Transparency Report 2008 Contents 3 Foreword 4 Thought leadership 6 Statement from the head of assurance 7 Services 11 Grant Thornton International 12 Governance and management 13 Legal structure “My director at Grant 14 Management structure 16 Quality control systems Thornton has been my 18 Independent oversight and external quality assurance review trusted adviser and confidante 19 Risk management from the very early stages of 21 Independence practices 22 Professional skills and values the development. Knowing 24 Financial information that we can rely on the advice 25 Director remuneration 26 Public interest entities we’ve received has enabled 27 Contacts us to focus on realising our vision.” Maha Sinnathamby Founder and chairman Springfield Land Corporation “Grant Thornton has consistently given me good advice and I would never make a key decision now without running it past them first.” Colin Hughes CEO Snow Confectionery 2 Transparency Report 2008 Foreword It has been a year of momentous change for Grant operations, values and how we uphold confidence Thornton in Australia. in our capabilities as public auditors. On 1 January 2008, our firm changed its This year we have seized a unique opportunity corporate structure from an association of five to change our business and we feel this report state-based firms to a single national corporation represents a benchmark for our national called Grant Thornton Australia Limited corporation. Based on providing seamless (GTAL). In an increasingly complex and regulated quality service to our clients, adaptability and a environment, we took the opportunity to create commitment to speak out on key issues, we believe a new, exciting and innovative entity which has Grant Thornton Australia is uniquely placed to delivered real, sustainable and growing benefits to carve its own niche in the marketplace. our people and clients. Following the change in structure, we continued Robert Quant to strengthen our position as a market leader by Chief executive officer merging with William Buck in Melbourne. This Grant Thornton Australia was in addition to our merger with Bentleys MRI, Perth in October 2007 which bolstered our presence in Western Australia. This has enabled us to offer a truly integrated national capability from the key capital cities. Similar strengthening by other “We pride ourselves on client member firms of Grant Thornton International has taken place this year as part of a global strategy to service excellence. We strive to further enhance international capabilities. The past year has seen fee income in Australia deliver a consistent level of client rise by 40 per cent to $151m, which we see as the first step towards our vision to be a $300m turnover experience throughout all states national business by 2011. Key to this target is our commitment to client service excellence. Our with a common focus on close people are at the centre of this commitment with relationships, communication, the development of existing strengths as well as the attainment of new areas of expertise a continued and friendly accessible service.” priority. Growth will also be key, both organic and through acquisition, along with the continued development of our national brand presence and Robert Quant overall pledge for integrity and clarity throughout CEO our organisation. Grant Thornton, Australia This transparency report for the year ending 30 June 2008 is the first report of its type produced by Grant Thornton Australia. It has been produced on a voluntary basis to provide a clear picture of our Transparency Report 2008 3 Thought leadership Grant Thornton Australia is dedicated Corporate governance survey – 2008 Surviving the credit crunch to providing resources, research and Our annual review of corporate Our practical guide to the ‘credit crunch’ opinion pieces on the issues and governance disclosure by the ASX 300 was produced with the privately held challenges to business and those affected is a valuable reference document for the business in mind and was well received by it. With our expertise, journalists Australian market, highlighting trends by clients and professional bodies alike. regularly seek our opinions on matters and reflecting the impact of new and The guide explored a ten point readiness of interest. Insolvency, tax, corporate revised guidance. check designed to help businesses take finance and succession options are In a period when businesses are quick and decisive action to turn difficult examples of the topics we have under increasing pressure to perform, market conditions to their advantage. commented on recently. the report outlined the importance for The guide examined key concepts Below are examples of thought businesses to be managed effectively. It such as cash flow management, cost leadership reports produced by Grant examined the good business practices of: controlling, tax plans, investment plans Thornton Australia this year, all of 1. Delivering a sustained report of good and protecting personal wealth. which are available on our website results. www.granthornton.com.au. 2. Demonstrating and implementing an International Business Report effective strategy. This year was the sixth year of our Grant Thornton Aged Care Survey 3. Transparently disclosing the actions participation in the Grant Thornton With an ageing population, Australia they take in order to create an International Business Report (IBR). faces a critical challenge to meet the need environment of strong corporate The global survey examines the thoughts of its elderly citizens over the coming governance to engender investor and opinions of over 7,000 privately held years. With the support of Professor confidence. businesses in 34 countries, including Warren Hogan, our survey examined 4. Implementing and disclosing entrepreneurs, family businesses and changing trends in the aged care industry corporate social responsibility non-listed entities which together and evaluated the extent to which the initiatives account for over 98 per cent of current funding and policy models businesses worldwide. promote service quality and choice for While share market analysts frequently Topics this year included examining Australia’s elderly population. focus on the first two elements, the business confidence and economic Among the recommendations purpose of this report is to provide the prospects, the continued emergence of of the report was for the review of reader with insight into what companies corporate social responsibility, global Australia’s aged care regulatory and are doing regarding the third. trends in recruitment and retention issues, funding arrangements, with particular investing in global growth markets and attention given to aspects of regulation trends in mergers and acquisitions. which limit consumer choice and investment. Initiatives introduced to enhance consumer influence should not undermine the accessibility, equity and quality of aged care services. 