RSM Transparency Report 2018

Global Report | 2018

Transparency

Report 2018 Delivering the Power of Being Understood

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING

CONTENTS Message from the CEO Introduction The RSM Global Network Structure and Functions Quality People and Culture

RSM INSIGHTS: Creating an enterprise-wide awareness of risk Quality and Excellence

RSM INSIGHTS: People strategies for success in a rapidly shifting global climate RSM Leaders and Representation

A world leader in audit, tax and consulting services

Jean Stephens Chief Executive Officer

MESSAGE FROM THE CEO Welcome to the 2018 RSM Transparency Report, which provides information on the structure and functions of the RSM network and how our global policies and procedures govern the provision of services that member firms provide to their clients.

As a global network of independently owned and operated firms, RSM’s core purpose is to bring our firms around the world closer together to allow them to provide seamless cross-border services to their clients. Whilst our global policies and procedures are fundamental to us working cohesively together, true collaboration only comes when the collective shares the same values and vision for the future. Our member firms are united under the same highquality standards – this is what they sign up to when joining the network. However, cultural fit and shared values are as important as our member firms’ commitment to our global expectations.

You can read more about our core beliefs of Understanding, Collaboration, and Ideas and Insight in this report. These beliefs are central to our client commitment – The Power of Being Understood – and underpinned by our shared global values of: Respect, Integrity, Teamwork, Excellence, and Stewardship.

2018 has been another year of uncertainty for businesses, with geopolitical issues impacting every region of the world.

Changing trade rules, regulations, tax regimes, and disruptive technologies are all challenges the middle market is facing, and that we are helping our clients overcome.

Included in this report are two RSM Insight articles which are from a wider library of articles (found on rsm.global) that are designed to help the middle market find the opportunities and thrive in these uncertain times.

While welcoming Marion Hannon to RSM, we would like to take this opportunity to express our gratitude and appreciation to Bob Dohrer, our previous Global Leader for Quality and Risk, who left RSM in September 2018 to pursue a new career with the AICPA as Chief Auditor. During his six years with RSM, Bob played an integral role in our growth and success. Bob led the RSM technical team on many successful projects, all with a clear vision of enhancing member firms’ capabilities and capacity to provide the highest quality services to our national and international clients. This included the maintenance and development of RSM’s various policies and procedures, common methodology tools and processes, our inspection programme and due diligence of new firms, risk containment policies and, most recently, the three-year programme to significantly update and enhance our Global Audit Methodology.

However, there are many people within the network who contribute their time and expertise to the various leadership groups and committees that help to steer and guide the provision of our services and the way our network operates.

Our thanks go to all those professionals for their dedication and commitment towards the development and sustainability of RSM.

Marion Hannon RSM Global Leader, Quality and Risk

INTRODUCTION I am delighted to have joined the RSM network in October 2018. I would firstly like to take the opportunity to thank my predecessor, Bob Dohrer. Bob’s vision, contributions and commitment have led to many successful and significant projects being undertaken at RSM to ensure that our member firms continue to provide services of the highest quality. I look forward to building on his exceptional work.

Market Position: the new methodology will help to enhance our market position as we go to market with a truly global audit offering and compete in today’s global environment. Prospective and current clients of member firms are demanding consistent performance across their global service providers and the new audit methodology will serve to meet those client demands.

During 2019, we will roll out our newly redeveloped RSM Global Audit Methodology. This is the culmination of a multiyear project to develop an audit methodology that is focused on quality but also is effective and efficient. The RSM audit methodology has long been based on International Standards on Auditing (ISA’s) but now the text of those Standards has been incorporated within our new RSM Global Audit Manual to make it easier for RSM engagement teams to apply the ISA’s throughout the audit process. The new RSM Global Audit Methodology also includes practice aids to provide additional guidance and, where required, local additions which are specific to individual countries. New features and functionality have been added to the audit software to improve the flow of our audit process, aid navigation and the review process.

People: not only will our people be equipped with stateof-the-art tools, but those auditors who take part in our secondment programmes will also be using familiar software and tools wherever they are in the world.

The new RSM Global Audit Methodology and associated software tools also embody elements of RSM’s strategic plan – The Power of Focus – for the period to 2022: Common Methods and Processes: the required use of common work programmes throughout the RSM network will aid consistency and high quality in both domestic and global audits. Member firms will reference the same forms, processes and methodology.

Collaboration, one of RSM’s key values, is made much easier when we have one way of doing things which we all understand and buy into.

We have developed a new RSM Global Audit Methodology that will serve our network well into the future. However, the rollout of this audit methodology is not the end of the story for RSM’s audit approach. We have learned much in the past few years about developments such as blockchain, data analytics and artificial intelligence and auditors need to respond to the increasingly fast pace of technological change. In addition, there will continue to be challenges resulting from regulatory changes in regimes across many countries. In developing our new methodology we have been mindful of the issues which auditors are facing and have taken care to build processes and tools that are flexible and form a foundation conducive to innovation and the strengthening of our audits well into the future.

THE RSM GLOBAL NETWORK OVERVIEW OF RSM INTERNATIONAL RSM is an international network of independent professional firms, formed in the early 1960s.

As at January 2019, RSM is the sixth largest network of independent accounting and advisory firms, comprising members and correspondents in 116 countries with 750 offices, 41,000 total staff, and combined revenues in excess of US$5.37 billion.

Many RSM member firms are among the top seven in their respective countries, and possess some of the best professional resources and experience available.

The member firms have a broad client base, from large listed and international companies to smaller, owner-managed businesses in the public and private sectors.

In addition to traditional assurance services, RSM possesses significant resources and experience in tax, transaction support, risk advisory, internal audit and corporate recovery and insolvency.

