected of all EY people. The GlobalConfidentiality Policy further details this approach toprotecting information and reflects the ever—increasing useof restricted data. This policy provides added clarity for EYpeople and forms the fundamental element of broaderguidance that includes key policies on conflicts of interest,personal data privacy and records retention. Otherguidance includes:

• Social media guidance• Information—handling requirements• Knowledge—sharing protocols

Cybersecurity

Managing the risk of major and complex cybersecurityattacks is a part of doing business for all organizations.While no systems are immune from the threat of cyber—attacks, EY Cyprus is vigilant in the steps taken to securethe environment of EYG member firms and to protect theirclients’ data. The EY approach to cybersecurity is proactiveand includes the implementation of technologies andprocesses necessary to manage and minimize cybersecurityrisks globally. EY information security and data privacyprograms, consistent with industry practices and applicablelegal requirements, are designed to protect againstunauthorized disclosure of data. There is a dedicated teamof internal and external cybersecurity specialists whoactively monitor and defend EY systems.

Beyond technical and process controls, all EY people arerequired to affirm in writing their understanding of theprinciples contained in the EY Global Code of Conduct andtheir commitment to abide by them and to participate in anannual security awareness learning activity. There arevarious policies outlining the due care that must be takenwith technology and data, including but not limited to theGlobal Information Security Policy, and a global policyaround the Acceptable Use of Technology. EYcybersecurity policies and processes recognize theimportance of timely communication. EY people receiveregular and periodic communications reminding them oftheir responsibilities around these policies and generalsecurity awareness practice.

Components of the audit quality control programIn the following sections, we describe the principalcomponents of the audit quality control program, which EYCyprus follows:

• Instilled professional values• Internal quality control system• Client acceptance and continuance• Performance of audits• Review and consultation• Audit partner rotation• Audit quality reviews• External quality—assurance reviews• Compliance with legal requirements

Instilled professional valuesSustainable Audit QualityQuality is the foundation for exceptional client service. It iswhat we pride ourselves on. It is integral to our work andcentral to our responsibility to provide confidence to thecapital markets. Delivering quality is at the heart of all wedo and supports our purpose of building a better workingworld for our people, our clients and our communities. Thisis reflected in the Sustainable Audit Quality (SAQ) program,which is the highest priority for our Assurance practices.

Each member firm that makes up our global structure iscommitted to providing high-quality audits. In 2015, welaunched the SAQ initiative throughout our Assurancepractices. SAQ establishes a governance structure and isfocused on continuously improving our audit process.

We use the word “sustainable” in SAQ to demonstrate thatthis is not a one-off, short-term initiative, but an ongoingprocess of improvement. EY has had a common auditmethodology for some time; now we have a commonlanguage and processes regarding audit quality.

There are six components to SAQ: tone at the top,strengthening people capabilities, simplification, audittechnology and digital, enablement and quality support,and accountability. SAQ is implemented by each memberfirm, and is coordinated and overseen globally.

Audit quality and the key elements of SAQ are somethingevery senior manager, manager and team member mustunderstand and be committed to implementing locally. SAQis essential to all our goals and ambitions, and each ofthe Regional and Area leaders is held accountable forthose goals.

We have made significant progress through SAQ. EY’sinternal and external inspection findings globally areshowing improvement, and we are producing greaterconsistency in execution. We have deployed world—classtools that enhance the quality and value of our audits. Ourability to deliver consistency is based in part on the use ofEY Canvas, our online audit platform. It better supportsaudit execution, streamlines communications and enablesus to provide a seamless audit.

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We recently launched the EY Canvas Client Portal, whichadds to the leading—edge tools already offered to ourauditors. In addition, we have deployed the 2018 AuditMilestones Program globally, which establishes the use ofMilestones on selected PIE audits as one important step toimproving results and sustaining quality acrossengagements.

There is also a network of Quality Enablement Leaders(QELs) across the practice and an overall Global AuditQuality Committee.They help us in executing and reviewing root-cause analysisand understanding the impact our initiatives are having indriving quality outcomes, better behaviors and a continuousimprovement mindset. This infrastructure demonstratesthat audit quality is the single most important factor in ourdecision—making and the key measure on which ourprofessional reputation stands.

Tone at the topEY Cyprus leadership is responsible for setting the righttone at the top and demonstrating EY’s commitment tobuilding a better working world through behavior andactions. While the tone at the top is vital, our people alsounderstand that quality and professional responsibility startwith them. Our shared values, which inspire our people andguide them to do the right thing, and our commitment toquality are embedded in who we are and in everythingwe do.

The EY approach to business ethics and integrity iscontained in the EY Global Code of Conduct and otherpolicies, and is embedded in the EY culture of consultation,training programs and internal communications. Seniormanagement regularly reinforces the importance ofperforming quality work, complying with professionalstandards, adhering to our policies, leading by example andthrough various communications. Also, EY’s quality reviewprograms assess professional service as a key metric inevaluating and rewarding all professionals.

The EY culture strongly supports collaboration and placesspecial emphasis on the importance of consultation indealing with complex or subjective accounting, auditing,reporting, regulatory and independence matters. We believeit is important to determine that engagement teams andclients correctly follow consultation advice, and weemphasize this when necessary.

The consistent stance of EY Cyprus has been that noclient is more important than our professionalreputation — the reputation of EY Cyprus and thereputation of each of our professionals.

Code of ConductWe promote a culture of integrity among our professionals.The EY Global Code of Conduct provides a clear set ofprinciples that guide our actions and our business conduct,and are to be followed by all EY personnel. The EY GlobalCode of Conduct is divided into five categories:

• Working with one another• Working with clients and others

• Acting with professional integrity• Maintaining our objectivity and independence• Respecting intellectual capital

Through our procedures to monitor compliance withthe EY Global Code of Conduct, and through frequentcommunications, we strive to create an environment thatencourages all personnel to act responsibly, includingreporting misconduct without fear of retaliation.

