2015 review malta firm - pwc · firms in 157 countries with ... they will expect authentic...

Working with our clients and communities to build trust in society and solve important problems

www.pwc.com/mt

2015Review Malta Firm

Introduction 4

Serving our clients 7

Committed to transparency 18

Creating value for our people 29

Our people

Our revenues

Fee income

€30.2 million15%

Statutory audit

€14.4 million30%

Non audit services

€15.8 million5%

€285,000In terms of cash contributions and hours dedicated to professional and philanthropic activities

17%

Our revenuesOur revenuesOur revenuesOur revenuesOur revenuesOur revenuesOur revenuesOur revenues

Highlights

This year our global workforce reached a new record level.PwC has a presence in almost every

corner of the world. 157countries 756

locations

Contents

At PwC Malta, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com/mt

Note to readers:PwC refers to the Malta member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

www.pwc.com/mt/2015reviewmalta

208,109people

2015 intake

Corporate Responsibility

80Approved projects receiving assistance under the PwC €1 million Start up Fund

2,679Hours dedicated to community and professional activities apart from the PwC €1 million Start up Fund

27%

PwC2 2015 Review Malta Firm 3

105 People joined PwC Malta during 2015

39University graduates

141Students

30Support staff

35ACA/ACCA/other students

24Experienced hires

7Support staff

403Professionals

574 Total staff complement

nevertheless that our growth rate has outperformed the growth in Malta’s GDP and has taken place across all parts of the firm – Assurance, Tax, Consulting and Deals, and Technology.

Our current position is based on the collective body of work of our partners as well as our teams of talented people spread across the firm. We are proud of the position and brand we have built, and our incredibly strong reputation, both in Malta and around the globe. At the same time, we must strive to build an even more powerful position to enhance our overall relevance among all our stakeholders with different business models.

We operate in a fast-paced and unpredictable environment, and there are a number of challenges on the horizon. Governments across the globe are under pressure to better manage their budgets and debt levels, which leads them to question the tax positions of the companies we serve. It also raises taxpayers’ concerns for accountability not just for the organizations themselves, but also for the professional services firms who provide advice or assurance. Regulators have a higher set

Once again, I am delighted to welcome you to our 2015 annual review and transparency report. As always, our aim is to provide a broad understanding of our firm, the services we provide, and the way that we do things. This publication also incorporates our transparency report for 2015 as required by the EU Statutory Audit Directive.

It has been another very positive year for PwC Malta. We are delighted with the growth rate that has been achieved - our revenues grew by 15% to €30.2 million – and I would like to thank all of our people for their tremendous efforts during the year in achieving this result. Of course, it has been a strong year for the Maltese economy as a whole, so our clients are also growing, and our performance in large part reflects the environment within which we operate. It is pleasing to note

Integrity is the foundation of this firm, and is of paramount importance to us in attaining sustainable long-term growth. It delineates the way that we go about our business. Forming part of PwC means something. We have a set of values and a culture which reflects our principles, and we need to ensure that these are communicated better and embraced wholeheartedly. We have an ambitious target and continue to build for the future, investing for long-term growth in order to meet the needs of all our stakeholders, including our clients and our people. But integrity, coupled with quality and technical skills, must remain at the core of everything we do.

As our business and delivery models continue to evolve, our focus on our single most important asset, our people, has become even more important. As top talent becomes increasingly scarce,

of expectations for those they regulate.

As a result, they are also focused on service providers to those organizations, often to look for more accountability. Investors evolve and demand more – from the companies in which they invest and from the auditors and service providers who they rely upon. And all of this is happening in a technology-enabled world, where news and points of view quickly travel the globe. Society is demanding and expecting more. How organizations, governments and others deal with these challenges, and how they are converted to opportunities, will have a broad reaching impact, including to and on PwC in Malta.

As a result of the breadth of capabilities we have created, and thanks to the many connection points we have in the issues and challenges facing local businesses, Government, and the community at large, we are uniquely positioned to deliver on these heightened expectations. We will act and continue to build on our capabilities and deliver for all our stakeholders in new and different ways, and that will ensure that we maintain, and improve upon, our current market position.

Introduction


Kevin ValenziaTerritory Senior Partner

“Integrity is of paramount importance in attaining sustainable long term growth”

and people have more opportunities for interesting and rewarding work, they will continue to have greater expectations of us, just as we have of them. They will look to PwC to provide not only experiences that bring them greater skills and insights, but also that help them grow as leaders. They will expect to have greater flexibility in where, when and how they work. And they will expect meaning from their work, a connection between their day to day work and a higher sense of purpose. They will expect a culture in which innovation flourishes, where their ideas will be heard and, more importantly, come to life. They will expect authentic leadership and two-way dialogue. And they will expect that our behaviours and decision making are consistent with our stated values and purpose.

We continue to break new ground in the breadth and depth of work that we are able to carry out, and our client base continues to grow impressively. Businesses want advice on how to translate strategy into action across the full scope of their geographies, businesses, and functions. They want strategic knowledge, along with

Do you have any questions for Kevin?

Email [email protected] him on twitter @Kevin_Valenzia

PwC6

Introduction

industry acumen, implementation know-how, and insights built on big data and analytics. They demand higher service levels. And they want to reduce complexity by working with one trusted, experienced, and accountable business advisor. This is what makes our positioning unique.

