Transparency Statement 2016

BDO Romania

Introduction

(1) Member States shall ensure that statutory auditors and audit firms that carry out statutory audit(s) of public-interest entities publish on their websites in accordance with OUG 90/2008, Chapter 10, Art 46, within three months of the end of each financial year, annual transparency reports that include at least the following:

A) A description of the legal structure and ownership;

B) Where the audit firm belongs to a network, a description of the network and the legal and structural arrangements in the network;

C) A description of the governance structure of the audit firm;

D) A description of the internal quality control system of the audit firm and a statement by the administrative or management body of the effectiveness of its functioning;

E) An indication of when the last quality control referred to in Article 31 took place;

F) A list of public interest entities for which the audit firm has carried out statutory audits during the preceding financial year;

G) A statement concerning the audit firm's independence practices which also confirms that an internal review of independence compliance has been conducted;

H) A statement on the policy followed by the audit firm concerning the continuing education of statutory auditors referred to in Article 11

I) Financial information showing the importance of the audit firm, such as the total turnover divided into fees from the statutory audit of annual and consolidated accounts, and fees charged for other assurance services, tax, advisory services and other non-audit services

J) Information concerning the basis for the partners' remuneration.

(2) The transparency report shall be signed by the statutory auditor or audit firm, as the case may be. 
All information provided in this Statement relates to the 31st of December 2016.

A) Description of the legal structure and ownership

BDO Audit SRL, BDO Auditors & Accountants SRL and BDO Auditors & Business Advisors SRL are privately owned Romanian limited liability companies. The associates are individuals who comply with the provisions concerning the competency and professional qualifications required by the Romanian Chamber of Financial Auditors (CAFR). 

Besides BDO Audit, BDO Auditors & Accountants and BDO Auditors & Business Advisors, we operate in Romania through 6 other companies, namely: BDO Business Advisory, BDO Business Restructuring, BDO Outsourcing Services, BDO Support Services, BDO Tax and Tudor, Andrei and Associates, associated law firm, member of the National Association of the Romanian Bars (UNBR).

At the 31st of December 2016 there were 8 associates in BDO Audit, 2 in BDO Auditors & Accountants and 2 in BDO Auditors & Business Advisors:

BDO Audit

Associate

%

Nicu Cretu

27.5

Silviu Manolescu

26.7

BDO Support Services

10

Cristian Iliescu

7.7

George Stancu

7.7

Mircea Tudor

7.7

Vasile Bulata

7.7

Alina Constandache

5

BDO Auditors & Accountants

Associate

%

BDO Audit

60

Dan Apostol

40

BDO Auditors & Business Advisors

Associate

%

BDO Audit

60

Dan Stirbu

40

We conduct our business from 4 offices: three headquartered in Romania (in Bucharest, Cluj, Timisoara and Iasi) and one located in Moldova, Chisinau.

B) Where the audit firm belongs to a network, a description of the network and the legal and structural arrangements in the network

BDO Audit SRL, BDO Auditors & Accountants and BDO Auditors & Business Advisors are Romanian Member Firms of the BDO network. BDO is the world's fifth largest accountancy network, with annual revenues of over $7.6 billion. Its member firms have over 67,000 professionals operating through 1,400 offices across 158 countries. 

Each BDO Member Firm is a member of BDO International Limited, a UK company limited by guarantee, either as a voting member (one per country) or non-voting member.

The BDO network is governed by the Council, the Policy Board and the Executive (or Global Leadership Team) of BDO International Limited.

The Council comprises one representative from each voting member and includes the members of BDO International Limited in general meeting. The Council approves budgets, appoints the Policy Board and approves any changes in the Articles and Regulations of BDO International Limited.

The Policy Board, which is the Board of Directors of BDO International Limited, currently comprises a representative of the network's five largest member firms, whose appointment, each for a three year term, is approved by the Council. The Policy Board sets policies and priorities for the network and oversees the work of the Global Leadership Team. The Policy Board meets at least four times a year and more if required. The Global Leadership Team is tasked with coordinating the activities of the network on a day-to-day basis. It is headed by the CEO and comprises the Global Heads of Audit & Accounting, Tax, People, Client Service, Network Development and the International Secretary.