OUR VALUES RESPECT

TREAT OTHERS AS WE WOULD LIKE TO BE TREATED

We display respect in each interaction with:

INTEGRITY

DO THE RIGHT THING

We stay true to our beliefs:

TEAMWORK

• in work groups • across member firms • across functions • amongst leaders

BE THE BEST IN EVERYTHING WE DO

We achieve distinction through:

STEWARDSHIP

• in decisions • in negotiations • in communications

WORK TOGETHER EFFECTIVELY

We cultivate genuine collaboration:

EXCELLENCE

• clients • employees • partners

• our standards • our operations • the work we deliver

BETTER OUR NETWORK, MEMBERS AND OUR PEOPLE

We make RSM a better place by:

• developing our people • building our brand • supporting our communities

MEMBERSHIP IN THE FORUM OF FIRMS RSM is a member of the Forum of Firms, an organisation formally established in 2002 as an association of international networks of accounting firms that perform transnational audits.

RSM is active in and fully supports the objective of the Forum of Firms, which is to promote consistent and high-quality standards of financial reporting and auditing practices worldwide and to support convergence of national audit standards with the International Standards on Auditing. Susana MartÍnez of RSM Mexico currently represents RSM as member of the Forum of Firms’ Transnational Auditors Committee.

GLOBAL REVENUE

US$ 5.4

116 COUNTRIES

OUR PURPOSE Our purpose is to deliver The Power of Being Understood to our clients, colleagues and communities through:

COLLABORATION

BILLION

750 OFFICES

41,000 PEOPLE

THE POWER OF BEING UNDERSTOOD

We build strong, collaborative and lasting relationships with all our stakeholders by being accessible, responsive and adaptive.

UNDERSTANDING

The RSM network connects member firms through common methods and processes, including commonly agreed and applied quality standards. This connection provides comfort to RSM member firm partners and their clients that the quality of service and advice to referred clients will be to a consistently high standard – everywhere in the world.

We exist to empower our clients to make confident decisions. To achieve this, we focus around a single, clarifying thought - the Power of Being Understood.

This is the idea that sits at the heart of our brand and guides us in our decisions, behaviours, values and actions.

THE CLIENT COMMITMENT From new trade rules to talent migration, from big data to cyber threats, new data secruity and privacy regulations, the world is changing at an unprecedented pace.

But upheaval also means opportunity, if you’re prepared.

We provide every client with the benefits of tailored thinking and the insight of our more senior experts, both locally and globally.

IDEAS AND INSIGHT

In this fast-paced environment, you need an adviser that thinks ahead and rapidly responds to your changing needs. At RSM, we build strong relationships based on deep understanding of what matters most to our clients.

It is our strong, collaborative approach that differentiates us. We will strive to truly understand you, your strategies and your aspirations and endeavour to be considered the adviser of choice to your business. By sharing the ideas and insights of our most senior professionals, we bring our expert local and global knowledge and resources to your environment, so you feel understood and empowered to move forward with confidence.

This is the power of being understood. This is the RSM experience and our commitment to you.

We gain a deep understanding of clients’ needs, strategy and aspirations and strive to be an essential part of their business environment.

STRUCTURE AND FUNCTIONS Our international structure is aimed at executing the RSM strategy and providing member firms with the platforms to develop business together. The structure also reflects our geographic coverage, ensuring representation from all key regions.

INTERNATIONAL BOARD OF DIRECTORS The members of the Board are appointed through a nomination process ensuring regional representation is achieved. The Board sets the international strategy of RSM and acts in the interests of all member firms. The Board has four committees: Board Strategic Risk Committee, Governance Committee, Audit Committee and Remuneration Committee. The Board has one executive committee: Transnational Assurance Services Executive Committee (TASEC).

CHIEF EXECUTIVE OFFICER (CEO) AND RSM GLOBAL EXECUTIVE OFFICE (GEO) TEAM The CEO and GEO have global functions and responsibilities and are primarily based in London. These include: Brand development and corporate messaging International client needs and business development International referral protocols Geographic coverage Budget and funding Market movements and competitor analysis RSM Academies and other training initiatives RSM Connect and capabilities database Support to the technical committees and regional councils Within the GEO, the RSM Global Leader, Quality and Risk has responsibility for the quality of assurance and other services provided by member firms. These responsibilities specifically include: Meeting membership obligations of the Forum of Firms RSM quality assurance policies, procedures and inspections Audit methodology and technology platform Global ethics and independence policies

RSM GLOBAL EXECUTIVE OFFICE Chief Executive Officer: Jean Stephens

Assistant to CEO

Chief Financial Officer

Finance Support

Marketing and Business Development

Regions

Technical

Operations / Member Resource

Global Marketing Consultant

Regional Leader, Latin America: Brendan Quirk

Global Leader, Quality & Risk: Marion Hannon

Manager, Corporate Development

Head of Marketing

Senior PR & Communications Manager

Content Marketing Manager

Senior Global Brand Manager

Digital Marketing Executive

Design Assistant

Senior Manager Global Business Development

Business Development Operations Assistant

Regional Coordinator

Regional Leader, Asia Pacific: Neil Hough

Regional Coordinator

Regional Leader, Europe: Gregor Schmidt

Regional Coordinator

Regional Leader, Africa: Clive Betty

Regional Leader, MENA: Bassam Dahman

North America International Office

Senior Manager, Audit Methodology

Project and Event Coordinator

Senior Manager, Global Inspections

Referrals Database Administrator

Manager, Independence

Administrative Support

Manager, Training

IT Coordinator

Manager, Technical

Risk Advisory and Corporate Development Executive

Inspection Coordinator

QUALITY RSM began as an audit network and during its development has focused on building high-quality member firm practices able to serve clients’ audit and other needs. Uniquely, RSM commenced a long-term programme in 1993, years before similar Forum of Firms initiatives, to ensure consistent audit practices and standards among RSM firms throughout the world. This programme continues to develop and expand and has successfully delivered global methodologies, policies and practices, including: Quality Assurance and Risk Containment Audit Methodology A udit Programmes and technology-enabled audit systems Ethics and Independence Anti-Bribery and Corruption Web-based Conflicts of Interest and Independence System International Tax Methodology Internal Audit Methodology Member firm inspection and monitoring programmes G lobal, network-wide inspection, observation and monitoring programme These methodologies, policies and practices are compliant with international standards (where applicable) and have been developed by specialists and leaders at member firms, and the RSM Global Executive Office, under the oversight of the RSM Transnational Assurance Services Executive Committee (TASEC) and the RSM International Board of Directors.