The EY Ethics Hotline provides our people, clients andothers outside of the organization with a means toconfidentially report activity that may involve unethical orimproper behavior and that may be in violation ofprofessional standards or otherwise inconsistent with theEY Global Code of Conduct. The hotline is operated by anexternal organization that provides confidential and, ifdesired, anonymous hotline reporting services worldwide.

When a report comes into the EY Ethics Hotline, either byphone or internet, it receives prompt attention. Dependingon the content of the report, appropriate individuals fromRisk Management, Talent, Legal or other functions areinvolved to address the report. The same procedures arefollowed for matters that are reported outside of the EYEthics Hotline.

Our values: who we are

People who demonstrate integrity, respect and teaming

People with energy, enthusiasm and the courage to lead

People who build relationships based on doing theright thing

Internal quality control systemStructureEY Cyprus’ reputation for providing high-qualityprofessional audit services independently, objectively andethically is fundamental to our success as independentauditors. We continue to invest in initiatives to promoteenhanced objectivity, independence and professionalskepticism. These are fundamental attributes of ahigh-quality audit.

At EY Cyprus, our role as auditors is to provide assuranceon the fair presentation of the financial statements of thecompanies we audit. We bring together qualified teams toprovide our services, drawing on our broad experienceacross industry sectors and services. We continually striveto improve our quality and risk management processes sothat the quality of our service is at a consistently high level.

We recognize that in today’s environment — characterizedby continuing globalization and the rapid movement ofcapital and the impact of technology changes — the qualityof our audit services has never been more important. Aspart of EY Vision 2020+, we continue to invest heavily indeveloping and maintaining our audit methodology, toolsand other resources needed to support quality service.

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While the market and stakeholders continue to demandhigh-quality audits, they also demand increasingly efficientand effective delivery of audit services. In addition to theinvestments mentioned, EY continues to seek ways toimprove the effectiveness and efficiency of its auditmethodology and processes, while improving audit quality.

We work to understand where our audit quality may not beup to our own expectations and those of stakeholders,including external audit firm regulators. We seek to learnfrom external and internal inspection activities and toidentify root causes of adverse quality occurrences toenable us continually to improve audit quality, and webelieve that taking effective and appropriate actions toimprove quality is important.

Effectiveness of the quality control systemEY has designed and implemented a comprehensive set ofglobal audit quality control policies and practices. Thesepolicies and practices meet the requirements of theInternational Standards on Quality Control issued by theInternational Auditing and Assurance Standards Board(IAASB). EY Cyprus has adopted these global policies andprocedures, and has supplemented them as necessary tocomply with local laws and professional guidelines, and toaddress specific business needs.

We also execute the EY Audit Quality Review (AQR) programto evaluate whether our system of audit quality control hasoperated effectively so as to provide reasonable assurancethat EY Cyprus and our people comply with applicableprofessional standards, internal policies and regulatoryrequirements.

The results of the AQR program and external inspectionsare evaluated and communicated within EY Cyprus toprovide the basis for continual improvement in audit quality,consistent with the highest standards in the profession.

The GE is responsible for implementing qualityimprovement. As such, it reviews the results of our internalAQR program and external audit firm regulatory reviews,as well as any key actions designed to address areasfor improvement.

The recent results of such monitoring, together with therecent feedback from independent external audit firmregulators, provide EY Cyprus with a basis to conclude thatour internal control systems are designed appropriately andare operating effectively.

Client acceptance andcontinuanceEY policyThe EY Global Client Acceptance and Continuance Policysets out principles for member firms to determine whetherto accept a new client or a new engagement, or to continuewith an existing client or engagement. These principles arefundamental to maintaining quality, managing risk,protecting our people and meeting regulatoryrequirements. The objectives of the policy are to:

• Establish a rigorous process for evaluating risk andmaking decisions to accept or continue clients orengagements

• Meet applicable independence requirements• Identify and deal appropriately with any conflicts

of interest• Identify and decline clients or engagements that pose

excessive risk• Require consultation with designated professionals to

identify additional risk management procedures forspecific high-risk factors

• Comply with legal, regulatory and professionalrequirements

In addition, the EY Global Conflicts of Interest Policy definesglobal standards for addressing categories of potentialconflicts of interest and a process for identifying them. Italso includes provisions for managing potential conflicts ofinterest as quickly and efficiently as possible through theuse of appropriate safeguards. Such safeguards range fromobtaining a client’s consent for EYG member firms to act fortwo or more clients to declining an engagement to avoid anidentified conflict.

The EY Global Conflicts of Interest Policy and associatedguidance were updated in early 2015. The updates take intoaccount the increasing complexity of engagements andclient relationships, and the need for speed and accuracy inresponding to clients. They also align with the latestInternational Ethics Standards Board for Accountants(IESBA) standards.

Putting policy into practiceWe use the EY Process for Acceptance of Clients andEngagements (PACE), an intranet—based system, forefficiently coordinating client and engagement acceptanceand continuance activities in line with global, service lineand member firm policies. PACE takes users through theacceptance and continuance requirements, and identifiesthe policies and references to professional standardsneeded to assess both business opportunities andassociated risks.

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As part of this process, we carefully consider the riskcharacteristics of a prospective client or engagement andthe results of several due diligence procedures. Before wetake on a new engagement or client, we determine whetherwe can commit sufficient resources to deliver qualityservice, especially in highly technical areas, and if theservices the client wants are appropriate for us to provide.The approval process is rigorous, and no new auditengagement may be accepted without the approval of ourPPD.

In the EY annual client and engagement continuanceprocess, we review our service and ability to continue toprovide quality service, and confirm that clients share EYCyprus’ commitment to quality and transparency in financialreporting. The partner in charge of each audit, togetherwith our Assurance leadership, annually reviews ourrelationship with the audit client to determine whethercontinuance is appropriate.

