Littlejohn LLP

Transparency statement 2011

We are pleased to present our Transparency Statement for 2011, designed to give information on the ownership and governance of the firm and the measures we take to maintain high quality standards in our audit and other services.

Legal structure and ownership

Littlejohn LLP is a limited liability partnership governed by the terms of its Members Agreement and is owned by its equity partners. As at 30 September 2011 there were 15 full equity and 13 fixed equity partners.

The firm operates from its offices at 1 Westferry Circus, Canary Wharf, London, E14 4HD and has no branches in the UK or elsewhere.

The firm offers a range of services comprising business advice, audit, accountancy, internal audit, taxation (corporate and personal), corporate finance, IT consultancy and litigation support.

We have two active subsidiary companies:

  • Littlejohn Wealth Management Limited in which we have a 75% share. The remaining 25% is owned by its managing director. The company is a Chartered Independent Financial Advisor and provided financial planning services to individuals and their families, companies and partnerships.
  • Littlejohn Payroll Services Limited which is managed on our behalf by Clement Keys & Co, Chartered Accountants from their Birmingham office. Its principal activity is the provision of outsourced payroll services.

Regulation

Littlejohn LLP is a Registered Auditor and is regulated in the conduct of its services by the Institute of Chartered Accountants in England & Wales (ICAEW), including as a Designated Professional Body for investment business. The firm is subject to periodic audit and whole practice reviews by the Quality Assurance Department (QAD) of the ICAEW and by the Audit Inspection Unit (AIU) of the Professional Oversight Board (part of the Financial Reporting Council). The last audit inspection visit by the QAD was completed in 2008; the next visit together with a whole practice review is scheduled for late 2011. The AIU carried out an inspection in 2011.

The firm is also registered with the Public Company Accounting Oversight Board and the Canadian Public Accountability Board to undertake audit work in connection with US and Canadian listed entities respectively.

Littlejohn Wealth Management Limited is regulated by the Financial Services Authority.

International affiliation

Littlejohn LLP is not a member of a network but it is a member of IGAF Polaris, a worldwide association of independent firms offering a range of professional services including auditing and accounting, taxation and business consulting.

Management

The firm is managed by a board of partners, reporting and accountable to the partners as a whole. The board comprises a managing partner who is elected by the partners and two further members also elected by the partners, one to act as chairman. Other members of the board are appointed by the managing partner. As at 30 September 2011 the board comprised:

Paul Hopper (Managing Partner)

David Roberts (Chairman)

Sarah Morrison

Carmine Papa

Dominic Roberts

Mary Stenson (Finance Partner)

Professional indemnity insurance

Littlejohn LLP maintains professional indemnity insurance, including for its subsidiaries in full compliance with the Professional Indemnity Insurance Regulations issued by the ICAEW.

Partner remuneration

Partners are remunerated wholly out of the profits of the firm as follows:

Full equity partners - profit shares are reviewed on a regular basis (normally every two years) by a remuneration committee comprising the managing partner and chairman as ex officio members and two other full equity partners elected by the partnership. The assessment takes into account partners' performance assessed against criteria covering client service, technical skills, working capital management and management responsibilities.

Fixed equity partners - fixed equity partners receive a fixed share of the profits as a first charge on the overall profits of the firm. These fixed shares are reviewed regularly (normally every two years) and are determined by the board, subject to the review and recommendations of the remuneration committee. The assessment of the board is based on similar criteria to those described above.

From time to time, full and fixed equity partners may be awarded bonuses in addition to their profit share for exceptional effort and performance. Eligibility for bonuses is assessed by the board and is subject to the approval of the full partnership. Having regard to auditor independence, partners are not incentivised to gain non audit work from audit clients.

Financial information

  Year ended 31 May 2011
(subject to audit)		 Year ended 31 May 2010
  £m £m
Audit fees 6.0 5.0
Fees for non audit services to audit clients 2.0 2.0
Fees for non audit services to non audit clients 7.0 9.0
Total revenue 15.0 16.0

Quality control system

Littlejohn LLP has established a quality control system that encompasses the six elements of quality control embedded within International Standard on Quality Control (UK and Ireland) 1 (ISQC1), which deals with an audit firm's responsibilities for systems of quality control for audits and reviews of financial statements and other assurance and related engagements.

The elements of quality control set out in ISQC1 have relevance to all services provided by the firm and the firm has applied them as follows:

  • Leadership responsibilities

Responsibility for the effective operation of the quality control system lies with the Managing Partner who is accountable to the board and partnership as a whole.

Professional standards and procedures are set by our Professional Standards Committee (PSC), reporting to the board. To avoid the possibility of management override the PSC has whistle blowing responsibilities both to the overall partnership and to our professional body. The firm's Ethics Partner and Compliance Partner are members of the PSC.

