Transparency Statement 2018
PKF Littlejohn LLP Transparency Report 2018
We are pleased to present our Transparency Report for the year ended 31 May 2018 designed to give information on the ownership and governance of the firm and the measures we take to maintain independence and high-quality standards in our audit and other services.
Legal structure and ownership
PKF 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 June 2018 there were 14 full equity and 17 fixed equity partners.
The firm operates from its offices at 1 Westferry Circus, Canary Wharf, London E14 4HD and 4 Carlton Court, Brown Lane West, Leeds, LS12 6LT. We offer a range of services comprising business advice, audit, accountancy, internal audit, taxation (corporate and personal), corporate finance, IT consultancy, litigation support, business recovery, turnaround and insolvency services. In addition, through its partnering arrangements with Capitalise (www.capitalise.com/) and Escalate (www.escalatedisputes.co.uk/), the firm offers funding solutions and dispute resolution services for SMEs.
We have four principal active subsidiary companies:
- PKF Geoffrey Martin & Co Limited – which specialises solely in business recovery, turnaround, fraud investigation and insolvency services.
- PKF Littlejohn Payroll Services Limited provides outsourced payroll services using Payroll Service Company as the provider of payroll services.
- PKF Littlejohn Accounts Limited – whose principal activity is the provision of accounting and tax services to certain clients.
- PKF Littlejohn Business Solutions Limited – which provides funding solutions.
PKF Littlejohn Business Solutions Limited has entered into a joint venture agreement with Moore Batch LLP and Harber Business Services Limited (a company under common control with Bermans 2012 Limited) via a company Capitalise Business Solutions Limited in which each party has a one third share. The principal activity of Capitalise Business Solutions Limited is the delivery of dispute resolution services.
PKF International network
The firm is a member firm of the PKF International (PKFI) family of legally independent firms. PKFI consists of members firms in locations around the world providing assurance, accounting and business advisory services. The network is a member of the Forum of Firms – an organisation dedicated to consistent and high-quality standards of financial reporting and auditing practices worldwide.
The firm does not accept any responsibility or liability for actions or inactions on the part of any other individual member firm or firms within PKFI.
The network formed by PKF International Limited (the Licensor or the Company) and the member firms (the Licensees) is regulated by adherence to an Operating Licence Agreement (OLA) between the Licensor and individual Licensees. The OLA authorises the Licensee to use the PKF name as defined under specific circumstances, under specific conditions, for specific purposes and in a specific territory, in consideration for which the Licensee pays a licence fee to the Licensor.
The Licensor is a private company registered in England and limited by guarantee. The Company’s Articles of Association require a Board of Directors who conduct the business of the Company. The Board has a strategic and co-ordinating role but has no executive authority of the operations of individual member firms.
Each Licensee is a legally independent entity owned and managed in each location. Contractual relations are only formed between a client and the member firm engaged by the client and no other member firm may be held liable. The Company has no financial or management interest in any member firm. None of the directors of the Company has a financial or management interest in any member firm other than his or her own.
Members firms are organised into five geographical regions. Each region has a regional board and elects or nominates representatives to the Company’s Board of Directors.
There are two international committees responsible for professional and practice standards – the International Professional Standards Committee (incl. Assurance) (IPSC) and International Tax Committee (ITC). A number of additional practice area committees operate both regionally and internationally.
PKFI operates a global monitoring programme covering member firms. The principal objectives are to ensure that the standards expected for the performance of certain types of professional work by member firms are established and communicated to firms, that those standards meet appropriate recognised professional practice requirements at least for transnational and referred work, and that a programme of monitoring of compliance with expected standards is operating effectively.
Member firms, countries and turnover
PKFI distinguishes between member firms and exclusive / non-exclusive correspondent firms. Correspondent firms do not form part of the Network as defined by the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants (IESBA), have none of the rights and privileges of member firms and are not covered by the global monitoring programme. An up to date list of member and correspondent firms, including the firm names and countries in which they are registered and operate from, can be found on the website www.pkf.com.
The aggregate fee income which relates to the statutory audit of annual and consolidated financial statements for EU EEA members firms that belong to the PKFI network, as reported in the Network Compliance Reporting ending 30 June 2017, is $143.83 million. The list of member firms operating within the EU as statutory auditors in the Network Compliance Reporting ending 30 June 2018 is set out in Appendix 1.