As a result of this review, certain audit engagements areidentified as requiring additional oversight proceduresduring the audit (close monitoring), and some audit clientsare discontinued. As with the client acceptance process, ourRegional PPD is involved in the client continuance processand must agree with the continuance decisions.

Decisions about acceptance or continuance of clients andengagements consider the engagement team’s assessmentof whether the company’s management may pressure us toaccept inappropriate accounting, auditing and reportingconclusions to undermine quality. Considerations andconclusions on the integrity of management are essentialto acceptance and continuance decisions.

Performance of auditsAs part of EY Vision 2020+, EY has invested significantly inimproving audit methodologies and tools, with the goal ofperforming the highest-quality audits in the profession. Thisinvestment reflects EY’s commitment to building trust andconfidence in the capital markets and in economies theworld over.

Audit methodologyEY GAM provides a global framework for delivering high-quality audit services through the consistent application ofthought processes, judgments and procedures in all auditengagements, regardless of size. EY GAM also requirescompliance with relevant ethical requirements, includingindependence from the entity we audit. Making riskassessments, reconsidering and modifying them asappropriate, and using these assessments to determine thenature, timing and extent of audit procedures arefundamental to EY GAM. The methodology also emphasizesapplying appropriate professional skepticism in theexecution of audit procedures. EY GAM is based onInternational Standards on Auditing (ISAs) and issupplemented in Cyprus to comply with the local regulatoryor statutory requirements.

Using an online tool, EY Atlas, an EY auditor is presentedwith a version of EY GAM organized by topic and designedto focus the audit strategy on the financial statement risks,and the design and execution of the appropriate auditresponse to those risks. EY GAM consists of two keycomponents: requirements and guidance, and supportingforms and examples. The requirements and guidance reflectboth auditing standards and EY policies. The forms andexamples include leading practice illustrations, and assist inperforming and documenting audit procedures.

EY GAM can be “profiled” or tailored to present the relevantrequirements and guidance, depending on the nature of theentity being audited. For example, there are profiles forlisted entities and for those considered non-complexentities. Enhancements to the audit methodology are maderegularly to address new standards, emerging auditingissues and matters, implementation experiences, andexternal and internal inspection results. In 2017, EY GAMwas updated to address the requirements of new section225 of the International Ethics Standards Board forAccountants Code of Ethics (IESBA Code), Responding toNon-Compliance with Laws and Regulations and theresulting conforming changes to the ISAs. In addition,updated guidance was issued on performing joint audits andaudits when the entity uses a service organization, alongwith new policies relating to maintaining the auditdocumentation in electronic form. EY GAM was alsoenhanced by adding guidance to address common questionsfrom audit teams and issues arising from inspections.

In addition, we monitor current and emergingdevelopments, and issue timely audit planning and otherreminders. These reminders emphasize areas noted duringinspections as well as other key topics of interest to ourlocal audit regulator(s) and the International Forum ofIndependent Audit Regulators (IFIAR).

TechnologyOur audit engagement teams use technology to assist inexecuting and documenting the work performed inaccordance with EY GAM.

EY Canvas, our global audit platform, lies at the heart of theaudit and enables us to provide a high-quality audit. EYCanvas is built using HTML5, state-of-the-art technology forweb applications. This allows us to provide data security andto evolve our software to respond to changes in theaccounting profession and regulatory environment. Thepredecessor audit support tool, GAMx, was decommissionedin 2018.

Through the use of profile questions, audit engagements inEY Canvas are automatically configured with informationrelevant to an entity’s listing requirements and industry.This helps to keep our audit plans customized and up-to-date, and provides direct linkage to our audit guidance,professional standards and documentation templates. EYCanvas is built with a user interface that allows the team tovisualize risks and their relationship to the planned

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response and work performed in key areas. It also enables alinkage for our group audit teams to communicate inter-office risks and instructions so that the primary audit teamcan direct execution and monitor performance of thegroup audit.

EY Canvas includes a Client Portal to assist teams incommunicating with clients and streamlining their clientrequests. Mobile applications are integrated with EY Canvasto help our people in their audit work; for example, inmonitoring the status of the audit, capturing audit evidencesecurely and performing inventory observations.

Audit engagement teams use other software applications,forms and templates during various phases of an audit toassist in executing procedures, making and documentingaudit conclusions, and performing analysis.

At EY, we are making data analysis integral to our audits.Our use of data and analysis is not about additiveprocedures or visualizations. It is about taking largepopulations of company data, and applying our globallyconsistent technology (EY Helix) and methodology (EYGAM) to audit that data.

EY Helix is a library of data analyzers for use in audits.These data analyzers are transforming the audit throughthe analysis of larger populations of audit-relevant data,identifying unseen patterns and trends in that data, andhelping to direct our audit efforts. The use of data analyticsalso allows us to obtain better perspectives, richer insightsand a deeper understanding of transactions and areas ofrisk.

EY is deploying data analyzers to analyze the businessoperating cycles of the companies that we audit, supportedby analytics-based audit programs to aid the application ofthese data analyzers.

Using the EY Helix library of data analyzers, ourengagement teams can enhance their audit riskassessment, enabling the audit of higher-risk transactions,and assisting our people in asking better questions aboutaudit findings and evaluating the outcomes.

EY Atlas is a global technology platform that enables ourauditors to access the latest accounting and auditingcontent, including external standards, EY interpretationsand thought leadership.

Formation of audit engagement teamsEY Cyprus policies require an annual review of partnerassignments by our Assurance leadership and Regional PPDto make sure that the professionals leading listed-companyaudits possess the appropriate competencies (i.e., theknowledge, skills and abilities) to fulfill their engagementresponsibilities, and are in compliance with applicableauditor rotation regulations.