TASEC is formed of senior partners and other leaders from key member firms and is responsible for oversight of all quality-related technical policies and practices throughout the network. TASEC monitors compliance with such policies through internal and global inspection programmes, which monitor each firm’s quality control. TASEC also evaluates due diligence reports on potential new member firms to ensure the highest quality standards are applied when admitting new member firms. The Committee reports their membership recommendations to the Chief Executive Officer and the RSM International Board of Directors, including action plans for new member firms to achieve quality targets within agreed timescales.

Quality is the bedrock and common foundation which allows us to develop and expand the range and depth of services offered to our growing client base.

PEOPLE AND CULTURE RSM has expectations for member firms to help ensure that there are consistently high standards of behaviour throughout the network. These expectations describe how we conduct ourselves in our professional dealings, and how our member firms connect with each other and with their clients. This is not a set of rules, but rather a set of benchmarks to align all members of the international network behind a common vision to achieve our global strategic objectives. Member firms agree to specific requirements in their membership agreement with regard to expected member behaviours, but we also encourage firms to maintain their own personality while still serving the needs of the network at the highest level.

At RSM we establish close and enduring relationships between member firms and with clients while maintaining objectivity and independence when required in all services provided. We have an in-depth understanding of our clients’ values, their working culture and their other requirements. At RSM, every team is led by senior personnel who deal directly with the client and act as their point of contact with the rest of the network. We also utilise global and regional engagement leaders and believe this is vital for client service, particularly when dealing with multiple locations or services. We focus on relationships because we believe it is the key to client service and future firm growth.

Through global and regional conferences, training programmes and our Centres of Excellence structure, we encourage people from across the world to network with each other, and form and develop close relationships. Our culture is strong because we do business together and this facilitates seamless service to clients across borders.

RSM operates a contributed hours concept. This concept means RSM member firms are expected to provide a certain number of hours every year, depending on their size, to initiatives such as training, our due diligence and inspection programme, articles for publications and Centres of Excellence. Asking member firms to contribute their time to the network means member firms are personally committed to the success of RSM.

RSM INSIGHTS Creating an enterprise-wide awareness of risk Dr Oliver Bungartz Head of Risk Advisory Services, RSM Germany, and member of RSM’s Global Risk Consulting Committee

We have all seen the brazen headlines depicting the latest fraud scandal and organisations crumbling as a result. We are saturated with recommendations, codes, standards and acts concerning Corporate Governance and Risk Management.

“Honing the riskconscious culture in today’s uncertain, techboom world is ever more crucial to avoid the next headline pointing at you.”

Risk awareness for all employees is vital for successful risk management and fraud prevention. Underpinning this idea is compliance with the SarbanesOxley (SOX) Act with regards to internal controls as this requires almost everyone within the business to be aware of potential risks, regardless of their position. The “tone at the top” may be fundamental but it does not guarantee an effective internal control system. These may be perfectly designed yet rendered useless unless each and every employee is aware of risks and an appropriate risk culture has been established throughout the entire organisation – only then will an internal control system fulfill its desired purpose.

An entity’s risk appetite is just one aspect of risk culture. Risk culture and the control environment are not mutually exclusive. Risk culture helps

employees to understand and follow internal controls and the same applies inversely; the control environment is heavily influenced by the risk culture.

Establishing a risk-conscious culture can be therefore considered key for SOX compliance as well as a successful fraud prevention programme.

1. S haping risk culture as an important part of corporate culture There are finite and detailed recommendations for risk management in economic literature and organisations’ annual reports would suggest that every business has implemented a system for managing risks. However, risk culture as a significant aspect of risk management seems to have been neglected by both the literature and reporting enterprises.

The underlying norms, values and attitudes of employees, as well as their understanding and experience of dealing with risk determine the risk culture of an enterprise. Risk management is primarily influenced by risk culture as an important part of corporate culture, which begs the question: how can you influence the risk culture of an organisation?

Shaping risk culture encompasses activities that lead to a proper, appropriate and desirable risk culture.

The creation of a risk culture must follow the evolutionary character of corporate culture. Expediting the cultural change process resulting in an immediate cultural change that still meets its

objectives, i.e. a “cultural revolution”, is unlikely. A cultural revolution is rare and occurs only by exception e.g. by changing the entire management of an organisation.

The plan for shaping the risk culture of an organisation should be carried out in three stages: F irstly, identify the existing risk culture S econdly, an analysis and evaluation of this should take place which will result in determining a desirable risk culture going forward L astly, an action plan will allow for the implementation of the new risk culture.

2. Identification of the existing risk culture According to Edgar Schein’s model of corporate culture, there are three levels that determine and describe the risk culture of an enterprise: Basic assumptions Values Artefacts and creations Basic assumptions are the foundation of corporate culture. They are invisible, preconscious and taken for granted.

Basic assumptions are intrinsic to organisational relations; they are the basis of human nature, the nature of

human activity and relationships and, most importantly, the nature of reality and truth. Embodied are the concepts of time, space and how people relate to each other. The basic perceptions, thoughts and feelings of employees about risks as well as the inherent way employees experience risks are the basic assumptions of a risk culture.

The level of values attempts to cover all basic assumptions. Values are reflected in moral conceptions and behavioural standards, maxims, unwritten guidelines and proscriptions that all have an impact on employees. Values, the second level of corporate culture, are partially visible.