PKF Littlejohn management
The firm is managed by a board, concentrating on strategic matters and reporting and accountable to the partnership as a whole. The current board comprises a Managing Partner and Chairman who are elected by the partners and further partners appointed by the Managing Partner from time to time as well as an independent non-executive board member appointed by the board. As at 31 May 2018 the board comprised:
- Carmine Papa (Managing Partner)
- Mark Ling (Chairman)
- Neil Coulson
- John Wallace (Independent Non-Executive board member)
The day to day running of the firm is handled by a leadership group which is appointed by the Managing Partner and which is accountable to the board and ultimately the partnership as a whole.
Fixed and full equity partners receive a fixed share of the profits as a first charge on the overall profits of the firm. The second charge on the firm’s profit is the award of bonuses both to fixed and full equity partners. The amount of any bonus awarded is assessed by the leadership team, moderated by a remuneration committee appointed by the partners and ultimately approved by the equity partners. Any residual profit is then allocated to the full equity partners based on their profit share. The fixed share of profits and the full equity partners profit shares are reviewed on a regular basis (normally every two years) by the remuneration committee. The assessment takes into account partners’ performance assessed against criteria covering client service, technical performance, technical ability, working capital management and management responsibilities.
The weighting attributed to these factors varies according to the circumstances of individual partners and the needs of the firm determined by management from time to time.
Two of the five areas captured in the assessment of an audit partner’s performance are focused on achieving audit quality. Audit partners are not incentivised to gain non-audit work from audit clients.
Financial information (Group)
The following information has been extracted from the unaudited financial statements for the year ended 31 May 2018, demonstrating the importance of statutory audit work to the overall results of the Firm.
31 May 2018
31 May 2017
31 May 2016
|Statutory audit fees of Public Interest Entities (PIEs)
|Statutory audit fees of other audit clients
|Fees for non-audit services to audit clients
|Fees for non-audit services to non-audit clients
A list of the Public Interest Entities in respect of which PKF Littlejohn LLP issued a statutory audit opinion in the year ended 31 May 2019 is set out in Appendix 2.
Quality control system
PKF Littlejohn LLP has established a quality control system that encompasses the six elements of quality control embedded within International Standard on Quality Control (UK) 1 (ISQC1), which deals with a 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 ISQC (UK) 1 have relevance to all services provided by the firm and the firm has applied them as follows:
Responsibility for the effective operation of the quality control system lies with the Managing Partner who is accountable to the board and the partnership as a whole.
Professional standards and procedures are set by our Professional Standards Committee (PSC), reporting to the Managing Partner. To avoid the possibility of management override, the PSC has whistle blowing responsibilities both to the board and the overall partnership. The firm has also appointed audit, ethics, money laundering, investment business and practice assurance partners who report directly to the Managing Partner but who also report to the PSC as appropriate on the firm’s compliance with those areas which they are responsible for.
The PSC operates primarily by publishing internal Professional Standards Notes (PSNs), which set out the standards that the firm must meet in order to comply with ISQC (UK) 1 and other professional standards. The PSC also monitors compliance and receives reports from the monitoring of quality (see below) and makes recommendations for improvement to the Managing Partner. Responsibility for implementing the firm’s professional standards lies with the leadership group.
The requirement to comply with the ICAEW’s Code of Ethics, the Financial Reporting Council (FRC) Revised Ethical Standard 2016 and, as the firm is a member of the PKF network and Forum of Firms, the IESBA Code of Ethics is set out in the firm’s PSNs.
The requirement to comply with the Bribery Act 2010 and the firm’s PSNs are set out in the staff handbook and form part of the employees’ contracts of employment. The requirements for the partners to comply are contained in the Members’ Agreement.
The firm’s PSNs, which also cover independence requirements, set out the following:
- Adherence to the ICAEW’s Code of Ethics, FRC Revised Ethical Standard and IESBA Code of Ethics takes precedence over commercial considerations.
- Before accepting any new work assignments from either new or existing clients, partners and staff must take reasonable steps to identify circumstances that could pose a conflict of interest both within the firm and the PKF network.
- Conflict of interest checks within the PKF network must include a review of the PKFI Transnational Entities database to establish if any network firm has an existing relationship with the new or existing client.
- 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 FRC’s Revised Ethical Standard, prior to the commencement of every audit.
- All members of the firm are required to complete an annual declaration of their independence, and freedom from conflicts of interest and prohibited investments.
- The Ethics Partner completes an annual review of the annual declarations for independence compliance.