The assignment of professionals to an audit engagement isalso made under the direction of our Assurance leadership.Factors considered when assigning people to audit teamsinclude engagement size and complexity, specializedindustry knowledge and experience, timing of work,continuity, and opportunities for on-the-job training. For

more complex engagements, consideration is given towhether specialized or additional expertise is needed tosupplement or enhance the audit engagement team.

In many situations, internal specialists are assigned as partof the audit engagement team to assist in performing auditprocedures and obtaining appropriate audit evidence. Theseprofessionals are used in situations requiring special skillsor knowledge, such as information systems, asset valuationand actuarial analysis.

Review and consultationReviews of audit workEY policies describe the requirements for timely and directsenior professional participation, as well as the level ofreview required for the work performed. Supervisorymembers of an audit engagement team perform a detailedreview of the audit documentation for accuracy andcompleteness. Senior audit executives and engagementpartners perform a second-level review to determineadequacy of the audit work as a whole, and the relatedaccounting and financial statement presentation. A taxprofessional reviews the significant tax and other relevantworking papers. For listed and certain other companies, anengagement quality reviewer (described below) reviewsimportant areas of accounting, financial reporting and auditexecution, as well as the financial statements of thecompany we audit and our auditor’s report.

The nature, timing and extent of the reviews of audit workdepend on many factors, including:

• The risk, materiality, subjectivity and complexity of thesubject matter

• The ability and experience of the audit team memberspreparing the audit documentation

• The level of the reviewer’s direct participation in theaudit work

• The extent of consultation employed

Our policies also describe the roles and responsibilities ofeach audit engagement team member for managing,directing and supervising the audit, as well as therequirements for documenting their work and conclusions.

Consultation requirementsEY consultation policies are built upon a culture ofcollaboration, whereby audit professionals are encouragedto share perspectives on complex accounting, auditing andreporting issues. Consultation requirements and relatedpolicies are designed to involve the right resources so thataudit teams reach appropriate conclusions.

Consultation is built into the decision-making process;it is not just a process to provide advice.

For complex and sensitive matters, we have a formalprocess requiring consultation outside of the auditengagement team with other personnel who have moreexperience or specialized knowledge, primarily ProfessionalPractice and Independence personnel. In the interests of

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objectivity and professional skepticism, our policies requiremembers of Professional Practice, Independence andcertain others to withdraw from a consultation if theycurrently serve, or have recently served, the client to whichthe consultation relates. In this circumstance, otherappropriate individuals would be assigned.

EY policies also require that we document all consultations,including written concurrence from the person or personsconsulted, in order to demonstrate their understanding ofthe matter and its resolution.

Engagement quality reviewsEngagement quality reviews are performed by auditpartners in compliance with professional standards foraudits of all listed companies and those considered closemonitoring. Engagement quality reviewers are experiencedprofessionals with significant subject matter knowledge.They are independent of the engagement team and ableto provide objective evaluation of significant accounting,auditing and reporting matters. In no circumstances maythe responsibility of the engagement quality reviewer bedelegated to another individual.

The engagement quality review spans the entireengagement cycle, including planning, risk assessment,audit strategy and execution. Policies and procedures forthe performance and documentation of engagement qualityreviews provide specific guidelines on the nature, timingand extent of the procedures to be performed, and therequired documentation evidencing their completion. OurRegional PPD approves all engagement quality reviewassignments.

Audit engagement team resolution process fordifferences of professional opinionEY has a collaborative culture that encourages and expectspeople to speak up, without fear of reprisal, if a differenceof professional opinion arises or if they are uncomfortableabout a matter relating to a client engagement. Policiesand procedures are designed to empower members of anaudit engagement team to raise any disagreements relatingto significant accounting, auditing or reporting matters.

These policies are made clear to people as they join EY, andwe continue to promote a culture that reinforces a person’sresponsibility and authority to make their own views heard,and seek out the views of others.

Differences of professional opinion that arise during anaudit are generally resolved at the audit engagement teamlevel. However, if any person involved in the discussion of anissue is not satisfied with the decision, they refer it to thenext level of authority until agreement is reached or a finaldecision is made.

Furthermore, if the engagement quality reviewer makesrecommendations that the engagement partner does notaccept or the matter is not resolved to the reviewer’ssatisfaction, the auditor’s report is not issued until thematter is resolved. EY policies require documentation ofdisagreements and their resolution.

Audit partner rotationEY supports mandatory audit partner rotation to helpreinforce auditor independence. EY Cyprus complies withthe audit partner rotation requirements of the code of theIESBA, Regulation (EU) 537/2014 of the EuropeanParliament and of the Counsel of 16 April 2014 (EU537/2014), as well as the U.S. Securities and ExchangeCommission (SEC), where required. EY Cyprus supportsaudit partner rotation because it provides a freshperspective and promotes independence from companymanagement, while retaining expertise and knowledge ofthe business. Audit partner rotation, combined withindependence requirements, enhanced systems of internalquality controls and independent audit oversight, helpsstrengthen independence and objectivity, and are importantsafeguards of audit quality.

For PIEs where rotation of the audit partner is notmandated by local independence regulation or is lessrestrictive than the IESBA or EU 537/2014 requirements,the EY Global Independence Policy requires the leadengagement partner and the engagement quality reviewerto be rotated after seven years. For a new PIE (including anewly listed company) client, the lead engagement partnerand the engagement quality reviewer may remain in placefor an additional two years before rotating off the team, ifthey have served the client for six or more years prior to thelisting. Following rotation, the partner may not resume thelead or engagement quality review role until at least twoyears have elapsed.

We employ tools to track partner rotation that enableeffective monitoring of compliance with requirements.We have also implemented a process for partner rotationplanning and decision-making that involves consultationwith, and approvals by, our Professional Practice andIndependence professionals.