The final level, artefacts and creations, contains forms of appearance that are clearly visible but often not decipherable. Examples of artefacts and creations of a risk management system include: a risk manual, the existence of a risk manager/risk committee, the publication of risk principles and guidelines, an IT-based risk reporting system, a printed risk report included in the annual report as well as the delivery of risk workshops. Visible forms of a risk management system allow for conclusions on the existing risk culture of an enterprise. The artefacts and creations level enables the description, the evaluation and the shaping of a risk culture.

The identification of the existing culture assumes a changed level of awareness that sensitises the employees for corporate risks. Sensitisation of employees for the risks of their enterprise supports the basic structures and processes of risk management.

Risk awareness of employees can be interpreted as an expression of a riskorientated corporate culture. A greater level of risk awareness is achieved through the appointment of powerful cultural leaders. Board members, the C-suite, management, internal and external auditors will also influence risk culture. Ultimately, risk culture is influenced by all employees.

A three-step model is proposed in the identification of the existing risk culture: (1) Questioning of all employees All employees in the organisation should be questioned in relation to risk culture.

Through this process, not only will everyone become aware of the risk culture topic but a sense of what the new risk culture should look like will also be sought.

(3) Questioning of the C-suite / management One-to-one interviews should be the method of questioning used with management as these enable a deeper analysis through increased Interactivity.

Obtaining a truthful and genuine account from management is the highest priority.

Identification of the existing risk culture is primarily achieved through observations. All steps of the identification stage can be supported by external consultants for assuring independence of the conclusions reached. The denouement of the existing risk culture must always be reached via members of the organisation and must not be forced or influenced upon employees from outside the business.

The identification of the existing risk culture is an assumption and provides the basis for the evaluation stage. It will also demonstrate what the new risk culture should look like.

(2) Analysis and Interpretation workshop

3. Evaluation of the existing culture to determine a new risk culture

A workshop with designated employees helps to find basic assumptions underlying the true rules (level of Norms and Values in the model of risk culture) of the enterprise.

A critical review of the existing culture forms the basis of a planned change in risk culture. Cultural change is only possible so long as there is sufficient reason and an understanding of its

Strategy / Philosophy

COORDINATION

INTEGRATION

MOTIVATION

Reactivity

necessity. The change is supposed to move existing risk culture towards the pre-determined desired culture.

The evolution of culture should contribute to a conscious handling of risks by every employee throughout the hierarchy of the organisation.

Factors of influence for a risk culture are strongly interdependent. An adequate and desirable risk culture results in: (1) Coordination Risk culture should create enterprisewide accepted guidelines for managing risks.

(2) Integration Risk culture should convey harmony and unity thereby encouraging the overall safeguarding of an employee’s activities.

(3) Motivation Motivation is closely connected to integration. Cultural integration increases a sense of belonging and perception, both of which motivate employees.

Consideration of all these factors are necessary in shaping a risk culture that encourages and enables comprehensive risk management.

4. Action plan for shaping risk culture Measures for cultural development include all activities that contribute to a goal-orientated cultural change.

Activities for change result from a comparison between the existing risk culture and the desired risk culture.

Cultural change has an impact on all factors of risk culture, and to influence a specific element of risk culture is neither possible nor desirable. Measures of cultural change influence multiple factors of risk culture. This highlights the varied perspective of a risk culture. Possible measures for changing a risk culture include the: I ntroduction and implementation of a risk policy I ntegration of employees and other personnel measures I ntroduction of a risk suggestion system The proposed measures and tools can only initiate cultural change. Initiating a change in risk culture can have unexpected affects. Any negative

consequences of the change can be identified, discussed and corrected, if necessary. Owing to this, monitoring of changes is vital. In order to ensure the new risk culture remains constant, the newly implemented measures must be stabilised.

5. A ppropriate risk culture; a necessary condition for an effective risk management An appropriate risk culture is required before a risk management system is able to work effectively. Corporate risk culture should always be monitored as it is open to fluctuation.

Risk culture consists of three levels: (1) Basic assumptions, (2) Values and (3) Artefacts and creations. The existing risk culture should be analysed using the different stages described above.

The various factors of risk culture are used to evaluate existing risk culture in the enterprise. Consideration of all risk culture factors lead to the desired new risk culture which should follow three stages: coordination, integration and motivation. Introduction of new orientation patterns, signals and display formats tend to result in the willingness for cultural change. Cultural change can be introduced through risk policies, personnel measures and a risk-suggestion system. The process of cultural change is characterised by intensive observation and

monitoring of measures for changing risk culture in the enterprise.

They will also support in the avoidance of fraud and threats that could jeopardise business continuity.

“A high level of risk awareness of management, an appropriate corporate risk culture and the establishment of an integrated risk management system are all of the necessary requirements to sustain the success of an organisation for the future.”

Peter Drucker coined the term “culture eats strategy for breakfast”, and later, allegedly, went on to say that it gets its appetite from purpose. Another Peter, (Davis) declared that, in fact, “culture eats process for breakfast”.

Before getting peckish, I’ll leave you with this – an appropriate corporate risk culture trumps it all. n

Ideas and insight, collaboration and understanding

QUALITY AND EXCELLENCE

RSM COMMITTEES AND LEADERSHIP GROUPS RSM has established the following committees, leadership and advisory groups, made up of professionals from member firms around the world. These include: IT Committee: actively engaged in the review, analysis and support of the IT infrastructure, data privacy and security Global Tax Leadership Group: supports and develops quality control standards, marketing, business development and global collaboration Global Risk Consulting Committee: supports and develops quality control standards, marketing, business development and global collaboration Global Financial Due Diligence Leadership Group: supports cross-border collaboration for financial due diligence assignments Operational Risk Committee: responsible for overseeing the development and management of operational risks for the network

TRANSNATIONAL ASSURANCE SERVICES EXECUTIVE COMMITTEE (TASEC) As an executive committee of the RSM Board of Directors, TASEC has oversight responsibility for development, promulgation and monitoring of compliance with all standards issued by the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA). TASEC is also charged with monitoring the operation of quality assurance activities conducted by the Global Executive Office, including the approval of due diligence reports for the admission of new member firms, the approval of member firm inspection reports, and action plans to address deficiencies noted during the global inspection programme.

