Network arrangements and member firms

In most parts of the world, the right to practise audit and accountancy is granted only to national firms that are majority-owned by locally qualified professionals. PwC is a global network of separate member firms, owned and operating locally in countries around the world. PwC firms are members of PricewaterhouseCoopers International Limited and have the right to use the PricewaterhouseCoopers name.

The network provides the foundation for member firms to share knowledge, skills and resources, enabling PwC firms to work together to provide consistently high-quality services on a global scale to international and local clients while still operating as local businesses.

PricewaterhouseCoopers International Limited

PricewaterhouseCoopers International Limited (PwCIL) is a UK private company limited by guarantee in which PwC firms are members. PwCIL doesn’t practise accountancy, provide services to clients or do business with third parties. Instead, its purpose is to act as a coordinating entity for PwC firms in the PwC network. PwCIL works to develop and implement policies and initiatives that create a common and coordinated approach for PwC firms, where it’s appropriate. PwCIL focuses on key areas like strategy, brand, and risk and quality.

Global Board

The Board is responsible for the governance of PwCIL, oversight of the Network Leadership Team and approval of network standards. The Board does not have an external role. Board members are elected by partners from all PwC firms every four years, with the current board taking up office in April 2009.

Network Leadership Team

The Network Leadership Team sets the overall strategy for the PwC network and the standards to which firms agree to adhere.

Strategy Council

The Strategy Council, which is made up of the leaders of the largest PwC firms, agrees changes in the strategic direction of the network and facilitates alignment in the execution of strategy.

Network Executive Team

The Network Executive Team reports to the Network Leadership Team and coordinates key service line and functional areas such as Risk and Quality, Human Capital, Operations, and Brand and Communications across the PwC network.

Membership in the PwC network depends on a firm’s implementation of common standards. Every PwC firm is responsible for its own risk and quality performance and, where necessary, for driving improvements. To support transparency and consistency, each member firm’s Territory Senior Partner signs an annual confirmation of compliance with certain standards. As stated above, these cover a range of areas, including independence, ethics and business conduct, Assurance, Advisory and Tax risk management, governance, anti-bribery and data protection and privacy.

There are some common processes to help PwC firms apply the standards. Major elements include:

• The way we do business
• Sustainable culture
• Quality policies and processes
• Quality reviews.

The way we do business

PwC firms undertake their business activities within the framework of applicable professional standards, laws, regulations and internal policies. These are supplemented by a Code of Ethics and Business Conduct for their partners and staff.

PwC people have an obligation to know, understand and comply with the guidelines contained in the Code as well as the values – Excellence, Teamwork and Leadership – on which the guidelines are based.

Sustainable culture

To promote continuing business success, PwC firms nurture a culture that supports and encourages PwC people to behave appropriately and ethically, especially when they have to make tough decisions. PwC people have ready access to a wide array of support networks within their respective firms – both formal and informal – and technical specialists to help them reach appropriate solutions. There is also a culture of objectivity, professional scepticism and cooperation between firms, and consultation supports this culture.

Quality policies and processes

Each PwC firm has policies that are based on PwC network standards. PwC firms also have access to common methodologies and supporting materials for many services. These methodologies and materials are designed to help firms’ partners and staff to perform their work more consistently, and to support their compliance with the way we do business. Each client engagement leader is responsible for assigning partners and staff to a particular engagement and building the appropriate combination of professional competence and experience.

Quality reviews

Each PwC firm is responsible for monitoring the effectiveness of its own quality control systems. This includes performing a self-assessment of its systems and procedures and carrying out – or arranging to have carried out on its behalf – independent reviews at the individual engagement level. In addition, PwCIL monitors firms’ compliance with network and professional standards. This includes monitoring whether each PwC firm conducts objective quality control reviews and engagement reviews consistent with regulation and established processes. PwCIL also monitors whether a firm has appropriately identified significant risks and is responding appropriately to those risks.

For Assurance work, the relevant standard on which the quality reviews are based is International Standard on Quality Control 1: ‘Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements’ (‘ISQC1’).

The overriding objective of the quality review programme is to assess for each PwC firm that:

• quality management systems are effective and comply with network standards
• engagements selected for review were performed in accordance with professional standards and PwC Audit requirements
• significant risks are identified and managed appropriately.