Audit quality reviewsThe EY Global AQR program is the cornerstone of the EYprocess to monitor audit quality. EY Cyprus executes theGlobal AQR program, reports results and developsresponsive actions plans. The primary goal of the programis to determine whether systems of quality controls,including those of EY Cyprus, are appropriately designedand followed in the execution of audit engagements toprovide reasonable assurance of compliance with policiesand procedures, professional standards, and regulatoryrequirements. The Global AQR program complies withguidelines in the International Standard on Quality ControlNo. 1 (ISQC No. 1), as amended, and is supplementedwhere necessary to comply with Cyprus professionalstandards and regulatory requirements. It also aids EYCyprus’ continual efforts to identify areas where wecan improve our performance or enhance our policiesand procedures.

Executed annually, the program is coordinated andmonitored by representatives of the Global PPD network,with oversight by Global Assurance leadership.

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The engagements reviewed each year are selected on a risk-based approach, emphasizing audit engagements that arelarge, complex or of significant public interest. The GlobalAQR program includes detailed risk-focused file reviewscovering a large sample of listed and non-listed auditengagements to measure compliance with internal policiesand procedures, EY GAM requirements, and relevant localprofessional standards and regulatory requirements. It alsoincludes reviews of a sample of non-audit engagements.These measure compliance with the relevant professionalstandards and internal policies and procedures that shouldbe applied in executing non-audit services. In addition,practice-level reviews are performed to assess compliancewith quality control policies and procedures in thefunctional areas set out in ISQC No. 1. The Global AQRprogram complements external practice monitoring andinspection activities, such as inspection programs executedby audit regulators and external peer reviews.

AQR reviewers and team leaders are selected for their skillsand professional competence in accounting and auditing, aswell as their industry specialization; they often work in theGlobal AQR program for a number of years and are highlyskilled in the execution of the program. Team leaders andreviewers are assigned to inspections outside of their homelocation and are independent of the audit teams reviewed.

The results of the Global AQR program, external practicemonitoring and inspection activities are evaluated andcommunicated to improve quality. Any qualityimprovement plans describe the follow-up actions to betaken, the people responsible, the timetable and deadlines,and sign-off on completed actions. Measures to resolveaudit quality matters noted from the Global AQR program,regulatory inspections and peer reviews are addressed byAssurance leadership and our PPD. The actions aremonitored by our PPD and Assurance leadership. Theseprograms provide important practice monitoring feedbackfor our continuing quality improvement efforts.

External quality assurancereviewEY Cyprus’ audit practice and our registered auditors aresubject to inspection by the Cyprus Public Audit OversightBoard (CyPAOB - Regulator) and by the Institute of CertifiedPublic Accountants of Cyprus (ICPAC – Professional Body).As part of their inspections, both the Regulator and theProfessional Body evaluate quality control systems andreview selected engagements. CyPAOB inspects firm-widecontrols and PIE audit files while ICPAC inspects non-PIEaudit files.

The last regulatory inspection on firm-wide controls carriedout by the CyPAOB took place in 2016 with a follow up in2017 – this follow up also included audit quality PIEengagement reviews carried in 2016. The final follow upreport on the inspection and reviews was issued on 8 March2018.

The last regulatory audit quality PIE engagement reviewcarried out by the CyPAOB took place in 2017/2018. Thefinal report on the inspection was issued on 11 September2018.

We have carried out Root Cause Analysis (RCA) on theregulatory inspection reports of 2016/2017 leading to thefinal report of 8 March 2018. We have implementedactions and also are working on improvement plans on theareas that the regulatory inspections in 2016/2017 and2017/2018 highlight as requiring action.

The last monitoring visit carried out by ICPAC took place in2015 and the final report was issued on 25 April 2016.

We respect and benefit from the CyPAOB and the ICPACinspection process and remain committed to continuing ourclose and constructive dialogue with them. We thoroughlyevaluate points raised during the inspection in order toidentify areas where we can improve audit quality. Togetherwith our AQR process, external inspections aid us in makingour audits and related control processes of the highestquality in the interests of investors and other stakeholders.

Information on the above-mentioned Regulator CyPAOB andProfessional Body ICPAC can be found atwww.cypaob.gov.cy and www.icpac.org.cy respectively.

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Compliance with legalrequirementsThe EY Global Code of Conduct provides a clear set ofstandards that guide our actions and business conduct.EY Cyprus complies with applicable laws and regulations,and EY’s values underpin our commitment to doing the rightthing. This important commitment is supported by anumber of policies and procedures, explained in theparagraphs below.

Anti-briberyThe EY Global Anti-bribery Policy provides EY people withdirection around certain unethical and illegal activities. Itemphasizes the obligation to comply with anti-bribery lawsand provides greater definition of what constitutes bribery.It also identifies reporting responsibilities when bribery isdiscovered. In recognition of the growing global impact ofbribery and corruption, efforts have been increased toembed anti-bribery measures across EY.

Insider tradingThe EY Global Insider Trading Policy reaffirms the obligationof our people not to trade in securities with insiderinformation, provides detail on what constitutes insiderinformation and identifies with whom our people shouldconsult if they have questions regarding theirresponsibilities.

Trade sanctionsIt is important that we are aware of the ever—changingsituation with respect to international trade sanctions. EYmonitors sanctions issued in multiple geographies andprovides guidance to EY people on impacted activities.

Data privacyThe EY Global Personal Data Privacy Policy sets out theprinciples to be applied to the use and protection ofpersonal data, including that relating to current, past andprospective personnel, clients, suppliers, and businessassociates. This policy is consistent with applicable laws andregulations concerning data protection and privacy formaintaining and processing personal data. Furthermore, wehave a policy to address our specific Cyprus data privacyrequirements and business needs.