Service provision within the BDO network is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Brussels. BDO International Limited and Brussels Worldwide Services BVBA do not provide any professional services to clients. This is the sole preserve of the BDO Member Firms.

Each of BDO International Limited, Brussels Worldwide Services BVBA and the member firms of the BDO network is a separate legal entity and has no liability for another such entity's acts or omissions. Nothing in the arrangements or rules of BDO shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO network.

C) Description of the governance structure of the audit firm

The audit & assurance stream is an integrated part of the firm and is subject to the same governance structure as all other business streams as follows:

Management Executive Team

The Management Executive team comprises of the Managing Partner and the Senior Partners who are also business stream leaders for Audit. It meets monthly, and more frequently if required.

The Management Executive team sets business strategy and ensures its implementation. The Managing Partner and each team member also have specific areas of responsibility for operational management.

The Management Executive team currently reports twice a year to partners, summarizing the development of the business and setting out key objectives for the following six months. 

Risk Management 

The Risk Management Partner has particular responsibility to ensure that the quality, objectivity and independence of client service is maintained through well managed client acceptance and engagement procedures, that guidance is updated regularly and published on the conduct of all professional services, and that rigorous processes are in place to identify and resolve conflicts of interest.

All partners and staff are required to submit annual confirmations of regulatory compliance which include statements of independence.

D) Description of the internal quality control system of the audit firm and a statement by the administrative or management body of the effectiveness of its functioning

We have established a system of internal quality that provides reasonable assurance that professional personnel at all organizational levels maintain independence in both fact and appearance according to professional standards, and perform their professional responsibilities with integrity and objectivity.

The Firm's system of internal quality control can be split into the following elements:

  • leadership responsibilities for quality within the firm
  • firm technical manuals
  • acceptance and continuance of client relationships and specific engagements
  • human resources
  • engagement performance
  • monitoring

1) Leadership responsibilities for quality within the firm

Our primary goal is to provide the highest quality of service in accordance with the standards of auditing and public accounting profession. To accomplish this, we have developed policies and procedures which ensure that the work carried out is of uniformly high quality.
Quality control in our firm is dependent upon an organizational structure which is inherently sound and which clearly defines the responsibilities of the various levels of management.

Along with the firm's management, the Partner responsible for Risk Management instills professional and ethical values in the firm by:

  • developing assurance guidance, and communicating guidance to the Firm's professionals,
  • maintaining the Firm's assurance practice at the highest standards prevailing in the profession,
  • monitoring of independence,
  • supervising the Firm's auditing work,
  • evaluating the Firm's quality control policies and procedures, and
  • overseeing the Firm's continuing professional education programs.

Each Audit Partner is primarily responsible for coordinating the professional performance of the audit teams and achieving standards that measure up to the Firm's professional objectives. 

Senior Audit Managers and Audit Managers are responsible for the delegation, supervision and review of audit work done by the professional staff.

2) Firm technical manuals

The BDO Independence Policies and Procedures Manual can be accessed online by each professional, on the Firm's internal network.
The Firm's manuals and other guidance materials are available to professional staff according to their areas of specialty and responsibility, and are available on the Firm's internal network. These manuals provide uniformity of procedural and technical matters within the Firm.

3) Acceptance and continuance of client relationships and specific engagements

Before accepting a new audit client, our Firm ensures that there are no independence or other ethical problems likely to cause conflict of interest according to the ethical code. Furthermore, we ensure that we have been appointed in a proper and legal manner.

The acceptance procedures that our firm carries out in order to be appointed as auditors for a new client or to continue the existing appointments are comprised in the following steps:

  • considering information regarding the integrity of company management, in order to see whether the prospective client is of good character;
  • evaluation of litigation matters or publicity in respect of the potential client;
  • gathering of relevant information from the former auditor;
  • evaluation of the information concerning the client: client's financing, recent and long-term performance, internal control, accounting policies developed, competence and honesty of management or related party or unusual transactions;
  • tailoring and performance of specific audit test procedures in order to minimize the risk;
  • assessment of our ability to serve the client;
  • periodic reevaluation of clients for retention.

4) Human Resources

Recruitment

Policies and procedures for hiring are established to provide reasonable assurance that those employed possess the appropriate knowledge and skills to enable them to perform competently.