- Gifts and hospitality can only be accepted or offered where an objective, reasonable and informed third party would consider, or perceive, the value to be trivial or inconsequential.
- The Ethics Partner must be consulted on all questions related to independence and professional ethics. The decision of the Ethics Partner on each matter is final.
- Instances of non-compliance with or breaches of the firm’s procedures must be reported to the Ethics Partner.
The firm’s policy on the rotation of key audit partners and staff is set out in a specific PSN. All partners and staff involved in a PIE audit must follow the firm’s rotation policies which have been established in line with the underlying ethical and legal requirements relevant to the firm. In summary these policies are:
The partner responsible for the audit must cease their participation in that audit no later than five years from that date of their appointment. Where the audit committee of the entity (or equivalent) request an extension to this, the Firm’s Ethics Partner may grant an extension for up to two years.
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 every appointment. This requires identification of the prospective client, an assessment of our independence, integrity and objectivity, freedom from conflicts of interest, an assessment of whether the firm has the requisite skills to carry out the engagement and an assessment of the risk the prospective client would present to the firm.
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.
In addition to the above, partners and staff involved in audit engagements, including statutory audits of PIEs, must separately complete a client acceptance of (re)appointment form before any work commences to ensure compliance with the requirements of the FRC’s Revised Ethical Standard.
The firm has established policies and procedures to ensure that partners and staff are equipped with the required technical skills and reflect the firm’s 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 including relevant experience as required. Partners are involved in all interviews and references are always taken, including verification of membership of professional or regulatory bodies.
All personnel undergo regular appraisals dealing with past performance, future development and training needs as aligned to the relevant competency framework. Audit staff receive performance appraisals at the end of each significant assignment, which includes the assessment of the achievement of audit quality, and this is fed into their six-monthly 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.
The training programme is informed by new technical developments, the identification of training needs through appraisals, the firm’s quality control system and a review of CPD records maintained by staff.
The firm provides:
- Dedicated technical support staff
- A technical library, including online 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 its output pertaining to audit and accounting, which is disseminated to audit partners and staff
- Regular internally and externally provided update training for partners and staff dealing with current developments in accounting, auditing, ethical standards and tax
- Internal training courses tailored to the specific roles of individuals at each stage of their careers (e.g. audit assignment leaders course and Director Responsible Individual training)
- Ad hoc internal and external training to meet specific needs.
Details of the mandatory training for relevant staff are as follows:
- Accounting updates
- Audit updates
- Tax updates
- Ethics updates
- Anti-money laundering
- Anti-bribery and corruption training
- GDPR training
- Pathway – a portfolio of management skills training
- Other technical based training as appropriate for specific partners and members of staff
The firm is an accredited training office with the ICAEW, 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.
The firm’s procedures for engagements are set out in professional standards notes developed by the firm. In respect of audit and assurance engagements, the firm uses proprietary audit programmes which have been developed with the firm’s own programmes for specialist audits, including the statutory audits of PIEs.
All professional work is subject to review by managers, directors and partners, with clear guidelines laid down for second partner consultation, engagement quality control reviews, consultation with the compliance partners and the use of external experts where required.
Internal quality control
The firm engages external reviewers to monitor the quality of audit, assurance and tax work, as well as other services provided by the firm. Reviews take place eight times per annum with reports delivered to the PSC and the Audit Compliance Partner. Our external reviewers also carry out an annual whole firm practice assurance review.
The reviews of the firm’s audit work are performed to ensure the firm is compliant with the requirements of ISQC (UK) 1. In the review year ended 30 June 2018, overall, the firm achieved it’s average benchmark of 85% or above.
External quality control
PKF Littlejohn LLP is a Registered Auditor and is regulated in the conduct of its services by the Financial Reporting Council and the Institute of Chartered Accountants in England & Wales (ICAEW), including as a Designated Professional Body for investment business. 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.
As a statutory auditor of entities defined as public interest entities, the firm is subject to monitoring by the Audit Quality Review Team (AQR) of the Financial Reporting Council. The AQR commenced a review of the firm in November 2017 with the final report received in August 2018. The firm takes the results of this review seriously and has put in place an action plan to address the findings from the AQR.
The firm is also subject to periodic audit and practice assurance reviews by the Quality Assurance Department (QAD) of the ICAEW with full and limited audit assurance reviews on alternate years. The QAD carried out a full audit monitoring visit and a whole firm practice assurance review in 2017. The next QAD limited audit assurance review is due in November 2018.