Document retentionEY Cyprus’ record retention policy applies to allengagements and personnel. This policy addressesdocument preservation whenever any person becomesaware of any actual or reasonably anticipated claim,litigation, investigation, subpoena or other governmentproceeding involving us or one of our clients that may relateto our work. It also addresses Cyprus legal requirementsapplicable to the creation and maintenance of workingpapers relevant to the work performed.

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Independence practicesEY Global Independence policies require EY Cyprus and ourpeople to comply with the independence standardsapplicable to specific engagements, including, for example,the Code of Ethics of the IESBA of the InternationalFederation of Accountants (IFAC) which has been adoptedby the Institute of Certified Public Accountants of Cyprus(ICPAC).

We consider and evaluate independence from severalperspectives, including our financial relationships and thoseof our people; employment relationships; businessrelationships; the permissibility of non-audit services weprovide to audit clients; applicable firm and partner rotationrequirements; fee arrangements; audit committee pre-approval, where applicable; and partner remunerationand compensation.

Failure to comply with applicable professionalindependence requirements will factor into decisionsrelating to a person’s promotion and compensation,and may lead to other disciplinary measures, includingseparation from EY Cyprus.

EY Cyprus has implemented EY’s global applications, toolsand processes to support us, our professionals and otheremployees in complying with independence policies.

EY Global Independence PolicyThe EY Global Independence Policy contains theindependence requirements for member firms,professionals and other personnel. It is a robust policypredicated on the IESBA Code of Ethics and supplementedby more stringent requirements where prescribed by agiven regulator. The policy also contains guidance to helppeople apply the independence rules. The EY GlobalIndependence Policy is readily accessible and easilysearchable on the EY intranet.

Global Independence System (GIS)The GIS is an intranet—based tool that helps EYprofessionals identify the listed entities from whichindependence is required and the independence restrictionsthat apply. Most often, these are listed audit clients andtheir affiliates, but they can be other types of attest orassurance clients too. The tool includes family—tree data

relating to affiliates of listed audit clients and is updated byclient—serving engagement teams. The entity data includesnotations that indicate the independence rules that apply toeach entity, helping our people determine the type ofservices that can be provided or other interests orrelationships that can be entered into.

Global Monitoring System (GMS)The GMS is another important global tool that assists inidentifying proscribed securities and other impermissiblefinancial interests. Professionals ranked as manager andabove are required to enter details about all securities theyhold, or those held by their immediate family, into the GMS.When a proscribed security is entered or if a security theyhold becomes proscribed, professionals receive a notice,and are required to dispose of the security. Identifiedexceptions are reported through the Global IndependenceIncident Reporting System (GIIRS) for regulatory matters.

GMS also facilitates annual and quarterly confirmation ofcompliance with independence policies, as described below.

Independence complianceEY has established a number of processes and programsaimed at monitoring the compliance with independencerequirements of EY member firms and their people. Theseinclude the following activities, programs and processes.

Independence confirmations

Annually, EY Cyprus is included in an Area-wide process toconfirm compliance with the EY Global Independence Policyand process requirements, and to report identifiedexceptions, if any.

All EY professionals, and certain others, based on their roleor function, are required to confirm compliance withindependence policies and procedures at least once a year.All partners are required to confirm compliance quarterly.

Independence compliance reviews

EY conducts internal procedures to assess member firmcompliance with independence matters. These reviewsinclude aspects of compliance related to non-audit services,business relationships with the companies we audit andfinancial relationships of member firms.

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Personal independence compliance testing

Each year, the EY Global Independence team establishes aprogram for testing compliance with personal independenceconfirmation requirements and with reporting ofinformation into GMS. For the 2017 testing cycle,EY Cyprus tested 8 partners and other personnel.

Non-audit services

We monitor compliance with professional standardsgoverning the provision of non-audit services to auditclients through a variety of mechanisms. These include theuse of tools, such as PACE (see page 11) and ServiceOffering Reference Tool (see below), and training andrequired procedures completed during the performance ofaudits and internal inspection processes. We also have aprocess in place for the review and approval of certain non-audit services in advance of accepting the engagement.

Global independence learning

EY develops and deploys a variety of independence learningprograms. All professionals and certain other personnelare required to participate in annual independence learningto help maintain our independence from the companieswe audit.

The goal is to help EY people understand theirresponsibility and to enable each of them, and theirmember firms, to be free from interests that might beregarded as incompatible with objectivity, integrity andimpartiality in serving an audit client.

The annual independence learning program coversindependence requirements focusing on recent changes topolicy, as well as recurring themes and topics ofimportance. Timely completion of annual independencelearning is required and is monitored closely.

In addition to the annual learning program, independenceawareness is promoted through a number of events andmaterials, including new-hire programs, milestone programsand core service line curricula.

Service Offering Reference Tool (SORT)

We assess and monitor our portfolio of services on anongoing basis to confirm that they are permitted by law andprofessional standards, and to make sure that we have theright methodologies, procedures and processes in place asnew service offerings are developed. We restrict servicesfrom being provided that could present undueindependence or other risks. SORT provides EY people withinformation about EY service offerings. It includes guidancearound which services can be delivered to audit and non-audit clients, as well as independence and other riskmanagement issues.

Business Relationship Evaluation Tool (BRET)

The BRET process helps to support compliance withindependence requirements. Our people are required to useBRET in many circumstances to identify, evaluate andobtain advance approval of a potential business relationshipwith an audit client.

Audit committees and oversight of independenceWe recognize the important role audit committees andsimilar corporate governance bodies undertake in theoversight of auditor independence. Empowered andindependent audit committees perform a vital role on behalfof shareholders in protecting independence and preventingconflicts of interest. We are committed to robust andregular communication with audit committees or thosecharged with governance. Through EY quality reviewprograms, we monitor and test compliance with EYstandards for audit committee communications, as well asthe pre-approval of non-audit services, where applicable.