Other responsibilities of TASEC include oversight of the development, promulgation and monitoring of compliance with the: Requirements of the RSM Audit Manual and methodology Non-service line specific and assurance services requirements of the RSM Quality Assurance and Risk Containment Policies Requirements of the RSM Ethics and Independence Policies

IFRS Advisory Committee: responsible for supporting the development of IFRS capabilities within member firms

Requirements of the RSM Anti-Bribery and Corruption Policies

Innovation Committee: responsible for developing and promoting an innovative culture contributing to the growth and long-term development of the network

Requirements of the Policies and Procedures for the Global Inspection Programme and Member Firm Inspection Programme

RSM CENTRES OF EXCELLENCE (COE) CoE play a critical role in our international business development efforts and also serve to enhance member firm core competencies in services delivered. The CoE are groups of professionals from various member firms who aim to establish common practices, facilitate seamless regional delivery and align our resources to enable targeting of midsize and larger, more sophisticated companies.

Requirements of the RSM Assurance Services Training and Continued Professional Development Policies When appropriate, TASEC, upon recommendation of the GEO, also recommends sanctions against member firms and professionals as a result of non-compliance with the Committee’s directives. The RSM Board of Directors ultimately acts on any such recommendations.

According to its terms of reference, TASEC consists of five to nine members of suitably qualified and experienced audit partners or audit directors from member firms. The chair of TASEC

AUDIT RESPONSIBILITY TRANSNATIONAL ASSURANCE SERVICES EXECUTIVE COMMITTEE

Marion Hannon Global Leader, Quality and Risk

Hiromi Kaneko Independence and IFRS

Steve Whitcher Audit Methodology

Dinesh Sharma Global Inspections

is selected by the International Board of Directors from the members of the Committee and serves for a term of three years and can be re-nominated at the end of the three-year term.

MEMBER FIRM ADMISSIONS RSM seeks to admit new member firms that share the RSM vision, mission, strategy and values. Each prospective new member firm is subjected to a due diligence process, the outcomes of which form the basis for deciding whether or not to admit the firm as a member firm of RSM. The due diligence engagements are conducted by qualified independent partners and senior personnel from current RSM member firms under the direction of RSM Global Executive Office personnel and the RSM Global Leader, Quality & Risk. The results of a due diligence engagement for a prospective new member firm are reviewed

by TASEC and the RSM Global Leader, Quality & Risk. The Chief Executive Officer then makes a membership recommendation to the RSM International Board of Directors, who ultimately approve or deny admittance of new member firms.

In the new member firm due diligence process, potential new member firms are evaluated against RSM criteria for membership, which include: T he prospective member firm’s reputation for quality and high ethical standards

Kevin Chowdhay Global Inspections

standards and requirements The prospective member firm’s commitment and capability in adopting RSM global policies, procedures, methodologies and tools The prospective member firm’s agreement to participate in the RSM global inspection programme All RSM member firms are subject to expectations defined in the RSM membership agreement which includes a license for the use of the RSM name, IP and brand. All RSM member firms are required to align with RSM policies, procedures, methodologies and tools.

ETHICS AND INDEPENDENCE POLICIES RSM maintains Ethics and Independence policies to provide reasonable assurance that member firms, partners and professional employees comply with the independence and ethical requirements of the following: International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants Local professional organisations Local security exchange regulators

Compliance with local/national standards and requirements, and if those local/national standards are not converged with standards established by International Federation of Accountants (IFAC) independent standard-setting boards, the prospective member firm’s commitment and capability of meeting international

Tessa Rowland Training

Other relevant regulatory authorities RSM International

Every member firm has a partner (or equivalent position) responsible for independence, whose responsibility it is to augment these policies, as necessary, to the specific requirements of their member firm to reflect additional local ethical codes or regulatory requirements that establish higher standards than those reflected in the basic RSM Ethics and Independence policies. Any amendments made to the RSM basic policies to include additional local requirements must be submitted to the Global Executive Office for review, and must be approved by the Global Leader, Quality & Risk. Partners or professional employees who have a question regarding the RSM Ethics and Independence policies are required to consult promptly with their member firm’s partner responsible for independence. If the member firm partner responsible for independence has a question regarding these policies, he or she consults with the Global Executive Office.

Member firms are required to maintain a listing of all clients to which the RSM Ethics and Independence policies apply.

The list is made available to all member firm partners and professional employees. Additions and deletions to the list are made available, when they occur, to all member firm partners and professional employees.

Partners and professional employees are required to annually complete an independence compliance questionnaire confirming that he or she: Has read the RSM Ethics and Independence policies Has read his or her member firm’s Ethics and Independence policies Understands their applicability to his or her activities Is, and has been for the past year, in compliance with those policies

Public Interest Entities, including listed entities Private Equity Groups or Funds Private entities with ownership or affiliates located in another jurisdiction or country, including ultimate parent companies, intermediate parent companies, sister companies, subsidiaries or affiliates Additionally, all clients that are subsidiaries or affiliates of groups meeting the above criteria are required to be included on the GRT. The Global Executive Office, under the direction of the RSM Global Leader, Quality and Risk, is responsible for overseeing the timely maintenance of the GRT (including communication of additions and deletions to the list), and for overseeing the adequate functioning of the policies and consultation process with respect to all of the clients on the GRT list.

Member firm partners and professional employees are required to consult the GRT and take such other precautions that are considered necessary in the circumstances to ensure compliance with the RSM Ethics and Independence policies with respect to financial, business, family or employment interests. Member firm partners or professional employees who grant discretionary investment authority to third parties are required to ensure compliance with these policies by the investment manager.

Member firm partners and professional employees are responsible for consulting the GRT and taking such other precautions that are considered necessary in the circumstances to ensure compliance with respect to identifying potential conflicts of interest in the services member firms provide to clients or prospective clients, particularly international groups.