4 Transparency Report 2008 Survey of Australia’s financial reporting deadlines Our survey on financial reporting deadlines was conducted as part of our commitment to speaking out on the issues that matter to businesses. In Australia, we have some of the tightest financial reporting deadlines in the world for both private and publicly listed companies. We also have predominance of 30 June year-ends due to the tax and company legislation. The survey examined the effects of this clustered reporting schedule and examined options relating to potential changes in legislation. Areas explored included: 1. allowing companies to change their year end dates more easily; and. 2. consideration of business size when setting reporting deadlines. Transparency Report 2008 5 Statement from the head of assurance Audit quality is the cornerstone on we have recently implemented along the size, depth and capability to audit which we’ve built our audit practice with member firms around the world. large, international listed companies. over the last decade. Many see audit Voyager builds on Grant Thornton By continuing to build on the expertise as a commodity. But beyond the International’s previous Explorer and gained through our current larger clients, robustness of our assurance opinions, auditCARE platforms, which we have we will continue to make inroads in our differentiation has been based on the been using successfully for more than this area and demonstrate to the market service levels and high level of director 10 years in Australia. They will provide that we are a very real and attractive involvement we provide to our clients. us with an even greater competitive alternative to the Big 4. This director-led relationship advantage against the mid-tier firms We’ve made significant progress model seeks to understand businesses who do not have such tools and will be a in achieving these goals in the last 12 and industries. Delivery is efficient strong platform to further challenge the months and will continue to grow with paramount importance given to Big 4 at the bigger end of town. strongly over the coming years, built deadlines and exceeding our clients’ high With our recent mergers in upon our commitment to audit quality, expectations on service quality. Access Melbourne and Perth we now have client service and the best people using to senior decision makers and technical sizeable, strong audit practices in all world class audit tools. resources is timely, with communication five major state capital cities. Our clear and responsive. ASX listed audit clients number over Matt Adam-Smith As national head of audit and 140 and growing. Our focus is now to National head of audit and assurance services assurance services, I am responsible for dispel the myth that only the Big 4 have Grant Thornton Australia all aspects of leading this service line, from delivering financial performance and driving growth to attracting, developing and retaining the best people. Naturally our delivery of audits complies with the increasingly complex professional standards. High quality, well trained auditors using state of the art audit methodology and tools are fundamental to our success. Our high standards are maintained through our national training model which ensures that staff in all offices obtain regular, consistent training tailored to their experience levels. We are fortunate to be able to leverage Grant Thornton International’s first class global audit methodology (Horizon™) along with its second generation software tool, Voyager, which 6 Transparency Report 2008 Services Audit and assurance Independence Reviews of financial reports You might not have a choice whether Conflicts of interest and independence Provision of review services (less your business carries out an audit or not, are of paramount concern to audit detailed and hence providing a lower however, you can still choose who you committees and auditors alike. We have level of assurance than an audit) for half appoint to conduct it. a web-based global independence and year reports of ASX listed companies conflict check system to ensure we under the Corporations Act 2001 and Why choose Grant Thornton? are independent of all clients, prior to other entities, as required. At Grant Thornton we pride ourselves undertaking work. Any conflicts of on having a director-led service for all interest that may arise are identified Internal audits our audit clients. We commit to being immediately. Provision of an internal audit function, responsive and spending the time either on a one-off or recurring basis, for required to understand your business Right sized replies organisations of all types. and meet the agreed timeframes. You’ll The need to gather, assess and act find our directors are very hands on, on information is as vital to Grant Systems and controls reviews with this type of work being their Thornton as it is to our clients. We know One-off reviews of an entity’s financial passion and the reason they are part of that, in most cases, our clients need and operating systems and controls, Grant Thornton. short, practical responses. Exhaustive, providing an independent assessment of As we are members of Grant time-intensive and costly reports are the internal systems and controls. These Thornton International, when we deal usually not warranted in response to the reviews assist in risk management and with member firms in other countries issues faced by our clients. We commit corporate governance. (perhaps where you have subsidiaries to always providing a fee estimate before or other operations) our audit files we undertake any significant assignment Agreed upon procedure reports are easily transferred to minimise outside of the scope the year-end audit. Conducting procedures on specified coordination costs. Through the financial information for a particular international organisation of firms, we Some of the Audit and Assurance special purpose and then preparing a deliver a truly seamless global audit in a Services we provide include: report based on these procedures. timely and efficient way. Nationally, we invest in technical Audits of financial reports Other types of audits resources and training to ensure our Provision of statutory audit services There are many other types of audits team are up to date with the latest for clients requiring an audit under the that we undertake such as: accounting and auditing standard Corporations Act 2001, or other relevant • trust accounts (solicitors and real requirements. The Institute of Chartered legislation. Our industry experience and estate agents) Accountants in Australia uses Grant exposure to different entity structures • grant acquittal statements Thornton for regular technical updates is very broad. Within Australia our • turnover audits for shopping centres. to members. This means we are not audit clients include 140 ASX listed reactive when issues arise. Instead we companies, some of the largest privately identify potential problems that may be owned businesses, right through to not- encountered by our clients and deal with for-profit entities. them in a planned and considered way. Transparency Report 2008 7 Tax Indirect tax Privately held business services Continual changes in taxation law • GST advice and compliance Privately held businesses are the bedrock constantly challenge businesses large • prudential review of GST returns to of the Australian economy and are seen and small, particularly those operating ensure correct compliance globally as the catalyst for economic internationally. How your business • stamp duty advice growth. It’s a progressive segment, meets this challenge can have a • land tax advice. with high levels of productivity and significant affect on your bottom-line • advice on payroll tax and grouping innovation, essential to the health of the and the more your business grows, the provisions. global economy. more complex tax requirements can Grant Thornton Australia has built become. Employment taxes its name on helping privately held Through legitimate planning, our • prudential review of fringe benefits businesses achieve their ambitions. We Grant Thornton tax team considers tax returns to ensure inclusion of all develop a close, long-term relationship issues that arise within specific types benefits with our clients and work with them to of tax, as well as the tax implications • salary packaging advice understand their needs and aspirations of a new project, or a change to the • fringe benefits tax calculations and and then tailor our services to meet those business. We work with you to develop compliance indirect taxes goals. tax-planning strategies suitable for • review of business systems and Our collaborative approach achieves your specific business or