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Continuing education ofaudit professionalsProfessional developmentThe EY career development framework, EYU, provides ourpeople with opportunities for the right experiences, learningand coaching to help them grow and achieve their potential.

The learning component of EYU is based on an extensiveand globally consistent learning curriculum that helps all EYpeople develop the right technical and personal leadershipskills, wherever they are located around the world. The EYaudit core curriculum, The Audit Academy, combinesinteractive classroom-based simulations and “on-demand”e-learning modules with relevant reinforcement andapplication support. This high impact and award-winninglearning is supplemented by learning programs that aredeveloped in response to changes in accounting andreporting standards, independence and professionalstandards, and emerging practice issues.

Where an EYG member firm audits and reviewsInternational Financial Reporting Standards (IFRS) financialstatements, relevant team members undertake learning tobecome IFRS-accredited.

EY Cyprus requires our audit professionals to obtain at least21 hours of continuing professional education each yearand at least 120 hours over a three-year period. Of thesehours, 40% (8 hours each year and 48 hours over a three-year period) must cover technical subjects related toaccounting and auditing.

In addition to formal learning, professional developmentoccurs through coaching and experiences our professionalsreceive on-the-job. Coaching helps to transform knowledgeand experience into practices.

Experienced professionals are expected to coach anddevelop less-experienced personnel to create a continuallearning environment. We also manage the assignment ofour people to particular engagements in a systematic waythat helps provide them exposure to a range of experiencesas part of their own development.

Knowledge and internal communicationsIn addition to professional development and performancemanagement, we understand the importance of providingclient engagement teams with up-to-date information tohelp them perform their professional responsibilities. EYmakes significant investments in knowledge andcommunication networks to enable the rapid disseminationof information to help people collaborate and share bestpractices. Examples include:

• EY Atlas, which includes local and internationalaccounting and auditing standards, as well asinterpretive guidance; replacement for GlobalAccounting and Auditing Information Tool (GAAIT)since the fiscal year 2017

• Publications such as International GAAP, IFRSdevelopments and illustrative financial statements

• Global Accounting and Auditing News, a weekly updatecovering assurance and independence policies,developments from standard setters and regulators, aswell as internal commentary thereon

• Practice alerts and webcasts covering a range of globaland country-specific matters designed for continuousimprovement in member firms’ Assurance practices

Performance managementLEAD, our new, forward-looking approach to people’scareer, development and performance sees an enhancedfocus on continuous feedback resulting in betterconversations built around 90-day cycles. Feedback isaggregated and used as an input to compensation andreward programs.

LEAD is designed to support the growth and development ofour people at all stages of their career at EY. An individual’spersonal dashboard provides an easy to interpret snap-shotof their performance against the Leadership at EYdimensions, and assess performance against peers.

LEAD retains components that were also included in ourprevious Performance Management and DevelopmentProcess approach. Those were providing our people withclear work expectations and the opportunity to self-assesstheir performance. During the course of the year, everyprofessional, in conjunction with their counselor, identifiesopportunities for further development.

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Revenue andremunerationFinancial informationRevenue includes expenses billed to clients and revenuesrelated to billings to other EYG member firms. Revenueamounts disclosed in this report include revenues from bothaudit and non-audit clients. Revenues reported for Cypruscomprise those of Ernst & Young Cyprus Limited; the otherEY audit firms in Cyprus shown in Appendix 2 do not carryout audits or provide any professional services.

Revenue is presented in accordance with Regulation (EU)537/2014 of the European Parliament and of the Council of16 April 2014 and included for:

1. Revenues from the statutory audit of annual andconsolidated financial statements of PIEs, and entitiesbelonging to a group of undertakings whose parentundertaking is a PIE

2. Revenues from the statutory audit of annual andconsolidated financial statements of other entities

3. Revenues from permitted non-audit services to entitiesthat are audited by the statutory auditor or theaudit firm

4. Revenues from non-audit services to other entities

Financial information for the year ended 30 June2018 expressed in millions of Euros

Service Revenue Percent

Statutory audits anddirectly related servicesfor PIEs

2,3 9,2%

Other audit services anddirectly related servicesfor non-PIEs

9,7 38,8%

Non-audit servicesprovided to audit clients 5,7 22,8%

Non-audit servicesprovided to other entities 7,3 29,2%

Total revenue 25,0 100%

Partner remunerationQuality is at the center of the EY strategy and is a keycomponent of EY performance management systems. EYCyprus partners and other professionals are evaluated andcompensated on the basis of criteria that include specificquality and risk management indicators, covering bothactions and results.

LEAD for partners, principals, executive directors anddirectors (PPEDDs) applies to all partners in EYG memberfirms around the world. LEAD for PPEDDs reinforces theglobal business agenda by continuing to link performance towider goals and values. The process includes goal setting,ongoing feedback, personal development planning andperformance review, and is tied to partners’ recognition andreward. Documenting partners’ goals and performance isthe cornerstone of the evaluation process. A partner’s goalsare required to reflect various global priorities, one of whichis quality.

EY prohibits evaluating and compensating lead auditengagement partners and other key audit partners on anengagement based on the sale of non-Assurance services totheir audit clients. This reinforces to our partners theirprofessional obligation to maintain our independence andobjectivity. For audits conducted in accordance with therequirements of Directive 2014/56/EU of the EuropeanParliament and of the Council of 16 April 2014, EYprohibits evaluating and compensating any partner orprofessional involved in, or able to influence the carryingout of, an engagement based on the sale of non-Assuranceservices to their audit clients. This reinforces thatprofessionals are obligated to maintain independence andobjectivity.