We hire mostly Junior Auditors, with no previous experience required, through our HR department. We choose our people based on a psychological assessment, IQ test, doubled by professional and foreign language tests. The future employee must be intelligent, motivated, flexible, honest, quick learner and team-oriented.

The Firm's personnel policies and procedures relevant to applicants and new employees are communicated to them upon joining the firm.

At least annually, our HR Director, together with the Managing Partner, reviews our hiring policies and procedures to determine if they are appropriate and are operating effectively. 

Performance Evaluation

The performance evaluation is the periodic assessment of specific characteristics that should be demonstrated by each individual in carrying out assigned duties and responsibilities. 

The most important factor taken into account when evaluating the personnel is the quality of the work performed.

Capabilities and competence

We are committed to developing and maintaining the highest possible standards of technical competence through our professional development program. Continuing Professional Development ("CPD") is the keystone of that effort. This commitment is carried out by attending courses emphasizing appropriate policies and procedures, as well as specialized technical knowledge.

Career development and promotion 

Policies and procedures for the advancement of personnel are established to provide reasonable assurance that the people selected will have the qualifications necessary to fulfill the responsibilities they will be called on to assume. In that regard, among other things, we review performance thoroughly through results and oral reports made by their superiors. Professionals are promoted to the next level only when they are prepared for the increased responsibilities that promotion entails.

From the moment an auditor has acquired enough experience in the job grade of manager, he or she may be eligible for promotion as a Partner. This may happen on the basis of a number of criteria, the most important of which will be: internal and external contacts, interaction with clients, leadership skills, knowledge and skill, special activities in working groups, integrity, honesty, and moral character.

5) Engagement performance

Common methodology 

Our policies and procedures cover planning, executing, supervising, reviewing, documenting and communicating the results of each engagement. In addition, our policies and procedures require all professionals to refer to the Firm's literature, authoritative literature or other sources and consult, on a timely basis, with individuals within or outside of the Firm, when appropriate (e.g., when dealing with complex or unusual issues). This methodology is fully compliant with International Auditing Standards and where appropiate these common processes are used by BDO member firms. 

Supervision and review

Professional audit personnel include managing partner, audit partner, audit managers, senior auditors, in-charge auditors and staff accountants whose responsibilities are commensurate with their experience and expertise.

Our policies require all reports, financial statements, working papers, management letters, and other letters are to be reviewed by someone other than the preparer. Depending on the report or working papers issued, the level of reviewer differs (e.g. could be either audit partner or audit manager).

The primary objective of the review process is to check that the correct audit opinion is being given on the financial statements by confirming that the audit has resulted in the obtaining of sufficient evidence to provide high, but not absolute, assurance that the financial statements are free from material misstatement, that all material or potentially material matters or issues raised during the audit have been satisfactorily resolved and that the audit has been carried out in accordance with the Firm's policies and procedures.

Consultation

Our practices for consultation consist of providing reasonable assurance that auditors will seek assistance on accounting and auditing questions, to the extent required, from persons having appropriate levels of knowledge, competence, judgment and authority.

6) Monitoring

Our quality control system includes the following procedures:

i) Analysis and assessment of: (a) new professional pronouncements, (b) results of independence testing, (c) CPE undertaken by professional personnel, and (d) decisions related to acceptance and continuance of client relationships and engagements

ii) Inspections program (see above) are:

  • Peer review from the BDO network every 3 years for engagements to provide reasonable assurance that BDO's policies and procedures for quality control are effectively applied.
  • The Romanian Chamber of Auditors review periodically our engagements to provide reasonable assurance that Romanian Auditing standards, which are based on International Standards on Auditing and procedures for quality control are effectively applied.
  • Internal QAR performed by an independent internal QAR officer, having the proper experience and qualifications,who ensures annual review for at least one report per each audit partner. Internal QAR's objectives are:
  • Compliance with ISA and Romanian Audit standards as adopted by CAFR
  • Compliance with BDO Audit Methodology
  • Best practices regarding planning, execution and completion of an assignment

iii) Determination of any corrective actions to be taken and improvements to be made in the quality control system
iv) Follow-up to ensure that any necessary modifications are made to the quality control policies and procedures on a timely basis

Management Executive Statement on effectiveness of functioning

These policies, procedures and monitoring activities in place at BDO Audit, BDO Auditors & Accountants and BDO Auditors & Business Advisors have provided the firm's Management Executive with reasonable assurance that the firm, its partners and staff have materially complied with applicable professional, regulatory and legal requirements, that work has been performed to a consistently high standard and that appropriate reports have been issued. The firm's Management Executive has considered the results of the regulatory inspections performed by CAFR and BDOGC in reaching this opinion.