Our goal is to remain the leading professional services firm in Malta. Given the nature of the changes that are occurring around us, it is essential that we shape our firm to be best suited to achieve that purpose and meet our ambitious goals. We are already a purpose-led, market focused organisation, and clearly the premier firm in Malta – we have achieved that by doing what is right, and through technical ability, leadership, and personal responsibility. We have also achieved that by being Malta’s leading technology-enabled professional services firm. Through our membership of the PwC network, we have access to

technologies, knowledge management tools and external specialists that are embedded into our service offerings, and which enable us to provide deeper, and more distinctive insights to our clients.

My sincere thanks goes to our clients and to our people, and all who have contributed to make PwC Malta what it is today.

Kevin ValenziaTerritory Senior Partner

March 2016

02Serving our clients

Statutory audit work carried out by the firm (including audit work performed by our staff participating in statutory audits overseas), grew by 30% to €14.4m in 2015.

We reported in 2014 that staffing constraints were hindering growth in our Assurance practice. An intensive recruitment and training drive was made in the latter half of 2014 to address this limitation.

Moreover, in 2014, a substantial team from our financial services assurance practice had participated in the asset quality review (AQR) work on local banks, an exercise that had occupied over 400 man weeks of the firm’s overall resources.

Our Assurance practice could in 2015 operate without the constraints noted above, permitting it to focus on new audit mandates secured in the course of 2014 and 2015.

On the local client side, these included significant clients such as HSBC, Vodafone and the IHI group (which will impact our audit practice in the main in 2016). These wins meant that at 31 December 2015 the firm audited 50% of the equities listed on the Malta Stock Exchange, both by number and value.

Similarly important wins were secured in the private sector, and in the range of international businesses choosing Malta as a base from which to operate.

The growth in the firm’s resource capability meant that it could better exploit opportunities for overseas work within the PwC global network. The extent of PwC Malta staff participating in statutory audits overseas amounted to 440 man weeks, representing a 64% increase over 2014. Such assignments have a value going well beyond their direct economic gain, in that they expose our staff to a range of experiences that widen their professional horizons; although

Assurance

priority is always given, in deploying our resources, to meeting our local commitments. In the course of 2015 we nevertheless had staff participating in statutory audits in a number of cities such as Boston, Chicago, Minneapolis, New York, San Francisco, Seattle, Brussels, Limassol, Lisbon, Lugano, Luxembourg, Geneva, London , Milan and Zurich.

Both regulators and the global accountancy profession remain focused on helping finance and industry re-establish public trust. 2014 saw the enactment of material reforms within the EU audit market that will come into effect in the near future, further tightening the regulation of the profession. In this respect we face the same regulatory challenges that impact many of our clients, particularly in the financial services arena.

Ensuring that our assurance work lives up to client and societal expectations is a continual challenge for the firm. Enforcing a high standard of quality control over statutory audit work remains a priority, one that is dealt with extensively in a subsequent section of this annual report. It entails the consistent application of a single audit

methodology used by all PwC auditors worldwide; backed by consistent audit training, policies, and guidance applicable to all partners and staff.

Our methodology is driven by the IT based tools used in the conduct of statutory audits, centred around Aura. These tools, which are developed and continually enhanced by the PwC global network, are designed to ensure that our work is fully compliant with all relevant auditing standards; and to facilitate the execution, review and control of an audit.

Our use of technology in the conduct of an audit is also concerned with

knowledge management. Rather than have our assurance procedures depend solely on the quality and experience of our staff, we seek to bring to bear on each audit the know how and experience of the PwC firm as a whole, placing a wealth of relevant material at the disposal of our staff. This material assists members of the assurance team in better understanding trends, regulations and risks relevant to their client’s industry. It facilitates the planning of the audit, and the drafting of auditing procedures relevant to the client’s circumstances.

Split of 2015 fee income

48%statutory audit

32%tax

20%advisory


Assurance is the largest activity carried out by the firm, with a complement of 235 partners and staff, and accounting for 48% of the firm’s income in 2015. It remains a brand defining activity for PwC, one that most reflects society’s expectations from the firm

1. Client acceptance & independence PwC’s audit is built on a foundation of People, Approach, and Technology. This, together with our six step audit process, results in an audit that is robust, insightful and relevant.

2. Deep business understanding

3. Relevant risks

4. Sophisticated scoping

5. Robust testing

6. Meaningful conclusions

Smart People Smart Approach Smart Technology


Continual investment in technology2015 saw the launch of two new IT tools aimed at enhancing our client interaction and the scope of our audit testing.

Client Connect is a simple and secure web-based tool to exchange information between the audit team and the client. It is available on smartphones, tablets and PCs, allowing individuals to check progress on the go – anywhere, any time, and giving users a personalised dashboard with real-time visibility of audit status.

The pervasiveness of technology has led to growing volumes of data being available to our clients. This in turn provides us with a heightened ability to analyse this data both in the course of our statutory audits and to help clients solve important problems.

We are looking to embed data and analytics across all of our services. This year we launched our ground-breaking data auditing methodology, Halo, leveraging leading-edge technologies. Halo enables us to perform 100% transaction trends, identify high-risk transactions, and provide valuable insights that support the audit process.

Our data model sorts the target population into expected and unexpected transactions, on which the audit team would then perform target testing. This allows us to efficiently scan the entire target population, rather than restrict our tests to random samples. It eliminates unnecessary audit work over transactions that do not demonstrate any unexpected features and frees up time to focus on other transactions that are inherently higher risk.

Assurance

Assurance YesterdayUses periodic sampling, mostly manual.

Assurance todayData auditing analyses the whole data population using algorithms for calculations, matching, flows, correlation, conditions and hypotheses with verification executed on a real time basis.

The unexpected transactions can be broken down and analysed further, resulting in greater insight and a risk focused audit.

99% validated

1% unexpected

100% of the population tested for accuracy and occurence assured.

100% of population assured

Client Connect

With a total of 141 partners and staff, our tax services registered a growth in income of 15% in 2015, accounting for one third of the billings of the firm.

Our Tax unit assists clients both in routine tax compliance work and in tax planning, advising clients on a range of topics. As tax advisers, our role is to help our clients navigate through the complexity of the applicable rules and make informed decisions with respect to the tax risks they face.

Tax


as possible while grappling with tax laws not designed for today’s business activities.

The debate over whether companies pay their ‘fair share’ has seen multinational corporations criticised publicly for implementing tax structures allowable under current tax law.

The increased scrutiny of multinationals’ international tax policies has led the Organisation for Economic Co-operation and Development (OECD) to tackle the issue of tax base erosion and profit shifting (BEPS).

The OECD’s Action Plan on BEPS began in 2013 with the aim of addressing perceived flaws in international tax rules, and proposals were published in 2015.

In their current form, these proposals would require a number of changes in Malta’s existing legislation. Having said this, the complex deliberations that must accompany a process of this sensitivity have much ground still to cover.

We are working closely with other tax professionals, with Government and

with the tax authorities to help ensure that Malta remains a competitive location for international business, operating in full compliance with applicable EU and other relevant legislation. The importance of the process to the country’s economy, and the constant focus it requires from all involved, cannot be underestimated.

In the meantime, the firm continues to invest with confidence in the future of this industry. In the course of 2015 the firm took over an additional 1875 sm of office space at ground floor level at its main office at Qormi, and this was in the main converted into a new floor for our tax unit.

This major office extension was completed in December, with tax staff settling in their new working environment upon returning from the Christmas shutdown.

In early 2016 work has commenced to convert the space vacated by the tax unit, in order to prepare a larger Advisory floor that would again enable the firm to house all its activities within one office.

The unit also provides company administration services, ranging from the maintenance of company secretarial records to the maintenance of accounting records. Our tax professionals moreover play an important supporting role in the audit of tax provisions and related data reflected in statutory financial statements.

The tax practice deals with a wide variety of local and international businesses. Malta continues to grow as a credibly regulated and reliable place from which to conduct business, apart from the safe, pleasant and friendly living environment it provides to expatriates working here.

In recent years we’ve seen the profile and significance of tax rise dramaticallyacross society as a whole, driven by several interrelated trends.

For governments, the recent global economic downturn has seen public finances come under heavy pressure in many parts of the world. This fiscal squeeze has led tax authorities to focus on increasing tax compliance. Meanwhile, companies continue to manage their tax costs to be as efficient

Source of total billings

50%clients based

in Malta

50%clients operating

overseas, including iGaming companies

Half the income of the firm is today derived from Malta’s continued development as a financial services centre. The beneficial impact of this activity permeates all sectors of the economy, and today represents perhaps the most important element, in conjunction with tourism, that is driving Malta’s economic growth.

New floor for our tax unit


Advisory Independence considerations

Excluding AQR work, the firm recorded a growth of 12% in advisory services income in 2015. The Advisory group had a partner and staff complement of 57 at 31 December 2015, focused exclusively on such work.

The heightened tempo of economic activity currently being experienced in the Maltese islands has led to increased deals activity, and 2015 was impacted by a constant influx of due diligence and business valuation assignments. The year was also impacted by a continued emphasis on financial services work, particularly in the banking sector, assisting clients in coping with regulatory changes.

Our Advisory business nevertheless remains characterised by the wide scope and variety of the assignments it handles. The size of our client base has enabled us to recruit and develop specialists across a varied spectrum of services in advisory (deals and consulting), and to bring these to bear on client issues in conjunction with our audit, accounting and tax capabilities.

Our client relationships are based on a mutual respect that recognises, inter alia, our reporting responsibilities; and the need to maintain our professional independence and objectivity.

A list of the public interest entities (PIE’s) currently audited by the firm is set out in the appendix to this publication. This list includes listed companies, banks and insurance companies, which are defined as PIE’s in terms of law, and for which additional independence requirements need to be met to safeguard the public interest.

The firm attaches importance to the maintenance of independence on audit engagements, and this requires care when providing non-audit services to audit clients. Certain services are deemed incompatible with an audit mandate, and are not provided to assurance clients. These include valuations that impact the statutory accounts that we are opining upon, book-keeping services to public interest entities and any assignments that require us to take executive decisions

Our strength often lies in the firm’s ability to combine these offerings to help meet a client’s particular needs. Many of our competitors in consulting cannot offer this combined approach.

– as against advising a client who is sufficiently familiar with the subject matter to make informed decisions independently of us.

In all cases, the final decision as to whether a non-audit service can be provided rests with the audit partner, who must also consider how any potential independence threats should be mitigated.

Further information on the safeguards applied by the firm on this topic is set out in the section ‘Committed to transparency’ of this annual report.

Our Advisory business remains characterised by the wide scope and variety of the assignments it handles

No one external client, audit or otherwise, accounted for more than 1.7% of the income of the firm during 2015

32%audit clients

Source of tax and advisory billings

68%non audit clients

Various vendor or buyer due diligence and valuation assignments

Assisting a client in a successful bid for a €200m project

Logistics company - migrating IT systems to the Cloud

National service provider -quality of service measurement

Assisting banks and insurance companies with regulatory issues

EU funds management training for Ministry of Education

Major bank - internal audit function quality assessment

4 Entertainment

2 Agriculture

2 Construction

5 Education

7 Arts / Culture / Antiques

7 Health

10 Others

15 Retail

52 Emerging technologies

The PwC €1 million Start up Fund, launched in mid-June 2013 is now approaching its third anniversary. In 2015, the firm has renewed again its commitment to dedicate €1 million worth of pro-bono services towards start-up businesses with an innovative business idea.

In this initiative, PwC Malta is collaborating with other key local institutions, the University of Malta, Times of Malta and Microsoft Malta.

We have to date received 104 applications. While these span across a number of industries, the majority are related to the ICT sector. Most applications are in the research development phase or have been in operation for less than one year.

The applications received are reviewed by a Selection Committee which meets on a regular basis. To date, 80 projects have been approved by the Selection Committee as deserving assistance and have been the recipients of pro-bono services from the firm on accounting, taxation and business administration.


During 2015, PwC's Academy continued to extend the firm's culture of life-long learning and to grow its footprint as a Higher Education Institution in Malta.

The Academy has trained and developed an increasingly large number of professionals working within the public and private sector, in a number of disciplines. During 2015, apart from providing a number of short sessions to support the CPE requirements for warrant holders, PwC's Academy expanded its repertoire of training offerings to meet the needs of different industries in a number of areas related to accounting, audit, tax and finance, business and management, information technology and soft skills.

Some of the larger training projects undertaken by the Academy during 2015 included:

Award in EU Funds Management at MQF Level 5

A practical certification in Accounting and Office Administration Award at MQF Level 4

Data Protection Certification award at MQF Level 5 for Transport Malta

Financial Management & Budgeting training programmes as part of a

public tender issued by the Centre for Development Research and Training

Information technology training programmes as part of a public tender issued by the Centre for Development Research and Training.

PwC's Academy continues to be a Microsoft Learning Partner offering IT development and IT infrastructure training programmes. During 2015, the IT arm of the Academy also worked towards bringing the finance and IT aspects of business closer together through end user training. This will continue in 2016, when the Academy's IT pillar will be focusing on Cloud technology training, data analytics for different industry sectors and CRM training programmes.

As a preferred learning partner of our clients, we are continuously investing in growing our service offerings and resources. During Q2 of 2016, the Academy floor space will be extended to include additional state-of-the art training rooms and facilities enabling our clients to continue developing professionally in an environment that is conducive to learning. PwC's Academy

will also be implementing a Learning Management System (LMS) which will support the launch of a new digital training service offering.

The firm also engages with clients through regular publications on relevant issues. During 2015, a total of 59 client newsalerts and newsletters were issued by the firm, covering accounting, income tax, VAT, regulatory and industry specific topics.

Engaging with clients - PwC’s Academy

Applications recieved (sorted by industry) as at 18 March 2016

Promoting entrepreneurship and innovation

(the Act). Kevin Valenzia is the firm’s Compliance Principal in terms of the Act.

The number of partners of the firm who are Certified Public Accountants holding a practicing certificate in auditing, and the percentage of voting rights in the firm held by such partners and directors, are materially in excess of the thresholds established in article 10.4 of the Act.

Legal structure and ownership PricewaterhouseCoopers (PwC) is a civil partnership governed by Maltese law. The firm is owned by a group of 18 members, commonly referred to as partners, all of whom are professionals active within the practice.

The firm is registered as an audit firm with the Accountancy Board in terms of the Accountancy Profession Act

Governance and management structureThe governing body of the firm is the partner group, which meets at regular intervals to discuss strategy and to monitor the firm’s progress.

The firm is organised in three service lines, namely Assurance, Tax (including Company Administration), and Advisory.

Service line issues are delegated to subsidiary boards comprised of all the partners in the respective service line, together with the territory senior partner.

Dedicated boards are also devoted to managing human resources, business development, training, risk management and technology. These boards have a role across all lines of service.

This structure ensures that all partners are actively involved in the management of the firm, while certain partners carry specific executive roles, reporting to the partner group as a whole.

The structure of our firm

2015 Review Malta Firm 19

The PwC Annual Conference 2015

03Committed to transparency

Network arrangements and network firmsPwC is a global network of separate firms, operating locally in countries around the world.

PwC firms are members of PricewaterhouseCoopers International Limited and have the right to use the PricewaterhouseCoopers name.

As members of the PwC network, PwC firms share knowledge, skills and resources. This membership facilitates PwC firms to work together to provide high-quality services on a global scale to international and local clients, while retaining the advantages of being local businesses – including being knowledgeable about local laws, regulations, standards and practices.

We acknowledge the impact our business has on our stakeholders, the capital market and the community in which we live and work. It is also important to us and all our stakeholders that we build confidence in PwC by emphasising the principle of transparency.

PricewaterhouseCoopers International LimitedPricewaterhouseCoopers International Limited (PwCIL) is a UK private company limited by guarantee. PwCIL acts as a coordinating entity for PwC firms and does not practise accountancy or provide services to clients.

PwCIL works to develop and implement policies and initiatives to create a common and coordinated approach for PwC firms in key areas such as strategy, brand, and risk and quality.

PwC firms use the PwC name and draw on the resources and methodologies of the PwC network. In return, member firms are required to comply with common policies and the standards of the PwC network.

Our firm as part of a global network


Standards and internal quality control systemsEvery PwC firm is responsible for its own risk and quality performance and, where necessary, for driving improvements. Each PwC firm is also exclusively responsible for the delivery of services to its clients.

To support transparency and consistency, each PwC firm’s Territory Senior Partner signs an annual

confirmation of compliance with certain standards. These cover a range of areas, including independence, ethics and business conduct, Assurance, Advisory and Tax risk management, governance, anti-bribery and data protection and privacy.

These confirmations are reviewed by others who are independent from the PwC firm in question. Member firms are required to develop an action plan to

address specific matters where they are not in compliance. The action plans are reviewed and their execution monitored.

There are some common principles and processes to guide PwC firms in applying the network standards. Major elements include:

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

Sustainable cultureTo promote continuing business success, PwC member firms nurture a culture that supports and encourages PwC people to behave appropriately and ethically, especially when they have to make tough decisions.PwC people have ready access to a wide array of support networks within their respective firms –both formal and informal – and technical specialists to help them reach appropriate solutions.

Quality in what we do

Policies and processesEach PwC firm has its own policies, based on the common standards and policies of the PwC network. PwC firms also have access to common methodologies, technologies and supporting materials for many services.

These methodologies, technologies and content are designed to help a member firm’s partners and staff perform their work more consistently, and support their compliance with the way PwC does business.

Quality reviewsEach PwC member firm is responsible for monitoring the effectiveness of its own quality control systems. This includes performing a self-assessment of its systems and procedures and carrying out, or arranging to have carried out on its behalf, an independent review.

In addition, the network monitors PwC member firms’ compliance with network quality expectations and risk and quality standards and policies. This includesmonitoring not only whether each PwC firm conducts an objective quality control review programme, but also considers a member firm’s processes to identify and respond to significant risks.

In accordance with applicable regulatory requirements, each member firm may also be reviewed periodically by national and international regulators and/or professional bodies. In this respect, PwC Malta is subject to periodic review by the QA unit of the Accountancy Board, usually on a triannual basis. The most recent QAU review of the firm was completed in early 2014.

For Assurance work, the quality review programme is based on relevant professional standards relating to quality controls including International Standard on Quality Control 1: ‘Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements’ (‘ISQC1’).

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

quality management systems are appropriately designed, are operating effectively and comply with applicable network standards and policies

engagements selected for review were performed in compliance with applicable professional standards and PwC Audit requirements, and

significant risks are identified and managed appropriately.

A member firm’s assurance quality review programme is monitored, as is the status and effectiveness of any quality improvement plans a PwC firm puts in place.


As auditors of financial statements and providers of other types of professional services, PwC firms and their partners and staff are expected to comply with the fundamental principles of objectivity, integrity and professional behaviour.

In relation to assurance clients, independence underpins these requirements. Compliance with these principles is fundamental to serving the capital markets and our clients.

PwC has implemented policies and processes based on ISQC1, issued by the International Accounting and Auditing Standards Board, the Code of Ethics for professional accountants issued by the International Ethics Standards Board for Accountants (IESBA), and, where applicable, the rules and standards issued by relevant regulatory authorities. These policies and processes are designed to help PwC comply with relevant professional and regulatory standards of independence that apply to the provision of assurance services. Where local standards go beyond the international requirements, compliance with those standards is also required.

Each PwC firm has a designated partner with appropriate seniority and standing, typically supported by other specialists, who is responsible for managing the independence process and providing support to the business. The designated partner in Malta is Lucienne Pace Ross.

Independence requirementsPwC maintains a system identifying entities which are subject to independence requirements for PwC firms and their partners and practice staff. This drives many of our controls and processes and assists in determining the independence status of entities before a PwC firm enters into a new non-audit engagement or business relationship.

Firm and personal relationshipsIndependence policies apply to the interests and relationships of each PwC firm and to partners, as well as to practice staff involved in providing services to an assurance client or its related entities.

Managing independence

Archbishop Charles Scicluna at the PwC Annual Conference 2015

Bjorn Formosa at the PwC Annual Conference 2015

Quality in what we do


Controls over non-audit servicesAll PwC firms are required to use a network system to obtain authorisation from the group audit engagement partner regarding the provision of non-audit services to entities that are subject to independence restrictions, as included on the PwC Independence List, or to a related entity thereof.

To assist this process and promote understanding of the independence requirements that apply, PwC has developed a comprehensive set of policy and guidance documents which provide implementation guidance on the application of the policy to the provision of non-audit services to audit clients. These statements are based on the provisions in the ‘IESBA Code of Ethics’, which forms the basis for the PwC Independence Policy, but also address the requirements of relevant regulatory authorities.

Consultation and trainingConsultation by engagement teams on independence issues is embedded in the PwC culture. Teams are encouraged to consult with independence experts when a matter is complex, where the facts and circumstances of a situation suggest more than a single conclusion may exist, or in the case of doubt.

Our processes are supported by training of partners and staff. All PwC firms are required to develop and implement a training plan to provide partners and practice staff with annual or ongoing training relating to independence appropriate to their position and role.

Quality management systemsEach PwC firm is responsible for monitoring the effectiveness of its quality control systems. This includes performing independent reviews both at the management level of the member firm’s systems and procedures, and sample reviews at the individual engagement level, including in respect of non-audit services.

These reviews include a focus on independence and application of required policy and processes.

PwC monitors each member firm’s compliance with professional standards and policies, including those relating to independence, through visits to PwC firms. The monitoring program is based on professional standards relating to quality control, including ISQC1 and other applicable professional standards.


The independence requirements are set out in the PwC Independence policy. Key controls include:

• Monitoring of investments• Annual independence compliance

confirmation – every partner and practice staff member is required to complete an annual confirmation of their compliance with all aspects of the independence policy, including personal independence

Personal Independence Compliance testing – all PwC firms undertake Personal Independence Compliance Testing as a means of monitoring compliance with personal independence policies

Approval of joint business relationships – before a PwC firm enters into a new joint business relationship, it must evaluate for compliance with the PwC Independence policy and applicable external independence requirements. All PwC firms are required to implement a policy regarding the periodic review of such joint business or financial relationships to ensure their ongoing permissibility.

BreachesAny breach of independence requirements in the PwC Independence Policy and/or external regulations is evaluated. PwC firms follow the relevant procedural steps set out in the IESBA Code of Ethics which involves discussion with those charged with governance of the client regarding the nature of the breach, the impact on objectivity and whether steps can be taken to address the consequences of the breach.

PwC firms also follow supplemental local requirements relating to the reporting of breaches.


With some 91,500 Assurance people across the firms in the PwC network, the task of providing continuing education throughout each professional’s career is a major undertaking. Mechanisms are in place at the network level to support PwC firms in achieving this goal.

The PwC approach to Assurance learning and education (L&E) is to provide access to a formal curriculum of technical courses, while also providing support for PwC firms’ L&E leadership and fostering personal accountability for continuing education.

PwC firms are committed to delivering quality audits around the world. To maximise consistency in the network, the formal curriculum provides access to courses covering the PwC audit approach and tools, updates on auditing standards and their implications, and areas of audit risk and engagement quality.

This formal learning is delivered using blended learning, which includes

Continuing education

AcquisitionsPwC has established protocols and processes that are followed for any acquisition a PwC firm makes.

Partner remunerationAn essential element of PwC’s ethos is a set of common principles for remuneration of partners in PwC firms, based on partner performance and quality of work.

The underlying premise of the partner income philosophy is to encourage, recognise and reward partners, both as individuals and as members of teams. Reward is based on their contribution to their respective firms and, where relevant, to the wider network. Quality is the most important measure in assessing a partner’s contribution.

MonitoringRegular reports, based on documented monitoring procedures, are submitted to the partner group by the partners responsible for risk management and for monitoring quality in terms of ISQC1, to ensure the proper operation of the procedures described above.

The review of our systems of internal control has not identified any failings or weaknesses that have been determined to be significant.

remote access and classroom learning. This learning supports PwC’s focus on audit quality and provides practitioners with the opportunity to sharpen their professional judgement, scepticism, technical and professional skills.

PwC firms provide informal training in the way of guidance, tools, templates, videos, workshops and forums for staff to share their experiences in order to support them on the job.

This informal training is supplemented with learning from others, whether by receiving and discussing feedback, or by shadowing, observing and/or working with others. Further information on this topic is included in the next section of this review.


The firm attaches great importance to confidentiality and to the management of potential conflicts of interest.

While very active in the corporate finance arena, the firm does not act as the originator of potential transactions, as this would entail having to choose between clients as to where to direct a business opportunity.

Conflicts of interest may arise on non-audit services, in particular when clients request assistance on purchase or sale transactions that may involve other clients in a counter party or competitor capacity.

Generally speaking, depending on the nature of the bid and the role requested from us, our firm prefers to act for only one party in a competitive bidding situation. When approached by more than one company to assist on a particular transaction, and after ensuring, where applicable, that we are able to assist on the transaction concerned within the constraints of audit independence rules, we act for the party that first approaches the firm.

In certain cases, it may be considered appropriate to assist more than one bidder. In such instances, all the clients concerned are advised that we would not be acting on an exclusive arrangement. The work concerned would in these cases be handled by teams working in a strictly segregated fashion. Such situations typically arise when the work requested from us is relatively limited, e.g., reporting on the proper technical preparation of the financial projections supporting a bid.

Managing potential conflicts of interest

04Creating value for our people

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105 new recruits in 2015

University graduatesOur CareerDeal provides students with a training programme which moves in parallel with their university studies, as well as work experience at different times of the year. The firm currently has 86 students on CareerDeal. The programme is managed by our dedicated human resources group. It is also supported by all our managers, who play a key role across all the activities of the firm.

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35

ACA/ACCA/other students35 staff members joined the firm after completing their ACA or ACCA qualifications, or as students who work with the firm on a full-time basis. A significant number of these staff already hold a tertiary level first degree. Other students opt to study for an ACA/ACCA qualification on a full-time basis after they obtain their ‘A’ Levels, or after they complete a first degree at University. For both streams, PwC’s Academy ACA/ACCA study programmes aim to accelerate the learning curve of students and offer a fast track route into the profession.

Experienced hiresThe recruitment of experienced professionals includes staff who have worked with other professional firms overseas. Today, the firm has a total of 56 overseas staff within its ranks, hailing from 14 countries, including Cyprus, Germany, Italy, the Philippines, Russia and Ukraine. Recruitment is not limited to accountancy graduates and students. Our advisory and tax practices are increasingly reliant on the recruitment of non-accountants at all levels of the firm. Moreover, a number of our accountants in these two service lines hold post-graduate degrees in other disciplines such as taxation, financial services, IT and economics. Support staff

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7

23,082 hoursstaff attendance at technical training courses during 2015

38,626 hoursstaff attendance at personal development and firm’s affairs training courses during 2015

The ongoing development of staff once they join the firm centres around a Personal Development and Coaching system, supported by a comprehensive and fully integrated training programme across all lines of service.

The system entails: Assigning a development coach to

all staff within the firm Setting and agreeing personal

development objectives aligned with the firm’s goals

Providing feedback after the performance of material assignments and at periodic intervals. This process entails formal manager and partner meetings with all staff, and serves as a determining factor in an individual’s career progression

Attendance to a series of courses throughout one’s career with the firm. Courses may be technical in their content, or may deal with the development of personal skills, the use of IT and the values of the firm.

Partners and staff working on a full-time basis with the firm attended a total of 61,708 hours of training in 2015, up from 47,500 hours in 2014.

This training ensures that our people are alert to regulatory changes, reinforces their awareness of key compliance matters and supports the wide range of industry expertise and specialist skills available across the firm.

Training courses are progressive in their design, with each year’s courses building on the earlier training given to an individual.

Courses are generally held in our training centre in Qormi, which is being expanded to include eight lecture theatres which can be utilised concurrently. Attendance at overseas courses and gatherings is however a regular event, particularly on specialist topics.

Developing our staff


Full-time CareerDeal and ACCA students are excluded from the statistics

Staff complement at 31 December 2015

Accountants 266

Other professional staff 65

Staff pursuing professional studies 72

Support staff 30

Full-time staff complement 433

CareerDeal students 86

ACCA full-time study programme students

55

Extended staff complement 574

Over 45 years old

30 years old or less

43%

25%

31 to 45 years old

17%10%

WOMEN

MEN

62% of our staff are female

The average age of our staff is

29 years

2%

3%

The commitment of our partners and staff was demonstrated during the year in the results attained by the firm, both in terms of numbers and in terms of safeguarding reputation and quality. It was visible as well in the results of our annual people survey.

Commitment to the firm

Our Social Activities group organised a total of 44 social and/or sporting events for partners and staff in the course of 2015

2015 Review Malta Firm 33

I am satisfied that PwC is responding appropriately to address the impact of our business activities on the enviroment 83%

PwC clearly communicates its expectations for ethical behaviour

PwC is a thought leader in my marketplace

I am proud to work at PwC

The people I work with help each other to do their job better

The leaders I work with are committed to providing high quality services to external clients

89%

90%

92%

93%

95%

Contributing to the PwC network

Our people form part of the PwC global network, to which they contribute in a variety of manners: We participate in various specialist courses held overseas, both by sending participants and by making lecturers available We attend and participate at all levels in various network meetings and gatherings that concern our operations. This entails

regular overseas travelling attending various leadership and service line meetings; and a number of technical, training and IT services meetings

We host and help organise network courses and other meetings held in Malta Partners and managers from the firm participate annually in quality control reviews of other member firms We participate in cross border panels that are convened on a regular basis to assess and approve large proposals from a risk

management perspective; or to form an opinion on complex technical issues We contribute, both financially and in terms of making time available, in the development of the network’s methodologies.

The firm’s annual PwC Experience prize was in 2015 awarded to Louisa Serge.

The PwC Experience programme seeks to optimise the manner in which our people interact both with clients and with their peers. PwC Experience is looking to differentiate the client’s experience in working with our firm.

We recognise our obligation to contribute to the wider community, and to our profession; to reducing our footprint on the environment; to making the office a better place to work in for our people; and to assist clients in integrating corporate responsibility goals within their business strategy, through our sustainibility services.

We continue to support Din l-Art Helwa through our ongoing partnership. The firm helps to fund the restoration of painting and frescoes at Our Lady of Victory Church – the first church and building completed in Valletta after the Great Siege. The firm’s commitment to this restoration process, which commenced in 2012, extends for a period of ten years.

Our staff also provided voluntary work to Din l-Art Helwa, such as gardening, photography, back office and administration work, maintenance work at various sites, the organisation of events and fund-raising. During the summer months, our 2nd year CareerDeal students were each assigned for 35 hours to assist at Din l-Art Helwa sites.

The firm regularly supports relevant professional bodies and the University, through the provision of partners and managers who participate on the council of the Malta Institute of Accountants, the Institute of Financial Services Practitioners and the Accountancy Board, or as lecturers and tutors at University.

Corporate responsibility


*excluding time dedicated to the PwC €1 million Start up Fund

Time value on activities related to the profession

Pro-bono work on various charities, and community organisations*

Cash donations to various worthy causes

2015

2014

€112,500

€97,500

2015

2014

€128,000

€105,000

2015€44,500

2014€41,500

Tax contributed in terms of income and employment taxes and VAT

€9.7 million

We take an active part in contributing to sustainable development, both in our operations and by raising awareness and improving the understanding of environmental issues with our clients. Our Sustainability Advisory Services support our clients in addressing environmental and social challenges, and in communicating better with their key stakeholders.

The way in which we work also has an impact on the environment, and we consistently undertake and discuss improvements to minimise this impact.

We track our performance in terms of environmental KPIs on a monthly basis. A team set up for this purpose, internally referred to as the Sustainability Group, meets on a quarterly basis to consider results and actions that may be appropriate. The results of its activities are disseminated within the firm.

In 2015 an additional 1875 sq mts were added to our overall office space. The project team comprised of a number of professionals ensuring that all attributes of design, development and energy saving solutions are covered. Energy solutions implemented within our

offices ensure improved distribution and flexibility in controlling air conditioning units to achieve better temperature control, particularly in open areas and taking into consideration the proximity to external windows; insulation within the roof lightweight structure which helps to reduce ingress of heat; use of glass with thermal insulation properties on all external apertures and shading devices on all south and west facing apertures to reduce air conditioning load; installation of energy saving lights throughout most of our premises together with motion sensors that turn off lights when floors and rooms are not in use; sensors also control electricity intensity depending on the availability of external light; and the use of collected rainwater to supply all our restrooms, amongst other measures.

We aim to measure our carbon footprint on a regular basis. The operational boundary of our footprint calculation looks primarily at the use of water, electricity and paper together with travel (including travelling to work and to meetings, locally and overseas) and laptops as our main consumables.

Reducing our environmental impact

Many of the firm’s staff attained personal achievements in the course of 2015, both in professional activities, their family life and in a variety of other areas, such as sports.

Lara Mintoff obtained a 'Distinction' in her Masters of Accountancy degree from the University of Malta. Twelve of our university students made it to the dean’s list of awards.

Six of our ACA/ACCA students – Steve Bilocca, Byron Dalli, Louise Galea (in two consecutive sessions), Malcolm Gatt Baldacchino, Andrew Tabone and Glorianne Xuereb – attained high local and global placings in their examinations.

Many of our partners and staff are active in the arts, in sports and in other activities. They included Vladyslava Kravchenko, who was selected by the EPC to serve as the Youth Ambassador for Para Sport in Europe. She also participated in the Swimming World Championship organised by the IPC in Glasgow. Mark Tabone, Thomas Najner and Andrew Zarb Cousin placed 4th in the Malta Triathlon and Bettina Mifsud, an associate in our Assurance practice, has successfully scaled the Kilimanjaro – at 5,895m the world’s highest free standing mountain.

Recognising achievement


Louise Galea, Glorianne Xuereb, Byron Dalli, Andrew Tabone & Steve Bilocca

Mark Tabone, Thomas Najner and Andrew Zarb Cousin Bettina Mifsud

Our congratulations go to all these and to many others within the firm whose achievements cannot all be recorded in this review

2%decrease in electricity consumption per staff member (2015 compared to 2014)

2%decrease in paper use per staff member (2015 compared to 2014)

The Accountancy Profession Act defines a Public Interest Entity (PIE) as an entity whose transferable securities are admitted to trading on a regulated market of any EU Member State within the meaning of point 14 of Article 4(1) of Directive 2004/39/EC, a credit institution as defined in point 1 of Article 1 of Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions, or an insurance undertaking within the meaning of Article 2(1) of Directive 91/674/EEC. The PIEs currently audited by the firm include:

Insurance CompaniesAAK Insurance Malta LtdArnold Clark Insurance (Malta) LtdAtlas Insurance PCC LtdBastion Insurance Company LtdBuilding Block Insurance (Malta) PCC LtdCafina Assurances LtdDarag Malta Insurance and Reinsurance PCC Ltd Elmo Insurance LtdErgon Insurance LtdFalcon Insurance LtdGasanMamo Insurance LtdHSBC Life Assurance (Malta) LtdMulti Risk Benefits LtdMulti Risk Indemnity Company LtdOne Insurance LtdOney Insurance (PCC) LtdOney Life (PCC) LtdPractice Plan Insurance LtdRhenas Insurance LtdSN SecureCorp Insurance Malta LtdTaurus Insurance LtdWerla Insurance Ltd

Listed BondsCentral Business Centres plcCorinthia Finance plcGasan Finance Company plcMediterranean Bank plcMizzi Organisation Finance plcPendergardens Development plcTumas Investments plcUnited Finance plc

Listed Asset Backed SecuritiesCommonwealth Securitisations plcDelta1 Securities plcETI Securities plc

Listed FundsAmalgamated Investments Sicav plcGlobal Funds Sicav plcHSBC Malta Funds Sicav plcHSBC No-Load Funds Sicav plcRohfund Global Sicav plcThe Timeless Precious Metal Fund Sicav plcThe Timeless Uranium Fund Sicav plcVilhena Funds Sicav plc

Listed equityGO plcHomechoice International plcHSBC Bank Malta plcInternational Hotel Investments plcLombard Bank Malta plcMalita Investments plcMaltaPost plcMalta Properties Company plcMidi plcPlaza Centres plcSimonds Farsons Cisk plcTigne Mall plcUnibet Group plc

Credit InstitutionsBanif Bank (Malta) plcCredorax Bank LtdCentral Bank of Malta CommBank Europe Ltd Ferratum Bank plcIIG Bank (Malta) Ltd

Public Interest Entities currently audited by the firm

05Appendices2015 Review Malta Firm 39

The partners

Kevin ValenziaTerritory Senior Partner responsible for the overall management of the firmTax partner

Stefan BonelloAssurance partner

Bernard AttardTax partner

Joseph CamilleriAssurance partner, asset managementHead of Business Development

Fabio AxisaAssurance partner, banking and capital marketsAccounting technical leader, Regulatory affairs partner

David FerryTax partnerVAT specialist


Simon FlynnAssurance partnerHead of Assurance

Neville GattTax partnerHead of Tax

Chris GaleaTax partner, company administration

Joseph MuscatAdvisory partner, deals Head of Advisory

Michel GanadoAdvisory partner, consulting

Lucienne Pace RossAssurance partner, asset managementHead of Quality Assurance and Risk Management

Lisa PullicinoHuman Capital partner PwC’s Academy leader

Ryan SciberrasAdvisory partner, deals and valuations

Mirko RapaTax partner

Romina SolerAssurance partner, insurance, pensions and iGaming

George SammutAdvisory partner, consultingTechnology services leader

David ValenziaAssurance partner Finance partnerHead of Human Capital

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The partners

Primary photography: Mark Cassar Additional photography taken by members of the staff of PwC MaltaPrinting: Printex Limited

© 2016 PricewaterhouseCoopers. PwC refers to the Malta member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

All persons appearing in this review are partners, managers or members of staff of PwC in 2015.

Printed in Malta on FSC certified paper.

www.pwc.com/mt

To view the web version of this report visitwww.pwc.com/mt/2015reviewmalta

2015 review malta firm - pwc · firms in 157 countries with ... they will expect authentic...

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