Specific quality and risk performance measures have beendeveloped to account for:

• Providing technical excellence• Living the EY values as demonstrated by behaviors

and attitude• Demonstrating knowledge of, and leadership in, quality

and risk management• Complying with policies and procedures

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• Complying with laws, regulations and professionalduties

• Contributing to protecting and enhancing the EY brand

The EY partner compensation philosophy calls formeaningfully differentiated rewards based on a partner’slevel of performance, as measured within the context ofLEAD. Partners are assessed by their firms annually ontheir performance in delivering quality, exceptional clientservice and people engagement alongside financial andmarket metrics.

We operate under a system that requires quality tobe a significant consideration in a partner’s overallyear-end rating.

To recognize different market values for different skills androles, and to attract and retain high-performing individuals,the following factors are also considered when wedetermine our partners’ total reward:

• Experience• Role and responsibility• Long-term potential

Instances of non-compliance with quality standards result inremedial actions, which may include compensationadjustment, additional training, additional supervision orreassignment. A pattern of non-compliance or particularlyserious non-compliance may result in actions that includeseparation from EY Cyprus.

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Appendix 1EY Cyprus PIE audit clients

Under the Cyprus Auditors Law of 2017, Public InterestEntities (PIEs) are defined as follows:

(a) Entities governed by the law of the Republic whosetransferable securities are admitted to trading onan organized or regulated market of any MemberState within the meaning of Article 2 of theInvestment Services and Activities and RegulatedMarkets Law;

(b) Licensed credit institutions as defined in Article 2of the Business of Credit Institutions Law;

(c) Insurance and reinsurance undertakings within themeaning of Article 2 of the Insurance andReinsurance Services and Other Related IssuesLaw

In the fiscal year that ended on 30 June 2018, EY Cyprusperformed audits of the following PIEs:

Alkis H. Hadjikyriacos (Frou-Frou Biscuits) Public Ltd

Arab Jordan Investment Bank S.A. Cyprus Branch

Bank of Cyprus Public Company Ltd

Blom Bank S.A.L. Cyprus Branch

Byblos Bank S.A.L. Cyprus Branch

Credit Libanais S.A.L. Cyprus Branch

Demetra Investments Public Ltd

Display Art Plc

Eurolife Ltd

General Insurance of Cyprus Ltd

Global Balanced Fund Of Funds Salamis Variable CapitalInvestment Company PLC (ex - Cytrustees Investment PublicCompany Ltd)

Housing Finance Corporation

Jordan Ahli Bank Cyprus Branch

Petrolia E&P Holdings SE

Public Joint-Stock Company Commercial Bank "Privatbank"Cyprus Branch

Saxo Bank Cyprus A/S Cyprus Branch

Société Générale Bank Cyprus Ltd

Universal Life Insurance Public Co. Ltd

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Appendix 2As of 30 June 2018, the following EYG member firms are approved to carry out statutory audits in an EU or EEA member state

Member State Statutory auditor or audit firm

Austria Ernst & Young Wirtschaftspruefungsgesellschaft mbH

Belgium Ernst & Young Assurance Services BCVBA

Ernst & Young Bedrijfsrevisoren B.C.V.B.A

Bulgaria Ernst & Young Audit OOD

Croatia Ernst & Young d.o.o.

Cyprus Ernst & Young Cyprus LimitedErnst & YoungErnst & Young CEA (South) Services LtdErnst & Young CEA (South) Holdings Plc

Czech Republic Ernst & Young Audit, s.r.o.

Denmark Ernst & Young Godkendt Revisionspartnerselskab

EY Grønland Statsautoriseret Revisionspartnerselskab

Estonia Ernst & Young Baltic ASBaltic Network OU

Finland Ernst & Young Oy

Julkispalvelut EY Oy

France Artois

Auditex

Barbier Frinault & Associes

Conseil Audit & Synthese

Ernst & Young Atlantique

Ernst & Young Audit

Ernst & Young et Autres

Picarle et Associes

Germany Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft

Ernst & Young Heilbronner Treuhand GmbH Wirtschaftsprüfungsgesellschaft

EY Revision und Treuhand GmbH Wirtschaftsprüfungsgesellschaft

Schitag Schwäbische Treuhand GmbH Wirtschaftsprüfungsgesellschaft

Gibraltar EY Limited

Transparency Report 2018: EY Cyprus 24

Member State Statutory auditor or audit firm

Greece Ernst & Young (Hellas) Certified Auditors Accountants SA

Hungary Ernst & Young Könyvvizsgáló Korlátolt Felelõsségû Társaság

Iceland Ernst & Young ehf

Ireland Ernst & Young Chartered Accountants

Italy EY S.p.A

Latvia Ernst & Young Baltic SIA

Liechtenstein Ernst & Young AG, BaselErnst & Young AG, Vaduz

Lithuania UAB Ernst & Young Baltic

Luxembourg Compagnie de Revision S.A.

Ernst & Young Luxembourg S.A.

Ernst & Young S.A.

Malta Ernst & Young Malta Limited

Netherlands Ernst & Young Accountants LLP

Norway Ernst & Young AS

Poland Ernst & Young Audyt Polska sp. z o.o.

Ernst & Young Audyt Polska Spółka z ograniczoną odpowiedzialnością Finance spółka komandytowa

Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością Doradztwo Podatkowe spółkakomandytowa

Ernst & Young Audyt Polska spółka z ograniczoną odpowiedzialnością sp. k.

Ernst & Young Usługi Finansowe Audyt sp. z o.o.

Portugal Ernst & Young Audit & Associados - SROC, S.A.

Romania Ernst & Young Assurance Services S.r.l.

Ernst & Young Support Services SRL

Slovakia Ernst & Young Slovakia, spol. s r.o.

Slovenia Ernst & Young d.o.o.

Spain ATD Auditores Sector Público, S.L.U

Ernst & Young, S.L.

Sweden Ernst & Young AB

United Kingdom Ernst & Young LLP

Ernst & Young Europe LLP

Total turnover of these EYG member firms resulting from statutory audits of annual and consolidated financial statements wasapproximately Euros 2,6 billion.

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