Policy

Auditors must be objective in all aspects of their work. Independence is a cornerstone of this objectivity and has two elements: independence of mind and independence in appearance. PwC firms reinforce both of these elements through a combination of setting the right tone from the top, independent consultation on judgemental issues, regular training and careful observance of independence requirements.

PwC’s Global Independence Policy – based on the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants – contains minimum standards with which PwC firms have agreed to comply, including processes for maintaining independence from their clients, when necessary. PwC firms impose supplementary independence restrictions and processes by reference to local regulatory and ethical requirements. Details of any such requirements with cross-border effects are communicated throughout the network.

Training

Training modules on the PwC Global Independence Policy and related topics have been delivered by all PwC firms. They supplement these training materials with additional content tailored to reflect their local requirements. The Assurance, Tax and Advisory lines of service also provide training and other materials dealing with independence considerations related to the provision of non-assurance services and business relationships. New joiners are trained in the PwC Global Independence Policy, irrespective of which part of the practice they join.

Compliance

Compliance processes rely on a combination of business activities and monitoring systems.

PwC firms are required to obtain authorisation from the lead audit engagement partner regarding the provision of non-audit and – in certain situations – audit services to entities on the ‘Independence List’. Authorisation is only given after careful analysis of whether the service could impair the reporting firm’s independence.

Partners and client-facing managers in all PwC firms are also required to record the details of their investment portfolios on a confidential database that provides real-time monitoring of investments held against an ‘Independence List’ of prohibited securities. Joint business relationships are required to be approved, recorded and regularly monitored.

As well as these and other compliance-monitoring systems, PwC firms operate a number of confirmation and verification processes, including:

• annual compliance confirmations, and
• inspection and compliance-testing programmes.

Violations

PwC firms are required to have disciplinary policies and mechanisms in place to promote compliance with independence policies and processes, and to report and address any violations of the PwC network’s independence requirements.

An essential element of PwC’s ethos is a set of common principles for remuneration of partners in PwC firms, based on partner performance and quality of work. These principles suggest that all PwC firms’ partner remuneration systems should reward partners on the basis of three core elements: first, the role they are asked to play in the partnership; second, how well they carry out their responsibilities; and third, how well their individual firm performs as a whole. The underlying premise of the partner income philosophy is to encourage, recognise and reward partners, both as individuals and as members of teams, based on their contribution to their respective firms. The primary measure of contribution for partners in the audit practice is quality.

The successful execution of PwC firms’ partner income arrangements, including delivery of actual rewards, hinges on a balanced scorecard evaluation against individual and team objectives. The performance-rewards structure respects the regulatory environment in which PwC firms operate, and each PwC firm maintains and operates a separate compensation system for both its partners and staff.

The PwC approach to learning and education (L&E) is to provide access to a wide curriculum of courses developed in accordance with global standards, while also providing support for PwC firms’ L&E leadership and fostering personal accountability for continuous education.

PwC firms are committed to delivering quality audits around the world. To help them do this, a consistent curriculum gives their Assurance practitioners, as well as specialists in Advisory and Tax who provide audit support, access to courses covering the PwC audit approach and tools, updates on audit and accounting standards and their implications, and areas of audit risk and engagement quality. Courses are developed using best-practice learning techniques designed to meet the needs of practitioners.

Our training solutions are designed to develop professional judgement, scepticism, and technical and professional excellence to achieve quality in everything we do. There are focused programmes for people with special roles or who serve clients with unique characteristics. These individuals include Quality Review Partners; people leading multi-location audits or engagements with shared service centres; and those serving clients around the globe who are listed on US stock exchanges. Our focus in the past year has been on continuing to enhance and develop our curricula in response to needs we have identified among our practitioners.

However, as well as focusing on ‘what’ our people learn, it is just as critical to consider ‘how’ they do it. A large part of PwC’s learning approach comes from on-the-job experiences. Another important area comes from learning from others, whether by receiving and discussing feedback, or by observing and working with others, with role models, or with coaches and mentors. The remainder comes from formal learning. Our formal learning solutions vary in method from e-learning to classroom courses that give practitioners the opportunity to sharpen their professional judgement by sharing insights and experiences with their instructors and peers.

With some 169,000 people across PwC’s firms, the task of providing continuous education throughout each professional’s career is a major challenge. Mechanisms have been put in place at all levels – individual, firm and network – to help achieve this goal. PwC firms’ L&E leaders are responsible for reporting their training plans for the year and, at year-end, their actual delivery of training to the target audience for each programme.