Any qualifications to such confirmation are fully explained in writing and corrective action taken by the member firm.

Annually, member firms are required to perform procedures sufficient to assess the completeness and accuracy of their client information required to be included on the GRT and report accordingly to the Executive Office.

INDEPENDENCE, RELATIONSHIP AND CONFLICT OF INTEREST TRACKING

CONFLICT RESOLUTION PROCESS

RSM maintains an online independence, relationship and conflict of interest tracking tool called the Global Relationship Tracker (GRT). This tool holds data of all assurance or nonassurance clients of member firms, including specifically the following categories of member firm clients at a minimum:

When a member firm partner or professional employee identifies a potential impairment of independence or conflict of interest with respect to a client or prospective client of another member firm through GRT searches and other conflict of interest checks, the international contact partner (ICP) of the member firm is required to be informed

Global vision backed by local knowledge

and communicates the relevant details of the client (or prospective client) and engagement to the ICP or other contact person of the other member firm(s). The contact persons of the member firms involved, in consultation with their partners responsible for independence, then assess the facts and circumstances relating to the potential impairment of independence or conflict of interest and apply the appropriate safeguards, which may include withdrawal from an engagement or opportunity.

If member firms are unable to agree appropriate safeguards, the GEO and the chair of the RSM International Board of Directors are requested to consider the potential impairment of independence or conflict of interest. The member firms provide the GEO with the necessary information regarding the relevant facts and circumstances, which will be used to assess the potential impairment of independence or conflict of interest with reference to seven assessment criteria. The GEO and the chair of the RSM International Board of Directors will then, after considering the request and information provided, make a recommendation as to the resolution of the potential impairment of independence or conflict of interest.

AUDIT QUALITY Quality is the absolute cornerstone for RSM. To reinforce the message that audit quality is of the utmost importance in RSM, the Global Executive Office develops and maintains global resources and tools for member firms, including: An audit methodology delivered via technology and software that is used globally An audit methodology manual and quality assurance and risk containment policies that are designed in accordance with international auditing, quality control, independence and ethics standards A comprehensive proprietary intranet service where information is housed for member firms covering topics such as auditing, financial reporting, ethics and independence requirements and training on all topics, processes and protocols enabling consultation with the Executive Office with regard to audit, independence and ethics matters The overall responsibility for effective and high-quality functioning of the member firm’s assurance practices lies with the RSM Global Leader, Quality and Risk. TASEC provides development of strategy and direction for the assurance practices which is then implemented through the RSM Global

47%

30%

22%

1%

AUDIT

TAX

CONSULTING

OTHER

Leader, Quality and Risk and the Global Executive Office team.

The heads of audit from member firms are also called upon to form task forces and to seek input with respect to specific needs and projects undertaken by the Executive Office.

The Global Leader, Quality and Risk is also supported in strategy implementation by assurance functional leaders for audit methodology and technology, International Financial Reporting Standards, global inspection and monitoring programmes and assurance services training.

CLIENT ACCEPTANCE/CONTINUANCE Providing high-quality assurance services requires that RSM member firms accept only clients who share RSM’s core values and beliefs. Member firms are required to only enter into relationships with clients who fit key RSM acceptance criteria and who are prepared to pay a fair fee for high value work.

These client acceptance criteria include: The client acts with integrity The member firm complies with RSM Ethics and Independence policies and is not entering into any client relationship or engagement which would be prohibited under those policies The member firm understands the client’s needs and service requirements The member firm has the necessary capabilities available, including sufficient resources and expertise to perform the work required by the client and to render the necessary reports and other deliverables within the reporting time frames During the client acceptance process, the prospective engagement partner, or lead assignment partner, also assesses the level of risk attached to the engagement and determines whether special staffing, supervision and review requirements apply. A second partner is assigned to concur with a conclusion to accept any engagement or a client relationship that meets certain risk profiles.

RSM GLOBAL AUDIT METHODOLOGY RSM member firms have agreed to comply with the requirements of the RSM Global Audit Manual and the RSM Global Audit Methodology. The Global RSM Audit Manual provides a risk-based methodology and includes providing

member firm engagement teams with guidance with respect to appropriate responses to identified risks of material misstatement. The requirements within the RSM Global Audit Manual are required to be used by RSM member firms when conducting audits of financial statements.

The RSM Audit Manual complies with the requirements of the following: International Standard on Quality Control issued by the International Auditing and Assurance Standards Board (IAASB) International Standards on Auditing issued by the IAASB International Auditing Practice Statements issued by the IAASB RSM Quality Assurance and Risk Containment Policies RSM member firms apply the requirements and guidance contained in the RSM Global Audit Manual through the use of audit programmes and also through an automated audit template.

GLOBAL IFRS RESOURCES Ensuring that IFRS capabilities are a core skill for member firms is the responsibility of the Global Executive Office under the direction of the RSM IFRS Advisory Committee and with the support of the RSM IFRS Centre of Excellence. The RSM IFRS Advisory Committee comprises several member firm representatives possessing high level IFRS expertise. The responsibility of the IFRS Advisory Committee is to provide direction and strategy with respect to IFRS services to the Global Executive Office as well as serving as the top IFRS consultant body within RSM. The RSM Centre of Excellence comprises representatives from each member firm who possess IFRS expertise in particular facets of IFRS. The IFRS Centre of Excellence, under the direction of the IFRS Advisory Committee, promotes global quality and consistency of IFRS services through the following activities: Operation of an IFRS help desk Development and delivery of IFRS training programmes and material, involving RSM IFRS Lead Member Firms covering timely and relevant IFRS topics Publishing technical alerts and monthly bulletins and other technical resources and tools

RSM is also active in the development of IFRS on a profession-wide scale by contributing global comment letters on proposed new standards and participating in the review process for new training on IFRS offered by standard-setting bodies

GLOBAL INSPECTION AND MONITORING PROGRAMMES

Whether the firm’s quality control system has been appropriately designed and implemented, so that reports that are issued by the firm or engagement partners are appropriate in the circumstances Areas where further actions are needed by either the firm or RSM in order to take corrective actions or make improvements to the firm’s quality control system

In our relentless pursuit of quality, RSM has developed both individual member firm inspection and monitoring programmes, as well as RSM’s global inspection and monitoring programme.