The European Court of Auditor also reviews the firm’s work on those services provided to the European Union or its institutions.
As a member of the PKF network, the firm is also subject to periodic reviews by the PKF International. The last review was performed in August 2016.
The results of all internal and external quality control reviews are used to inform improvements to the firm’s policies and procedures and are also fed into the firm’s internal training programme. Where appropriate and considered necessary, the PSC will issue Quality Control Monitoring Alerts to bring to the attention of partners and staff any matters that need to be addressed.
Directors and associates of PKF Geoffrey Martin & Co Limited who act as insolvency practitioners are individually authorised and regulated either by the Insolvency Practitioners Association or the ICAEW, both bodies are recognised by the Insolvency Service (an executive agency sponsored by the Department for Business, Energy and Industrial Strategy), which is the ultimate regulator of the insolvency profession. Practitioners are typically inspected on a cyclical basis. Practitioners who are Directors and associates or PKF Geoffrey Martin & Co Limited were last inspected in 2017.
Statement of effectiveness
Based on the results of the monitoring as referred to above, the firm is satisfied that its quality control system is operating effectively to ensure that the firm complies with all professional standards and delivers a quality service to clients.
For and on behalf of PKF Littlejohn LLP
31 August 2018
PKF International member and correspondent firms providing statutory audit services within the European Union.
|Head office city
|PKF Corti & Partner GmbH Wirtschaftsprüfer und Steuerberater
|PKF Österreicher – Staribacher Wirtschaftsprüfungs GmbH & Co KG
|PKF Centurion Wirtschaftsprüfungsgesellschaft mbH
|PKF Rößlhuber & Partner Steuerberatungs GmbH & Co KG
|PKF-VMB Bedrijfsrevisoren cvba
|PKF Bulgaria Ltd.
|PKF ATCO Limited
|PKF Savvides & Co Ltd
|APOGEO Group, SE
|PKF Munkebo Vindelev, Statsautoriseret Revisionsaktieselskab
|Copenhagen – Glostrup
|PKF Estonia OÜ
|PKF Audit Conseil
|PKF Fasselt Schlage Partnerschaft mbB Berlin
|PKF Industrie- und Verkehrstreuhand GmbH Wirtschaftsprüfungsgesellschaft
|PKF Issing Faulhaber Wozar Altenbeck GmbH & Co. KG
|PKF Riedel Appel Hornig GmbH
|PKF Sozietät Dr. Fischer
|PKF VOGT & PARTNER Wirtschaftsprüfer Steuerberater
|PKF WMS Bruns-Coppenrath & Partner mbB Wirtschaftsprüfungsgesellschaft Steuerberater Rechtsanwälte
|PKF WULF & PARTNER Partnerschaft mbB Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft
|PKF Euroauditing S.A.
|PKF Audit Kft
|PKF O’Connor, Leddy & Holmes Limited
|Associazione Professionale Studio Maurizio Godoli
|PKF Italia S.p.A.
|PKF Studio TCL – Tax Consulting Legal
|PKF Latvia SIA
|L’Alliance Révision S.à.r.l.
|PKF Audit & Conseil S.à.r.l.
|PKF Beckman Lundevall Revisjon AS
|PKF Consult Spółka z ograniczoną odpowiedzialnością Sp. k.
|PKF II Portugal Lda
|PKF Econometrica S. R. L.
|PKF Finconta S. R. L.
|PKF Slovensko S.R.O
|PKF – Audiec SAP
|PKF Revidentia AB
|PKF Cooper Parry Group Limited*
|Francis Clark LLP
|Johnston Carmichael LLP
Public Interest Entities in respect of which PKF Littlejohn LLP issued a statutory audit opinion in the year end 31 May 2018 were as follows:
- Dukemount Capital Plc
- Housing Associations Mutual Insurance Association Limited
- Hemogenyx Pharmaceuticals Plc (formerly Silver Falcon Plc)
- Irwell Insurance Company Limited
- London Finance & Investments Group Plc
- PAMIA Limited
- Pembridge Resources Plc
- Pennpetro Energy Plc
- R&Q Alpha Company Limited
- R&Q Beta Company Limited
- R&Q Gamma Company Limited
- Toople Plc
- Tradex Insurance Company Limited
- Western Capital Insurance Company DAC
- Zenith Energy Ltd
View our Transparency Statements from other years.