E) Indication of when the last quality control referred to in Article 31 took place

For BDO Audit, the last inspection performed by the Romanian Chamber of Auditors took place on the 27th of October 2014. The company received grade A with a score of 100 out of 100.
 

F) List of public interest entities for which the audit firm has carried out statutory audits during the preceding financial year

Audit clients listed on an EU regulated market:

  • Antibiotice SA
  • Biofarm SA
  • Cemacon SA
  • CONDMAG S.A.
  • COS TARGOVISTE SA
  • IFMA SA
  • Laminorul SA
  • Mecanica Fina SA
  • PRIMCOM SA
  • ROMAERO S.A.
  • ROPHARMA SA
  • SANTIERUL NAVAL CONSTANTA SA
  • SSIF BRK FINANCIAL GROUP SA

G) Statement concerning the audit firm's independence practices which also confirms that an internal review of independence compliance has been conducted

The company's independence guidance is located on its intranet site that includes the following:

  • Policies and Procedures Manual that summarizes the rules of the ISA (International Standards on Auditing)) and IFAC Code of Ethics for Professionals. The Manual is used as the first resource for researching independence questions.
  • Database that contains a current listing of all entities where we are prohibited from owning any financial interest and having a business/personal relationship. All professionals check the listing periodically to confirm their personal financial holdings (stocks, loans, etc.) is not with companies on the list. Professionals are required to check the list before buying any stocks or obtaining loans. The Database is monitored by the Managing Partner. To facilitate the review, the list changes (additions and deletions) to the listing monthly, via e-mail to all of its professionals.

In addition, several other key features in the independence quality control system include:

  • An annual online independence confirmation that is completed by all professionals and that includes questions relating to financial interests and business/personal relationships with restricted entities.
  • Testing the independence confirmations of partners and managers prior to the acceptance / reacceptance of each audit engagement.
  • Annual confirmations, correspondence and questionnaires for use by all BDO Member Firms.
  • Testing the independence if the Firm provides other services to a client, care is taken not to perform management functions or make management decisions

H) Statement on the policy followed by the audit firm concerning the continuing education of statutory auditors referred to in Article 11

People are the most important resource for our business, therefore we invest a lot of time, financial and human resources into their continuous professional development. 

BDO's annual training program includes both in-house and external trainings which cover different areas from the financial field: reporting, financial audit, up-dates of reporting standards, internal audit, risk assessment, etc. Regional courses at BDO network level are organized annually and our people also benefit from the experience and knowledge of foreign tutors.

Each staff level has a mandatory set of trainings, courses and professional exams to sit each year in order to develop their careers and to enhance the quality of services provided to clients.

At BDO, we believe in a performance based culture, where people are promoted and supported in their continuous development process by identifying their improvement needs and providing access to knowledge center resources and trainings.

We support and encourage our professionals to become members of national and international professional bodies and to obtain relevant prestigious qualifications in the financial field.

I) Financial information showing the importance of the audit firm, such as the total turnover divided into fees from the statutory audit of annual and consolidated accounts, and fees charged for other assurance services, tax advisory services and other non-audit services

Consolidated turnover for BDO Audit SRL, BDO Auditors & Accountants SRL and BDO Auditors & Business Advisors SRL as at the 31st of December 2016

Services

Lei

Audit & related services

14,213,056

    out of which:

 

    Statutory audit and IFRS

12,001,985

Tax

252,193

Other services

8,352,281

Total

22,817,530

 

J) Information concerning the basis for the partners' remuneration

Profits are shared among all partners based on agreed performance criteria. Allocations are based on a fixed first tranche, plus a second tranche based on the performance achieved by each individual partner. There is provision to make payments for exceptional performance, severance payments or inducements to new partners.

 

March 31, 2017