Under the joint operation of these programmes, RSM member firms are provided with the necessary information regarding the design, implementation and operating effectiveness of their quality control practices surrounding their assurance practices as well as other service lines.

A further distinct benefit of the inspection process is that it provides the opportunity to identify areas for improvement in engagement management and the client service production and delivery system.

Each individual RSM member firm is required to establish a monitoring process designed to provide it with reasonable assurance that the policies and procedures relating to the system of quality control over its assurance practice are relevant, adequate, operating effectively, are aligned with RSM expectations and all requirements established by the International Federation of Accountants (IFAC) standardsetting boards including:

Such inspections are referred to as globally coordinated inspections. RSM globally coordinated inspections are conducted by independent qualified partners and senior personnel of other member firms under the direction of the Global Executive Office personnel and the RSM Global Leader, Quality and Risk. The RSM global inspection programme is also designed to meet the membership obligations of the Forum of Firms, of which RSM is a member network.

International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Historical Financial Statements, and Other Assurance and Related Services Engagements International Standard on Auditing (ISA) 220, Quality Control for an Audit of Financial Statements IESBA Code of Ethics for Professional Accountants Further objectives of an RSM member firm inspection programme are to provide an evaluation of: The extent of the member firm’s alignment with RSM policies and procedures The member firm’s adherence to local/national professional standards and applicable local/national legal and regulatory requirements

IFRS

PROFILES

124

JURISDICTONS

Under RSM’s global inspection programme, RSM periodically oversees and/or participates in all member firm inspection programmes on a cycle not exceeding three years.

RSM’s Transnational Assurance Services Executive Committee (TASEC) is responsible for establishing policies and guidelines for both the RSM member firm inspection programme and the RSM global inspection programme.

The RSM Global Executive Office is then responsible for the implementation and operation of the global inspection programme. The RSM International Board of Directors has the authority to impose sanctions on a member firm to ensure compliance with professional requirements and RSM methodologies, policies and procedures.

Don’t just see potential, see it realised

RSM INSIGHTS People strategies for success in a rapidly shifting global climate Jean M. Stephens | Chief Executive Officer, RSM International

One issue stands out for every middle-market business that operates internationally: the struggle to find and retain the most skilled and innovative employees — those who will drive growth and company performance.

“Success is achieved not just by a set of human resources processes, but by placing people’s creativity at the heart of an organisation’s ambition.”

McKinsey and Co. coined the term “war for talent” in 1997. It is a neverending conflict. The issue is becoming even more crucial now as globalisation appears to have stalled, the regulatory landscape shifts and populist politics threatens to make it harder to hire internationally or move staff freely across borders.

Companies that can navigate this complex environment will have a massive advantage. They must be smart in mastering migration rules, locate operations where they stand the best chance of getting skilled staff at an affordable cost, use automation and communications effectively and encourage the development of talent from within.

Above all, they must be people-friendly and make sure they are seen as the place where the best employees want to work. Success is achieved not just

by a set of human resources processes, but by placing people’s creativity at the heart of an organisation’s ambition.

Migration is likely to be at or near the top of the political agenda for years to come, with serious implications for employers.

It was a big factor behind the UK’s referendum vote to leave the European Union in 2016. Donald Trump’s promises on immigration helped to take him to the White House.

It is not all just one-way pressure to curb migration. Mr Trump has not managed to build a wall on the US-Mexico border and has had to scale back his effort to limit immigration from a number of Muslim-majority countries. The British government has had to soften its harsh treatment of long-term residents who originally came from the Caribbean.

However, anti-migrant pressures are present in many countries.

In this rapidly shifting environment, employers need to think carefully about where they locate their offices and factories. Uncertainty is something that they will simply have to deal with.

It will be hard to close borders completely, given how dependent many businesses are on finding people with the right skills, as well as refugee flows.

People living outside their home country reached a record 258 million in 2017, up from 173 million in 2000, according to the United Nations.

That is a modest increase from 2.8 per cent to 3.4 per cent of the world’s population, though high-income

countries have seen a much bigger rise in migrants as a fraction of their population from 9.6 per cent in 2000 to 14 per cent in 2017. India has the largest number of people born in the country who are now living outside its borders, followed by Mexico.

In dealing with these issues, mid-market companies can be more flexible and innovative than their larger counterparts, if they get their strategies right. They can be opportunistic in spotting areas of comparative advantage as long as they are adaptable and resilient.

“To maximise the benefit of talent within organisations, companies will need to embrace diversity and hire from all sections of society.”

Skill shortages exist to varying degrees in every market, so employers need to research the cost and availability of talent carefully and, if necessary, move the location of some operations. They must make sure they incentivise their people correctly and consider how roles will change with automation and artificial intelligence.

According to research by recruitment company Hays, “talent mismatches” — the gap between the skills employers are looking for, and the skills available in the labour market — are particularly acute in Brazil, Japan and the US.

PEOPLE LIVING OUTSIDE THEIR HOME COUNTRY REACHED A RECORD 258M IN 2017, UP FROM 173M IN 2000 - according to the United Nations.

To maximise the benefit of talent within organisations, companies will need to embrace diversity and hire from all sections of society. They must also strive to eliminate gender pay gaps and put checks and balances in place to make sure these do not arise inadvertently.

Some will need to do more training to meet their talent needs and also encourage employees to take responsibility for their own development, perhaps through online courses. Lifelong learning is becoming an urgent necessity as skills change rapidly.

One of the most important issues is how much is funded by employers and how much by the state and individuals.

Singapore, for example, has learning credits that over-25s can draw on. The Nordic countries and the Netherlands and Canada have also won praise for their programmes. However, the global picture is patchy. Companies cannot wait for this to be resolved. They must take the initiative to meet their vital needs.