individual procedures to identify potential maximum results both for the business structure. Our common-sense approach problem areas and, more importantly, the owner. is designed to help you understand and • PAYG advice Clients deal directly with our directors minimise the tax challenges you or your • advice on the superannuation who call upon their breadth of technical business faces. guarantee charge expertise to benefit businesses through • prudential review of payroll innovative solutions and their passion to Our tax services include: records to ensure correct PAYG, understand privately held businesses. superannuation and payroll tax. Corporate tax services • preparation/review of corporate tax returns • preparation/review of IFRS tax calculations • transaction tax advice • ATO audit assistance. International tax • tax-effective international business structures • advice on the impact of double tax treaties • expatriate planning • staff secondment advice • structuring of inbound and outbound investments • transfer pricing reports and advice • withholding tax requirements. Corporate advisory services • capital raising tax advice • advice on tax and structuring matters pertaining to private equity and venture capital transactions • due diligence reviews • preparation of reports for inclusion in public documents. 8 Transparency Report 2008 Services offered to the privately held Corporate finance Our capital market, M&A, transaction business owner include: Are you looking at a merger, making support services, advisory and valuation • strategic planning an acquisition, disposing of a business, teams are represented by member firms • structuring advice for the business undertaking a public share offering or in Asia Pacific, the United Kingdom, and owner raising finance? Whatever your strategic Europe and the Americas, positioning • finance/banking reviews objectives, Grant Thornton can help us ideally to consider both domestic and • tax planning you achieve them and increase your international requirements of businesses. • business profit improvement shareholders’ wealth. Corporate finance teams in • asset protection planning Our success is built on the member firms worldwide work and • specialist business owner audits importance we place on developing train together, sharing industry and • remuneration planning deep, long-lasting relationships, both technical expertise and a commitment to • franchise services with our clients and with third parties excellence. With an active secondment • owner affairs management such as private equity houses, banks, program between countries, we can field • wealth investment management other financial intermediaries, lawyers experienced international and dedicated • succession planning and government bodies. The strength service teams to suit your needs. • mergers and acquisitions of our partnerships and our multi- Wherever the geographic location, • estate planning disciplined team allows us to provide we apply the same insight, flexibility • retirement planning a rapid response, tailored to your and relevant experience. We examine • superannuation advice particular circumstances. each transaction objectively and • ongoing mentoring If you are competing internationally, independently from all angles and work • specialist tax advice Grant Thornton offers particular actively to involve all parties including • accounting and compliance expertise in complex transactions purchaser, vendor, investor and • business valuation across diverse geographic jurisdictions, management. This thorough approach • business health checks. particularly in the rapidly changing ensures you receive the highest quality middle market. advice at all times and has gained us an established track record for delivering commercial and profitable solutions. Corporate finance services include: Pre deal services • assurance • analysis • mergers and acquisitions • valuations. Strategy and planning • structuring • tax planning • project plan • research • financial modelling. Pre bid analysis • desk top review • valuation parameters/sensitivities • gearing scenarios • fundraising. Due diligence (DD) • financial DD • taxation DD • vendor DD • information technology and systems review • internal controls. 9 Transparency Report 2008 Transparency Report 2008 9 Completion they can benefit from our strong sector Outsourcing • completion accounts knowledge. Workforce relations are a challenge. • sale and purchase agreement advice Outside of Australia, our multi- Employee agreements, generational • assistance with lending and funding disciplined international capability change, varied/flexible work • documentation. enables us to provide integrated cross- entitlements, legislative changes and border recovery and restructuring loss/lack of skilled resources all create Post deal services solutions to multinational corporations. complexity. • purchase price allocation Recovery and reorganisation services Grant Thornton Australia offers • integration include: solutions that assist clients improve how • assurance services • restructuring and turnaround they manage and deploy employees • tax compliance • exit strategy services and improve support service delivery. • M&A • lender support services A comprehensive outsourced financial • valuations. • insolvency services and HR solution – fully supported • pre-lending reviews. “back office” infrastructure with timely, Recovery and reorganisation practical advice. The normal lifecycle of every business Other services The team provides three key services: has peaks and troughs. Just as the Other advisory services provided by • managing workforce deployment successes can exceed expectations, Grant Thornton Australia include: to ensure required talent is available financial difficulties, if left unchecked, cost-effectively can threaten the very survival of any Business risk services • servicing outsourcing operations business. Directors see the management from base transactional services (e.g. Grant Thornton works directly with of business risk as not just about payment compliance) to premium companies, law firms and all the major compliance, but as an opportunity. We engagement services (e.g. wealth Australian lenders to help anticipate and provide enhanced risk management management) prevent corporate insolvency. Where it and compliance services along with IT • providing interim HR/payroll is not possible to turn around a troubled related risk management to align systems management on a short or long term business without formal insolvency to your business and strategic objectives. basis. proceedings, we are qualified to act as Above all, we are focused on voluntary administrators, receivers, improving business processes and Litigation and forensic liquidators or trustees in bankruptcy ensuring good governance and control. Our forensic accounting and litigation as appropriate and often use these We work with businesses to set a clear support services helps businesses procedures as a restructuring tool. strategy for improvement by helping quantify and recover economic losses. In every situation we use hard-won tackle issues and take advantage of We provide specialist investigative experience and commercially proven opportunities they present. financial, accounting and taxation techniques to address the pertinent issues services that assist to build a case necessary to turn around a business – Business transformation consulting against a breach of contract or obtain a from tax advice and compliance through Our management consulting services settlement on a wide range of disputes. to refinancing, profit improvement and help organisations successfully Our services include: management counselling. implement complex initiatives. • investigation and analysis of financial We draw on our experience working Consultants provide key insights evidence with both companies and lenders to and experience to successfully execute • development of computerised broker solutions designed to guide on priority business initiatives including applications to assist analysis and debtors, creditors and other stakeholders market, financial, technology and presentation of financial evidence towards a successful long-term future. operational strategies. • communication of findings (e.g. Grant Thornton’s recovery and Specialist offerings include: reports and exhibits) to assist in legal reorganisation team is regarded as one • market sustainability proceedings, including testifying of Australia’s leading practices, both − developing and deploying in court as an expert witness and domestically and abroad. strategic capabilities preparing visual aids to support trial Our proven ability to quickly • service integration evidence. identify underlying performance issues − enhancing the operation of is supported by Grant Thornton’s businesses support functions. Industry Intelligence Unit. This produces regular industry-specific research papers and articles for publication and undertakes specialist training for Grant Thornton’s clients so 10 Transparency Report 2008 Transparency Report 2008 10 Grant Thornton International Grant Thornton Australia Limited is a Services are delivered independently by member firm within Grant Thornton the member and correspondent firms International Ltd (Grant Thornton within Grant Thornton International, a International). non-practising, international umbrella Grant Thornton International is entity organised as a private company one of the world’s leading organisations limited by guarantee incorporated in of independently owned and managed England and Wales. Grant Thornton accounting and consulting firms. International does not deliver services Highlights These firms provide assurance, tax in its own name or otherwise. Grant • Member firm personnel in 2008 totalled and specialist business advice to Thornton International and the member 27,861 (21,822 in 2007) of which 2,539 privately-held businesses and public firms are not a worldwide partnership. were partners (2,448 in 2007). interest entities. Clients of member Each member and correspondent firm • Grant Thornton member firms served as and correspondent firms can access within Grant Thornton International primary auditors for approximately 1,500 the knowledge and experience of more is a separate national firm. These firms publicly listed companies in 2007. than 2400 partners in over 100 countries are not members of one international • The member firms of Grant Thornton International achieved combined global and consistently receive a distinctive, partnership or otherwise legal partners revenues of US$4 billion to 30 September high quality and personalised service with each other (with the exception of 2008, a 14 percent increase on 2007. wherever they choose to do business. certain limited instances), nor is any • Member firms of Grant Thornton International Grant Thornton International strives one firm responsible for the services or experienced significant expansion in to speak out on issues that matter to activities of any other. Each firm governs emerging economies via organic growth and acquisition, for example, the member firm business and which are in the wider itself and handles its administrative in Brazil experienced 65 per cent organic public interest and to be a bold and matters on a local basis. Although many growth in 2007. positive leader in its chosen markets and of the member firms carry the Grant • Mergers in Australia, Hong Kong, Ireland within the global accounting profession. Thornton name, either exclusively or and the United Kingdom have strengthened in their national practice names, there the global organisation further in 2007 and 2008. is no common ownership among the • A new global brand identity was launched firms (with the exception of certain throughout the global organisation in 2008. limited instances) or by Grant Thornton • Specialist services, such as Business International. Risk, Corporate Finance, Recovery & Reorganisation, and Public Sector Advisory, increased by 33 per cent in 2007. Transparency Report 2008 11 Governance and management In a fast changing world, with increasing Governance Our independent chairman oversees the regulation, Grant Thornton Australia Grant Thornton in Australia operates policy and strategy body to protect the can be relied on to provide practical directly through, or as subsidiaries of firm’s values at a board level. In addition, and independent advice centred on the Grant Thornton Australia Limited, as an we will appoint two external directors highest professional ethics, principles unlisted public company. Shareholders to contribute business expertise and and standards. of Grant Thornton Australia Limited independent thinking. are the directors of Grant Thornton in Three national committees stand New structure Australia. aside from the board: Our national structure allows us to offer Our new ‘single entity’ corporate • the national risk management a full service of offerings to privately structure enables us to reduce risks advisory committee (NRMAC) is held businesses and public interest through stronger, more consistently established to recognise and manage entities alike. Something that smaller applied systems and procedures. risk; firms will struggle to offer as the cost of The firm is governed by a board. The • the remuneration and equity compliance and regulation increases. board composition is comprised of an committee (REC) oversees fair and Although a unified national firm, independent chairman, two independent responsible remuneration practices; our tailored approach to different states directors, five state based executive and has been preserved through a continued directors and a national CEO. This • the audit committee assist the board local office framework to preserve composition enables the organisation to to fulfil its responsibilities in relation tailored responses and a local market provide sufficient oversight, independent to financial reporting, governance and focus. This allows each office to pursue thought leadership and working audit functions. opportunities within its local market knowledge of local office environments whilst maximising the advantages of to maintain our entrepreneurial business One of our foundation principles is that being a national entity. culture. Our structure enables local we have a national service line leader offices to have sufficient authority so approach to service delivery which Leadership they are able to respond to their local provides us with competitive advantage We pride ourselves on having a director- market as well as having considerable in our markets and protects our led service for all clients. High on each influence at a national level. entrepreneurial spirit. director’s agenda is a desire to maintain a collaborative, values-based organisation and to value and leverage individual strengths and passions. Our people are encouraged to speak out on a wide range of issues relating to our clients and in the public interest. We strive to lead in our chosen markets and support necessary change in our profession. Our directors contribute on domestic and international issues with strong collaboration with professional and industrial associations. 12 Transparency Report 2008 Legal structure Ownership Regulatory body affiliation Grant Thornton Australia Ltd is Grant Thornton Australia Ltd is a single Many of the firm’s activities are subject to reviews by certain regulatory national corporation which is entirely regulated by a number of independent authorities including the ICAA, ASIC owned by its shareholders, all of whom bodies including: and APRA. are employees of the firm. • institute of chartered accountants in Grant Thornton Australia Ltd is Within our structure we do not refer Australia (ICAA) a member firm of Grant Thornton to ourselves as partners, but instead we • Australian securities and investments International Ltd. use the title of director, for example: commission (ASIC) director – taxation. • Company auditors board • tax agents board • Australian prudential regulatory authority (APRA). Transparency Report 2008 13 Management structure Board Remuneration & Equity Committee Chief Executive Officer Risk Executive Management Officer Committee National Chief Service Operating Line Leaders Officer Privately Specialist Chief Chief Human Audit Held Advisory Tax NSW QLD SA VIC WA Marketing Financial Information Resources Business Services Officer Officer Office Office Office Office Office Managing Managing Managing Managing Managing Director Director Director Director Director Business Business Corporate Recovery & Risk Services Transformation Finance Reorganisation Directors Directors Directors Directors Directors Figure 1: Grant Thornton Australia – reporting structure The key roles and responsibilities for and growth. The board appoint, direct • One representative from each of the management under the new structure are and hold the chief executive officer five states: as follows: (CEO) accountable for ensuring − New South Wales - Mark Bisset the business is operating in manner − Queensland - Rodger Flynn Board consistent with the vision and values. − South Australia - Steve Westaway The principal role of the board is to The board consists of the following − Victoria - Ian Herman lead the firm’s strategic priorities. The members: − Western Australia - Bill Stephen. board is responsible for determining • independent chairman - Professor national policy, strategy and governance Roger Collins standards. It approves and oversees • CEO – Robert Quant delivery of the overall vision and • two external directors to be strategy for the firm’s profitable success appointed shortly. 14 Transparency Report 2008 The independent chairman has been Office managing directors (OMDs) Chief operating officer (COO) appointed to provide direction and As part of the national strategy, OMDs This new role will provide leadership support for the delivery of the firm’s collaboratively lead, build and deliver and management of the national support vision and strategy. The role of the growth and profitable performance in operations. The senior executives independent directors is to ensure all each local market. in finance, information technology, members of the board are focussed on • New South Wales - Mark Bisset marketing and human resources will the national shareholders’ best interests • Queensland - Rodger Flynn report to and work with the COO to and to support executive directors • South Australia - Steve Westaway deliver the strategic outcomes required during decision making processes. • Victoria - Ian Herman to meet the firm’s business and cultural • Western Australia - Bill Stephen. objectives. Remuneration and equity committee (REC) National service line leaders (NSLLs) National director marketing and This committee’s role is to oversee and Our NSLLs establish the vision and business development approve the annual remuneration awards define the direction of each service line. Leadership, development and and equity allocation for directors. Their goal is to leverage national service management of the firm’s brand, line capability and market presence to marketing and business development in National risk management advisory deliver the highest quality service to line with national strategy. committee (NRMAC) clients and to achieve growth and market Approves and monitors the firm’s risk leadership. National director of human resources management and compliance policies. • Audit/assurance - Matt Adam-Smith Leadership, development, management • Privately held business - Tony and delivery of the firm’s people strategy Audit committee Markwell to ensure we attract and retain the best The audit committee assists the board • Specialist advisory services & people to meet our strategic goals. to fulfil its corporate governance and corporate finance - Scott Griffin oversight responsibilities in relation to • Recovery and re-organisation - Paul Chief information officer (CIO) the firm’s financial reporting, internal Billingham The CIO will work with the COO control systems, risk management • Taxation - Peter Godber in developing and implementing systems and the internal and external information technology initiatives, audit functions. They objectively analyse Executive officer (EO) technology platforms and systems to firm financial data and ensure the board The EO’s role is to support the CEO deliver the optimum structure for the receive the information they require in a with the secretarial management and operations of the firm. timely manner. co-ordination of the reporting and information requirements across local Chief executive officer (CEO) - offices and service lines. Robert Quant The CEO has overall responsibility for: • building and delivering national strategies for profitable growth and market position • ensuring the management of the firm is in a manner consistent with the interests of our clients, people and ethical standards • providing leadership for the values, brand development and stewardship of the firm • management of the appointment, performance and development of directors. • The appointment and delegated management of the senior executive team. Office managing directors (OMDs) report to the CEO as do our national service line leaders (NSLLs). Transparency Report 2008 15 Quality control systems Quality management and technical Grant Thornton Australia operates Client acceptance and continuance excellence a risk management framework with All of Grant Thornton Australia’s Our success centres on our management taking responsibility for statutory audit clients are subject to determination to be leaders in our the quality service line delivery and categorisation policies to make sure that chosen fields. Stringent quality ensuring that the appropriate processes the appropriate procedures are applied. management procedures, internal are in place on an annual basis. Should That categorisation is used to drive key control systems and risk assessment any areas of weakness be identified, procedures including: measures ensure that everyone at Grant appropriate action is taken with the • the need to consult and acquire Thornton Australia adheres to the improvement process monitored specific, external-to-the-office standards that we and our clients have throughout. This framework forms part approval prior to the acceptance and come to expect. of our internal audit review. continuation with particular new Nowhere is this more important We adopt a quality management clients than in our audit services where the approach for auditing and financial • the requirement of specific team quality of work is critical for our clients reporting which is based on the members, with relevant experience, and professional regulators. To uphold following components: to perform the role of audit director our standards, we have established a • A robust and rigorous risk-based and ‘on-site’ roles range of precautions which oversee our audit approach – we allocate • for certain categories of audit, to audit procedure and the independence of significant resource to ensure recognise the need to appoint an directors and staff. audit quality including widespread appropriately experience review Every part of our business is consultation and on the job technical director. required to be governed by rigorous training. quality control systems, such as: • Skills and personal attributes of our Clients are only engaged if we are fully • detailed technical manuals – directors and staff. satisfied that we have the required documenting procedures and • Ethics and integrity – we only capacity, skills and expertise to enable us standards expected of our work accept and act for businesses which to offer the highest possible standards • continual training of directors and we believe exhibit integrity and of service and care to meet client staff including comprehensive ethical standards and for whom we expectations. Acceptance of a client must inductions, yearly appraisals and consider the risks of acting for to be also not prejudice our independence, director peer reviews acceptable. objectivity or integrity. • quality control measures – to review • Independence and impartiality – High profile appointments are and assess each assignment to uphold throughout the organisation we required to be pre-approved by senior required standards of quality understand that our reputation relies management who are independent of the • quality assurance processes – these on the quality of our work and proposed client service team. A similar include retrospective reviews to strength of the decisions we take. process is compulsory on an annual basis enable feedback into the procedures • Consultation – we operate a culture or if there are any known changes in to continually review their where consultation is ingrained circumstances. effectiveness. in our approach and in relevant circumstances, compulsory. 16 Transparency Report 2008 We maintain strong quality management Clear and unambiguous audit the following standards issued by the systems for all service lines to ensure reporting International Federation of Accountants that each individual assignment is Regular mandatory training is crucial (IFAC) (as supplemented by additional delivered to a consistently high level of so directors and staff are aware of Grant Thornton International professional and technical excellence. the latest issues in order to address quality assurance policies) which are In addition, we have dedicated central them appropriately within the audit consistent with Australian professional support teams for all service areas who approach. It also means we are able to requirements: offer practical support and advice to all communicate with client’s board and • International Standard on Quality client-facing directors and staff. audit committees on matters of relevance Control 1:Quality Control for Firms to them in a clear, practical and positive That Perform Audits and Reviews Supporting audit delivery manner. of Historical Financial Information, Grant Thornton International develops Close consultation is maintained and Other Assurance and Related resources that assist member firms in throughout the audit process with audit Services Engagements delivering a strong and rigorous audit. committees on a range of issues such • International Standard on Auditing They include: as initial scoping, through to crucial 220:Quality Control for Audits of • the Voyager audit methodology, with judgements. Our strategy and key issues Historical Financial Information supporting state-of-the-art software, memoranda also provide structure for • International Federation of manuals and policies, benchmarked continued interaction with boards and Accountants (IFAC) Code of Ethics against the International Standards audit committees. for Professional Accountants. on Auditing, International Standards on Quality Control, and the IFAC Grant Thornton International One of the pillars of the Grant Thornton Code of Ethics for Professional audit review International global strategy is to Accountants The Grant Thornton International support member firms in their delivery • protocols that enable member firms Audit Review (GTAR) programme is of consistently high quality client service to consult with audit specialists in part of the overall quality assurance worldwide. Quality control of assurance other member firms throughout the monitoring procedures of Grant services is overseen by the worldwide international organisation Thornton International, and under director – quality control. Member • a comprehensive intranet service this programme every member firm firms are provided with guidance on that includes up to date information that provides assurance services, the design and implementation of their for member firms on relevant whether to publicly- or privately-held own quality control systems to support professional standards, a worldwide businesses, is subject to review at least their compliance with all applicable restricted-entity list, an International once every three years. Assessments international and local standards. The Financial Reporting Standards evaluate policies and procedures of the global Grant Thornton International help desk, topical alerts, financial member firm applicable to its assurance Audit Review programme (GTAR) statement templates and examples. practice, benchmark those policies and reviews the conduct of audit work procedures against relevant policies performed by each member firm. In Australia, our national audit support and procedures of the international team provides high quality technical organisation, review financial statements Internal quality assurance reviews support and guidance on all audit related and audit reports that have been National audit reviews are carried out issues. issued, review engagement files, and annually to assess the quality of the audit interview directors and staff on various work across various areas of activity and Audit team structures matters. The most recent review of industry sectors. The reviews are risk Strong emphasis is given to the Grant Thornton Australia Limited focused and review teams are selected requirement to have the highest quality was completed for the Sydney and from outside the office under review. of expertise within each audit team Melbourne offices in November 2007, Reviews cover each office location once with substantial director and manager and no significant issues were identified. every three years and all new audit involvement encouraged throughout the directors one year after appointment. audit process. This is fundamental to our Grant Thornton International quality In accordance with the Transparency audit approach and a key differentiator control procedures Report requirements, the above outlines within the marketplace. We also dedicate In addition to our own quality control the procedures that we have adopted considerable resources to appraising procedures – and in line with the Grant to ensure that our assurance work is of and developing all audit team members, Thornton International founding the highest quality. Similar processes are including mentoring, professional and member status of the Forum of Firms – adopted across all client-facing segments personal development courses. Grant Thornton International member of our business to ensure that our firms are required to abide by a system reputation is protected and maintained. of quality control. It encompasses Transparency Report 2008 17 Independent oversight and external quality assurance review A number of the firm’s activities, including audit, recovery and reorganisation, financial planning work and some aspects of our corporate finance work are regulated by independent bodies. The firm’s audit practice is regulated by the Institute of Chartered Accountants in Australia (ICAA); and we are subject to inspection of our audit files by the Australian Securities and Investments Commission (ASIC). Each of our offices was inspected by the ICAA in 2007 and ASIC inspected our Adelaide office in 2007 also. No major issues were identified in these various reviews. The firm is registered with the Public Company Accounting Oversight Board (PCAOB). Serious consideration is given by senior management, to any recommendations made as a result of internal reviews or by a regulator and action taken to implement appropriate changes. 18 Transparency Report 2008 Risk management At Grant Thornton we consider risk chaired by the local NRMAC member. A formal risk issue and compliance management to be an integral part of The LRMAC’s are in turn supported by breach reporting program is in place. our business activity. A key objective of risk and compliance representatives in Reported issues are recorded in a central our approach to risk management and the business. database and tracked to completion. compliance is to achieve our business The national risk and compliance This involves gathering monthly updates objectives without surprises and to meet manager is responsible for developing from those responsible for completing our compliance obligations. To this end the risk and compliance strategy, the actions, monitoring progress against we have developed a comprehensive frameworks and programs and pre-determined completion dates (set by and integrated risk management and implementing them in the business. risk rating), reporting to management compliance strategy which plays The risk and compliance strategy, and on individual and overall status of issues a crucial role in our governance its supporting elements, are based on and evidencing completion. Where an framework. This strategy was launched Australia/New Zealand Standards issue is a compliance breach, protocols in New South Wales in July 2008 and 4360 (Risk Management) and 3806 are utilised to manage all liaison with is being rolled out nationally from (Compliance). the regulator or professional body. If the December 2008 onwards. issue or breach concerns the assurance Frameworks area, the national head of professional Roles and responsibilities Our risk management framework standards is a key stakeholder in the The board has ultimate accountability incorporates a fully integrated program process. for the firm’s risk management and which is used to: Testing of controls is performed both compliance outcomes. They are • identify risk and controls and internally and externally. External audit responsible for ensuring that the allocate responsibilities for them results from the GTAR, SASPR, ASIC, entity has appropriate systems in • measure our inherent and residual ICAA etc. are subject to the reporting place to manage our risk exposures risk and set risk tolerance levels protocols. and our compliance obligations. Their • quantify the impact and likelihood of Further, the “Internal Quality commitment to a strong risk and occurrence Control Review Program” is compliance culture is reflected in our • assess controls for effectiveness of undertaken annually across the entire risk management and compliance policy design and performance business, including support services. statements. • monitor programs for testing This program involves file reviews The National Risk Management controls (operational service lines) as well as the Advisory Committee (NRMAC), • raise risk issue action plans and track measuring of compliance with Grant chaired by the national risk leader, is them to completion Thornton International requirements, responsible for monitoring our risk • report to management on our risk local legislation and other compliance and compliance performance against status in order to facilitate informed obligations. Management Action our strategy and advising directors on decision making. Plans resulting from internal reviews all elements of risk and compliance. are monitored via the risk issue and This committee meets bi-monthly and Risk assessments form the basis of compliance breach reporting program. is supported in the business by state our risk management program and based Local Risk Management Advisory are currently being developed for all Committees (LRMAC’s) which are operational and support service lines. Transparency Report 2008 19 Key controls Training – a range of technical and compliance training modules are in use across the business. Attendance is monitored and the modules incorporate assessment where appropriate. Professional indemnity insurance – this cover is in place through Allianz and is supported by escalation and reporting protocols and processes. Policy – national and local policies are used to set standards and guide behaviour. Policies are subject to a formal approvals process, are periodically reviewed and include an explanation of ramifications in the event of breach. Process and procedure – various documented processes and procedures are used to support the implementation of policy in the business. Key amongst these are the compliance manual (incorporating EQCM) or local equivalent, specialist advisory services (SAS) manual (undergoing national roll-out), audit manual and tax quality control procedures and policies manual. 20 Transparency Report 2008 Independence practices Maintaining objectivity and Grant Thornton International Grant Thornton International has independence of thought is vital to In addition to our own independence adopted an automated tracking system, maintaining our reputation. We have practices, Grant Thornton International the Global Independence System (GIS). a strong system of independence and requires member firms to adopt The GIS is a centralised database that conflict checks, which is designed to policies and procedures to uphold stores information about the identity identify potential conflicts of interest the independence of other network of publicly traded securities held by at the earliest possible juncture, and members. Member firms are required member firms and relevant individuals deal with them appropriately. Sources to maintain a listing of companies within each member firm. Directors and of potential conflict include providing considered ‘restricted’ as a result client-facing managers in member firms additional services to existing audit of an audit relationship either with are required to maintain a portfolio in clients, acceptance of new clients and the company or a related company. GIS of those publicly traded securities in investments by the firm and staff. Those restricted companies that have which they have a financial interest. For audit and similar engagements, publicly traded securities are required The GIS is designed to automatically where independence is a matter of to be posted no less than monthly alert the individual professional and a public interest, our procedures are to a global restricted list through a national compliance officer in the event even more stringent. We ensure that system maintained by Grant Thornton that a security held becomes restricted, directors carry out a check of whether International. Professional personnel and provides a mechanism to assist the other services have been provided that in member firms have access to this individual and the compliance officer in might impact on our independence database via the Grant Thornton determining whether the security may before engaging with new audit clients. International intranet. continue to be held, based upon the facts We also require the engagement team and circumstances. to confirm their independence on each audit file. Furthermore, for all publicly quoted clients, we disclose other services provided to the audit committee at the planning and conclusion stages. Transparency Report 2008 21 Professional skills and values Our vision and values • ensure deep respect for people Continued professional development Grant Thornton Australia has adopted − we build relationships based on Grant Thornton Australia is committed the Grant Thornton International global confidence and trust. We treat to make sure all our people are equipped vision and values strategy. These values people as individuals, promoting with the necessary skills and expertise and guiding behaviours are designed to an inclusive environment that to deliver the range of quality services guide daily life within Grant Thornton values the capabilities and and technical expertise essential to our under one global vision. contributions of each person. clients. All directors and qualified staff • take responsibility for all our actions. are required to keep up to date with the Our vision: − we recognise our wider impact latest professional standards, including “Empowered people providing bold on our clients, people and society. our own risk management, ethical and leadership and distinctive client service We also recognise that decisions independence requirements. worldwide.” we make are investments in All staff operating in specialist service a sustainable future. We act lines or dedicated markets including Our values: with integrity, openness and statutory audit must comply with the • unite through global collaboration accountability to stay true to our compulsory training requirements. On − we are committed to provide the purpose and behave in a way that an annual basis we actively monitor same quality experience for all is consistent with our values. that that any requirements are adhered our clients and people seamlessly to with each staff member required across national and international All staff at Grant Thornton have the to submit a continued professional borders responsibility to live by this vision development record. • demonstrate leadership in all we do and values and promise to make a On an internal basis, technical − we are committed to the commitment to “be better tomorrow resources and support is provided success of our clients, people, than we are today”. Grant Thornton through regular electronic updates, profession and stakeholders by Australia will be running a full roll out training workshops and seminars. demonstrating clear leadership at of the Grant Thornton global vision all levels and values throughout late 2008 and Client service • promote a consistent culture of early 2009 with a series of workshops, Grant Thornton Australia prides itself excellence seminars and communications. These are on client service excellence. We want − we are distinguished for designed to familiarise Grant Thornton all our clients to experience a consistent innovation and solutions-based Australia staff with the global vision level of service no matter which state approaches created and delivered and values, as well as to get buy in on they are in. Our common focus is to by talented people with the what the values mean on a more local understand what businesses want, need passion to exceed expectation. and personal level, to ensure we “live the and value: close relationships, constant • act with agility vales” as a firm on an everyday basis. communication and a friendly, easily − we have the ability to adapt, accessible service from their business anticipate and respond quickly to advisers. meet complex client requirements along with changes within the marketplace and profession 22 Transparency Report 2008 Take Nippy’s Fruit Juices as an example. The South Australian fresh juice producers are jointly owned and managed by brothers John and Jeff Knispel. The brothers often have different perspectives on the business and this is where their relationship with Grant Thornton can be most beneficial. “Grant Thornton’s long-term involvement and working knowledge of the business make their input invaluable,” John says. “They often help my brother and I resolve issues simply because we value their opinion.” The company now boasts an Australia-wide distribution network, an Asian export market and a production capacity of 25,000 tonnes of citrus fruit each year. We believe in working alongside our clients to understand their objectives and help them reach their goals. It’s about delivering on the basics and sustaining a strong approach. Delivering when we say we will and offering value at every opportunity is fundamental to our approach. “Empowered Our client satisfaction research programme examines the thoughts and people providing experiences of our service delivery to regularly monitor, review and tailor bold leadership and our client service delivery. By tailoring and reviewing the ‘Grant Thornton distinctive client experience’ we are able to enhance every service worldwide.” element of our approach and ensure we constantly offer value and deliver services to help clients to meet their Our vision objectives. Grant Thornton Transparency Report 2008 23 Financial information Grant Thornton Australia Number of offices 5 (Adelaide, Brisbane, Melbourne, Perth and Sydney) Head office Sydney Fees 2007-8 ($) 151,140,000 Number of directors 106 Revenue per director ($) 1,425,849 Number of professional staff (full time equivalent) 689 Revenue per professional staff ($) 219,361 Total staff (ex-directors, full time staff equivalent) 821 Fee income for financial 2007-2008 Service line fee income 2007-2008 year ending 30 June 2008 2006-2007 versus 30 June 2007 160 50 140 40 120 100 30 80 $m $m 20 60 40 10 20 0 0 Audit (internal and external) Corporate finance Tax Privately held business services Recovery and reorganisation 24 Transparency Report 2008 Director remuneration The Grant Thornton Australia Long Term Incentives are nominated remuneration and equity committee by the CEO or OMDs based on (REC) stands aside from the board sustained performance against agreed and oversees fair and responsible criteria. Performance can be related to remuneration practice for all directors. contributions to both local and national Director’s remuneration includes office. a base salary which is determined by Dividends are approved by the the REC in consultation with external board, based on profitability and cash consultants on an annual basis reflecting flow of the firm subject to agreed market rate within each state. retention levels. Short Term Incentives are calculated based on the performances of the director’s local office, national service line and national firm. These levels are proposed through consultation with OMDs, NSLLs and the CEO respectively. This excludes the CEO which is proposed by the REC. The Director’s performance is measured applying a balanced scorecard methodology. Transparency Report 2008 25 Public interest entities Grant Thornton Australia Limited audits 140 public companies that are listed on the Australian Stock Exchange. This represents just under eight per cent of all listed companies. Beach Petroleum is in the S&P/ASX 200 index, and 13 companies are in the Top 500 by market capitalisation. Our 10 largest ASX Top public interest entity listed audits by market clients capitalisation (4/11/2008) Beach Petroleum Ltd Southern Health WHK Group GM Holden Ltd Hunter Hall Global Value St Vincent’s Health Melbourne Hunter Hall International Royal Children’s Hospital Walter Diversified Services Ltd DMS Holdings Pty Ltd ATF DMS Glass Unit Trust Century Australia AI Limited Investments Ltd Talent2 International Ltd Royal Women’s Hospital Reverse Corp Ltd Spotless Sirtex Medical Ltd Telstra Ramelius Resources Ltd Melbourne Health 26 Transparency Report 2008 Contacts Australian offices and contact details Adelaide Melbourne Sydney Level 1 Level 2 Level 17 67 Greenhill Road 215 Spring Street 383 Kent Street Wayville SA 5034 Melbourne VIC 3000 Sydney NSW 2000 T 08 8372 6666 T 03 8663 6000 T 02 8297 2400 F 08 8372 6677 F 03 8663 6333 F 02 9299 4445 E email@example.com E firstname.lastname@example.org E email@example.com Brisbane Perth Ground Floor Level 1 Grant Thornton House 10 Kings Park Road King George Square West Perth WA 6005 102 Adelaide Street T 08 9480 2000 Brisbane QLD 4000 F 08 9322 7787 T 07 3222 0200 E firstname.lastname@example.org F 07 3222 0444 E email@example.com Transparency Report 2008 27 www.grantthornton.com.au Grant Thornton Australia Limited is a member firm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member firms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia. Liability limited by a scheme approved under Professional Standards Legislation.