The PSC operates primarily by publishing Professional Standards Notes and Technical Notes, which set out the standards that the firm must meet in order to comply with ISQC1 and other professional standards. The PSC also monitors compliance, receives reports from quality monitoring (see below) and makes recommendations for improvement to the managing partner.

Responsibility for implementing the firm's professional standards lies with departmental heads and line managers.

  • Ethical requirements

The firm's Professional Standards Note covering independence sets out the following.

    • Adherence to the ICAEW's Code of Ethics and Ethical Standards issued by the Auditing Practices Board (APB) takes precedence over commercial considerations
    • Partners and managers are required to keep independence issues under constant review and, in respect of audit assignments, reconfirm the firm's independence having regard to the APB Ethical Standards, prior to the commencement of each audit.
    • All members of the firm are required to complete an annual declaration of their independence and freedom from conflicts of interest.
    • The Ethics Partner must be consulted on all questions related to independence and professional ethics. His decision on each matter is final.
    • Instances of non-compliance with the firm's procedures must be reported to the Ethics Partner and the Managing Partner.

The requirement to comply with the ICAEW's Code of Ethics and the APB's Ethical Standards is set out in the Staff Handbook and forms part of employees' contracts of employment.

  • Acceptance and continuance of client relationships and specific engagements

The firm has detailed procedures covering the acceptance and continuance of client relationships and new specific engagements. A comprehensive client acceptance form must be completed prior to acceptance of an appointment. This requires identification of the prospective client, an assessment of our independence and freedom from conflicts of interest, and an assessment of whether the firm has the requisite skills to carry out the engagement.

Upon acceptance of a new client or a specific engagement from an existing client, the firm issues a detailed engagement letter for agreement by the client, setting out, inter alia, our understanding of the nature of the assignment and what is required of us and our standard terms of business.

  • Human resources

We have established policies and procedures to ensure that our people are equipped with the required technical skills and reflect our values of commitment to client service and high professional and ethical standards, covering objectivity, integrity and independence.

The firm sets high standards for the recruitment and promotion of personnel, in particular with regard to the selection and interview of candidates and the qualifications required. Partners are involved in all interviews and references are always taken, including from professional or regulatory bodies.

All personnel undergo regular appraisals dealing with past performance, future development and training needs.

Audit staff receive performance appraisals at the end of each significant assignment, which feed into their annual appraisals.

The firm adheres to the requirements of the ICAEW for continuing professional development (CPD). Responsibility for providing full support for the development needs of individuals lies with the board, exercised through our HR development department, which is headed by the Technical and Training Partner.

The training programme is informed by new technical developments, the identification of training needs through appraisals and a review of CPD records maintained by staff.

The firm provides:

    • Dedicated technical support staff
    • A technical library, including on line resources available via the firm's intranet
    • Manuals setting out the firm's procedures for all audit and assurance engagements as well as other services provided by the firm
    • Membership of the Faculties and Special Interest Groups of the ICAEW and dissemination of their guidance and bulletins to audit partners and staff
    • Subscription to the email update service of the Financial Reporting Council, enabling early access, inter alia, to the output of the Auditing Practices and Accounting Standards Boards, the Audit Inspection Unit and the Financial Review Reporting Panel, which is disseminated to audit and partners and staff
    • Quarterly and externally provided update training for audit staff and partners dealing with current developments, (new legislation, accounting and auditing standards).
    • Internal training courses tailored to the specific roles of individuals at each stage of their careers (e.g. audit assignment leaders course)
    • Ad hoc internal and external training to meet specific needs.

The firm is an accredited training office with the ICAEW and also the Institute of Chartered Accountants of Scotland, the Association of Certified Chartered Accountants and the Association of Accounting Technicians. The progress of students studying for their professional qualifications with these and other bodies (for example, the Chartered Institute of Taxation) is carefully monitored, with each student being closely supported.

  • Engagement performance

The firm's procedures for engagements are set out in comprehensive manuals developed by the firm. In respect of audit and assurance engagements we use proprietary audit programmes and have developed our own programmes for specialist audits.

All professional work is subject to review by line managers and partners, with clear guidelines laid down for second partner consultation and hot review and the use of external experts where required.

  • Monitoring

We engage external reviewers to monitor the quality of audit and assurance work as well as other services provided by the firm. Audit reviews take place every two months with reports delivered to the Managing Partner and the Compliance Partner.

Our external reviewers also carry out an annual whole practice review.

The results of the reviews, as well as those by the QAD and AIU, are used to inform improvements to our procedures and are fed into our internal training programme.

Separate external reviewers monitor the work of Littlejohn Wealth Management Limited.

  • Statement of effectiveness

Based on the results of the monitoring we are satisfied that our quality control system is operating effectively to ensure that we comply with professional standards and deliver a quality service to our clients.

 

P W Hopper
Managing Partner
For and on behalf of Littlejohn LLP

30 September 2011

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