The growth of non-standard forms of employment widens options for companies and workers. Digital freelance work platforms, for example, can make it less costly to get work

done while allowing workers in lowerincome countries to offer their skills worldwide. A study by the Organisation for Economic Co-operation and Development found that the Philippines, Bangladesh, India and Pakistan were among countries with the highest freelancer earnings, while employers in Israel, Singapore and Australia were among the highest numbers.

Employers that get these things right will find they can succeed, even in an environment where shifting regulations and volatile politics make recruitment and workforce planning difficult. n

RSM LEADERS International Board of Directors Mike Kirley, Chairman, USA Joe Adams, USA Brian Eaton, South Africa Guillermo Erhard, Mexico David Gwilliam, UK Cherif Hammouda, Egypt

Information Technology Committee Simon Harding-Rolls, UK David Hilland, UK Paul Joseph, Australia Jeff Wobbema, USA Sanjay Sood and Emily Thomas, RSM GEO Support

Jorge PĂŠrez, Argentina James Komninos, Australia Angela Simatupang, Indonesia Luc Toelen, Belgium Stefan Walter, Austria Wong Poh Weng, Hong Kong

Global Financial Due Diligence Leadership Group Ewan Grant, Chairman, UK Terence Ang, Singapore Volkmar Berner, Germany Lee Castledine, UK Michael Grossman, US Bobby Rooney, US Glyn Yates, Australia Lauren Summers, RSM GEO Support

Regional Leaders Clive Betty, Africa Gregor Schmidt, Europe Bassam Dahman, Middle East & North Africa Neil Hough, Asia Pacific Brendan Quirk, Latin America

IFRS Advisory Committee Monique Cole, USA Christelle Camion, France Victor Gomez, Columbia Ralph Martin, Australia Gary Stevenson, Hong Kong Richard Stuart, USA Nicky Warburton, UK Hiromi Kaneko, RSM GEO Support

Transnational Assurance Services Executive Committee Jean-Charles Boucher, France Jonathan Ericson, UK Henk Heymans, South Africa Susana MartĂ?nez, Mexico Jim Morton, USA Ged Stenhouse, Australia Stephen Wong, Hong Kong Steve Whitcher, RSM GEO Support

Global Tax Leadership Group Rudolf Winkenius, Chairman, Netherlands Aristides Batista, Panama Eric Chen, Hong Kong Francesco Gerla, Italy Bert Hawkins, USA Paul Heiler, Australia John Jones, South Africa Ross Wilkinson, UK Rob Mander and Caroline Walenkamp, RSM GEO Support

Global Risk Consulting Committee Richard Smith, Chairman, UK Peter Brady, USA Oliver Bungartz, Germany Marcelo Conti, Brazil Jean-Marc Imbert, Australia Rami Wadie, Kuwait Lauren Summers, RSM GEO Support

FINANCIAL INFORMATION Global combined revenues for year ending December 2017.

By region

($m) 2017

($m) 2016

Variance ($m)

Variance (%)

39.7

40.7

-1

-2.5%

642.6

617.4

25.2

4%

1,025.8

997.8

28.0

3%

123.8

119.7

4.1

3%

41.6

37.6

4.0

10%

North America

3,222.0

3,052.4

169.6

5%

Total

5,095.5

4,865.6

229.9

4.5%

2017

2016

Variance ($m)

Variance (%)

Audit and accounting

2,440.8

2,330.7

110.1

4.5%

Tax

1,528.6

1,454.9

73.7

5%

1014.0

982.9

31.1

3%

112.1

97.1

15.0

13%

5,095.5

4,865.6

229.9

5%

Africa Asia Pacific Europe Latin America Middle East

By service line

Consulting Other Total

RSM REPRESENTATION RSM has member and correspondent firms in the following countries.

AFRICA Botswana Ghana Kenya

Malawi Mauritius Mozambique

Nigeria South Africa Eswatini

Tanzania Uganda Zambia

Zimbabwe

Hong Kong India Indonesia Japan

Malaysia Myanmar New Zealand Pakistan

Philippines Singapore South Korea Sri Lanka

Taiwan Thailand Vietnam

Croatia Cyprus Czech Republic Finland France Georgia Germany Gibraltar Greece

Hungary Ireland (Republic) Isle of Man Israel Italy Kosovo Luxembourg Macedonia Malta

Netherlands Norway Poland Portugal Romania Russia Serbia Slovakia Spain

Sweden Switzerland Tajikistan Turkey Ukraine United Kingdom

Colombia Costa Rica Ecuador El Salvador

Guatemala Honduras Nicaragua Panama

Peru Uruguay Venezuela

Kuwait Lebanon Morocco Oman Palestine

Qatar Saudi Arabia Senegal Tunisia United Arab Emirates

Mexico Puerto Rico

Turks & Caicos USA

ASIA PACIFIC Australia Bangladesh Cambodia China

EUROPE Andorra Austria Azerbaijan Belarus Belgium Bosnia & Herzegovina Bulgaria Channel Islands

LATIN AMERICA Argentina Bolivia Brazil Chile

MIDDLE EAST & NORTH AFRICA Afghanistan Bahrain Benin Burkina Faso Chad

Egypt Guinea Iraq Ivory Coast Jordan

NORTH AMERICA & CARIBBEAN Bermuda Canada

Cayman Islands Dominican Republic

Services in other countries are provided through contacts and support from RSM member firms.

RSM Global Executive Office 50 Cannon Street London EC4N 6JJ United Kingdom T: +44 (0) 20 7601 1080 E: rsmcommunications@rsm.global rsm.global

RSM is the brand used by a network of independent accounting and consulting firms, each of which practices in its own right. The network is not itself a separate legal entity of any description in any jurisdiction.

The network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 50 Cannon Street, London EC4N 6JJ. The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug. Š RSM International Association, 2019

THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING