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Transparency Report 2009 Ernst & Young LLP United Kingdom

Transparency Report 2009 - EY · Transparency Report 2009 4 — Ernst & Young UK Legal structure, ownership and governance In the United Kingdom, Ernst & Young LLP is a limited liability

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Page 1: Transparency Report 2009 - EY · Transparency Report 2009 4 — Ernst & Young UK Legal structure, ownership and governance In the United Kingdom, Ernst & Young LLP is a limited liability

Transparency Report 2009

Ernst & Young LLP

United Kingdom

Page 2: Transparency Report 2009 - EY · Transparency Report 2009 4 — Ernst & Young UK Legal structure, ownership and governance In the United Kingdom, Ernst & Young LLP is a limited liability

Transparency Report 2009 — Ernst & Young UK

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Contents

Contents

Country Managing Partner’s letter….…………………………………………3

Legal structure, ownership and governance……………………..…… 4

Network arrangements…………………………………………………………6

Internal quality control system………………………………………………… 7

Effectiveness of quality control system………………………………7

Instilling professional values ……………………………………………… 9

Performing Audits …………………………………….…………………………10

Review and consultation …………………………………………………… 11

Data retention and data privacy……………………………………… 12

Internal and external accountability ………………….……………. 13

Audit quality reviews ………………………………………………….…….. 15

The reliability and usefulness of audit reporting…………………… 16

Factors outside of our control affecting audit quality………… 17

External quality assurance review……………………………………………18

Independence practices………………………………………………........... 19

Continuing education of statutory auditors ........……………….. 21

Financial information………………………………………………………………. 22

Partner remuneration……………………………………………………………… 23

Appendix: Public interest entity audit clients………………………… 24

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Country Managing Partner’s letter

Investor confidence is fundamental to healthy economies and capital markets. A cornerstone of that confidence is transparency.

The audit profession plays a key role in promoting transparency and therefore helping to provide the investor confidence that drives economic growth. In recent years, the independent oversight and regulation that auditors have faced globally have helped to further the quality of our work, and auditors have become more transparent to our regulators around the World.

As part of this move toward greater transparency, the European Union’s 8th Company Law Directive as implemented in the UK by the Statutory Auditors (Transparency) Instrument 2008 with respect to the production of transparency reports by statutory auditors require UK statutory auditors of EU Public Interest Entities to publish annual transparency reports disclosing certain information.

This Ernst & Young UK Transparency Report 2009 complies with the Directive and the Statutory Auditors (Transparency) Instrument 2008. It covers the Firm’s financial year ended 3 July 2009.

We welcome the opportunity to be transparent. We believe this transparency will make a positive difference, not just for our regulators, but for clients and other stakeholders.

The quality of our services has always been central to our strategy, which has enabled us to respond quickly and appropriately to the new risks and challenges of the credit crisis. To ensure that our audit professionals encountering issues relating to the current economic environment receive the appropriate level of support, and that we as a firm respond appropriately to issues, we communicate regularly with our audit staff and clients, amend firm-wide policies and practices as appropriate and provide specific supplementary training as necessary.

Our unique global structure has been of great value to our UK clients and our people during these demanding times. Having now brought together all our member firms into five geographic Areas (Americas, EMEIA - Europe, Middle East, India and Africa -, Far East, Japan and Oceania), we can be more streamlined and effective in communicating cross-border business developments, the accounting, risk and reporting issues that flow from them and in agreeing and resourcing appropriate solutions. In a complex, connected and interdependent world, this is a huge asset.

As one can expect, our consultation procedures, particularly in respect of going concern matters, have been, and continue to be, extensively utilised throughout these challenging times.

Scott K Halliday Country Managing Partner Ernst & Young UK 29 September 2009

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Legal structure, ownership and governance In the United Kingdom, Ernst & Young LLP is a limited liability partnership incorporated in England and Wales and is a member firm of Ernst & Young Global Limited (EYG or Global). In this report we refer to ourselves as Ernst & Young UK, the “Firm”, “we” or “us”. Legal Structure and ownership Ernst & Young’s EMEIA Area comprises EYG member firms in 88 countries in Europe, Middle East, India and Africa. Ernst & Young (EMEIA) Limited (“EMEIA Limited”), a UK incorporated company limited by guarantee, is the principal governance entity for the EYG member firms in the EMEIA Area. EMEIA Limited facilitates the coordination of these firms and cooperation between them, but it does not control them. EMEIA Limited is a member firm of EYG. In Europe, a holding entity, Ernst & Young Europe LLP (“Ernst & Young Europe”) was formed in conjunction with the EMEIA Area. Ernst & Young Europe is a UK incorporated LLP and is an audit firm registered with the Institute of Chartered in England and Wales ( ICAEW), but it does not carry out audits or provide any professional services. To the extent permitted by local legal and regulatory requirements, Ernst & Young Europe has acquired or will acquire control of the EYG member firms in 46 European countries in the EMEIA Area. Ernst & Young Europe is a member firm of both EYG and EMEIA Limited. On 14 November 2008, Ernst & Young Europe took control of Ernst & Young UK following which the partners of Ernst & Young UK became members of Ernst & Young Europe. They also remain members of Ernst & Young UK. At 3 July 2009 Ernst & Young UK had 506 partners operating from 21 offices including offices in Jersey and Guernsey. Governance structure � At European level

The Board of Ernst & Young Europe, the Europe Executive, has authority and accountability for strategy execution and management of its operations under four dimensions being ‘People’, ‘Quality’, ‘Growth’ and ‘Operational Excellence’. It comprises the Europe Managing Partner, the Europe Chief Operating Officer, the leaders for Markets, People, Q&RM, the service line leaders for Assurance, Advisory, Transaction Advisory Services and Tax and all Sub-Area Managing Partners of the Sub-Areas in Europe.

The Europe Executive meet at least monthly except in the month of August. At 3 July 2009 the Europe Executive comprised: Mark Otty*+ Richard King* Tom McGrath*

Scott Halliday* Olivier Breillot Jean-Pierre Letartre

Pascal Macioce^ Christian Mouillon Christoph Gross

Karen Hochrein Christos Glavanis Pellegrino Libroia

Pieter Jongstra Torstein Hokholt Karl Johansson

Stephan Kuhn Dave Read* Georg Graf Waldersee *From Ernst & Young UK ^Europe Assurance Leader

+ Europe Managing Partner

Ernst & Young Europe has an elected Europe Advisory Council, which comprises 27 partners of the EYG member firms in Europe, including six from Ernst & Young UK. It serves in an advisory role to the Europe Executive on policies, strategies and other matters and whose approval is required for a number of significant matters, e.g. appointment of the Europe Managing Partner, the financial reports of Ernst & Young Europe, and material transactions.

The Europe Advisory Council meets at least twice in each fiscal year. At 3 July 2009 Ernst & Young UK had the following six representatives on the Europe Advisory Council: Michael Lynch-Bell Alec Carstairs John Cole

Nicola Corp Karl Havers Steve Wills

At the date of this report, Ernst & Young Europe has not yet acquired control of all EYG member firms in Europe which it is planning to control in line with applicable legal and regulatory requirements. However, the Europe Executive and the Europe Advisory council are fully functioning.

� In the UK

Ernst & Young UK is managed by a UK Board appointed by the Europe Executive and the UK Country Managing Partner (“the CMP”) who has full authority to deal with the UK Firm’s general and operational management. The CMP is appointed by the Europe Managing Partner who has the right to remove the CMP, with the consent of the Europe Executive having consulted with the UK Board and appropriate partners.

The CMP of Ernst & Young UK is Scott Halliday.

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The role of the CMP includes: � Representing Ernst & Young UK in the United Kingdom

� Providing leadership for the partners and employees of the UK Firm; and

� Acting as the interface with regulators and governmental authorities.

The CMP is supported by the Board. The Board is responsible for matters such as the general and operational management of the UK Firm as a whole, implementing the admission of new members, maintaining liaison with members, approving the financial statements and other matters delegated to it from time to time by the Europe Executive. At 3 July 2009 the UK Board comprised: Scott Halliday UK & Ireland (“UK&I”) Sub-Area

Managing Partner (“SAMP”) and CMP

Tom McGrath EMEIA Financial Services Organisation

(“FSO”) SAMP

Robin Heath Deputy SAMP, UK&I

Richard King Deputy SAMP, UK&I

For the year to 3 July 2009 the day to day management of the London and UKI non-financial services assurance practices was led by Sub-Area Assurance Leaders, Tim Gordon and Trevor Denny respectively. From July 2009 the UKI and London Sub-Areas merged to create one Sub-Area. The assurance practice within the merged UK&I Sub-Area is led by John Flaherty who reports directly to Pascal Macioce, Europe Assurance Leader and Scott Halliday, UK&I SAMP. The day to day management of the FSO Assurance practice in the UK is led by Jon Bourne who reports to the Europe Financial Services Assurance Leader, Victor Veger, who in turn reports to Pascal Macioce.

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Network arrangements

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, 144,000 people in over 140 countries are united by shared values and an unwavering commitment to quality. Ernst & Young makes a difference by helping its people, clients and wider communities achieve their potential.

In this report, Ernst & Young refers collectively to the global organisation of member firms of EYG, a UK company limited by guarantee. EYG is the central entity of the Ernst & Young network and coordinates the member firms and cooperation among them. EYG does not provide services to clients. Each member firm is a legally distinct entity. The member firms’ obligations and responsibilities are governed by the regulations of EYG and various other agreements.

The member firms are grouped into five geographic Areas: Americas, EMEIA (Europe, Middle East, India and Africa), Far East, Japan, and Oceania. The Areas comprise a number of Sub-Areas, which are composed of member firms or, in the case of large member firms, sections of those firms.

Ernst & Young UK belongs to EMEIA, which comprises member firms in 88 countries. Within the EMEIA Area, there are 12 Sub-Areas. Ernst & Young UK is part of both the UK&I and the EMEIA FSO Sub-Areas. Prior to July 2009, UK&I was made up of the ‘UK & Ireland’ and the ‘London’ Sub-Areas.

The structure of the global organisation is centred on two guiding principles: separating management and governance roles; and operating Ernst & Young as a global organisation with one shared strategy.

EYG’s principal global bodies include:

Global Advisory Council The Global Advisory Council includes approximately 40 member-firm partner-level professionals (referred to as “partners”) drawn from across the five Areas. These partners, who otherwise do not hold senior management roles, are elected by their peers. They advise EYG and Ernst & Young on policies and strategies. The approval of the Global Advisory Council is required for a number of significant matters that could affect Ernst & Young.

Global Executive The Global Executive brings together the three dimensions of Ernst & Young – functions, services and geographies. It is chaired by the Chairman and Chief Executive Officer of EYG, and includes its Chief Operating Officer; the Area Managing Partners; the global functional leaders – the Global Managing Partners of People, Markets, Quality & Risk Management and

Operations and Finance; and the global Service Line Vice Chairs – Assurance, Advisory, Tax and Transaction Advisory Services.

The Global Executive approves a nominee for the Chairman and Chief Executive Officer of EYG before the Global Advisory Council considers the nominee.

Global Executive Committees Chaired by members of the Global Executive and bringing together representatives from the five Areas, the Global Executive Committees are responsible for making recommendations to the Global Executive. There are committees for People, Quality & Risk Management, Markets, Operations and Finance, Assurance, Advisory, Tax, and Transaction Advisory Services.

Global Practice Group This group brings together the members of the Global Executive, Global Executive Committees and Sub-Area leaders. The Global Practice Group seeks to ensure common understanding across member firms of Ernst & Young’s strategic objectives and consistency of execution across the organisation.

All member firms are subject to specific requirements to maintain their member firm status, including the adoption of certain fundamental policies and processes. In certain circumstances, member firms are subject to reviews that evaluate their adherence to EYG requirements and policies governing issues such as independence, quality and risk management, audit methodology, operations and human resources. As necessary, other special focus reviews are performed to address situations or concerns, as they arise. Member firms unable to meet the quality commitments and other EYG membership requirements are subject to separation from the Ernst & Young network.

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Internal quality control system

Ernst & Young UK’s reputation for providing high quality professional audit services in an independent, objective and ethical manner is a key to our success as independent auditors.

At Ernst & Young UK, our role as auditors is to provide assurance on the fair presentation of audit clients’ financial reports. We bring together qualified teams to serve our clients, drawing on our expertise – across industry sectors and services. We are continually enhancing the consistency of our quality and risk management processes so that we can improve the quality of our client service.

We recognise that in today’s environment – characterised by continuing globalisation and the rapid movement of capital – the quality of our audit services has never been more important. Reflecting the strength of our commitment to delivering quality in everything we do, Ernst & Young has continued to invest heavily in building the audit methodology and tools to support quality service delivery. While the market continues to demand high quality audits, it also demands increasingly efficient and effective delivery of audit services. Ernst & Young continues to seek ways to improve the effectiveness and the efficiency of the audit methodology and processes, while maintaining audit quality.

Effectiveness of quality control system

Ernst & Young has designed and implemented a comprehensive set of global audit quality control policies and practices, as described herein. These policies and practices meet the requirements of the International Standards on Quality Control issued by the International Auditing and Assurance Standards Board (IAASB). Ernst & Young UK has adopted these global policies and procedures, and has supplemented them as necessary to comply with local laws and professional guidelines and to address specific business needs. We also execute the Ernst & Young Audit Quality Review (AQR) programme and annually evaluate whether our system of audit quality control has operated effectively in a manner so as to provide reasonable assurance that Ernst & Young UK and our personnel comply with applicable professional and Ernst & Young standards and regulatory requirements.

The results of the AQR programme and external inspections are evaluated and communicated within Ernst & Young UK to provide the basis for continuous improvement in audit quality, consistent with the highest standards in the profession.

The recent results of such monitoring together with the recent feedback from independent regulatory inspection visits provide Ernst & Young UK with a basis to conclude that our internal control systems are designed appropriately and are operating effectively.

In this section, we describe the various components of our audit quality control system:

• Instilling professional values

• Performing audits

• Review and consultation

• Document retention and data privacy

• Internal and external accountability

• Audit quality reviews

“We recognise that in today’s environment the quality of our audit services has never been more important.”

Lisa Cameron, UK and Ireland Sub-Area Q&RM Leader

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In the United Kingdom, the Financial Reporting Council’s (“FRC’s”) publication, “The Audit Quality Framework” (the “Framework”) aims to support effective communication between auditors and stakeholders on audit quality. The table below maps the components of our internal quality control system to the Framework.

Drivers of audit quality as identified by the Framework

Components of our internal quality control system

Page

The culture within an audit firm

Instilling professional values

Internal and external accountability

Audit quality review

9

13

15

The skills and personal qualities of audit partners and staff

Performing audits

Continuing education of our statutory auditors

10

21

The effectiveness of the audit process

Performing audits

Review and consultation

10

11

The reliability and usefulness of audit reporting

These drivers are covered as separate headings on the pages indicated.

16

Factors outside the control of auditors affecting audit quality

17

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Instilling professional values

Tone at the top Setting the right “tone at the top” is a key responsibility of our senior leadership team. We communicate to our people that quality and professional responsibility starts with them and is the most important thing they do every day. Our approach to ethics and integrity is embedded in training programmes and internal communications. Our senior management regularly reinforces these expectations and the importance of performing quality work and complying with professional standards and our policies. Our culture strongly supports collaboration and consultation and places special emphasis on the importance of consultation in dealing with complex or subjective accounting, auditing, reporting, regulatory and independence matters. We also emphasise the importance of determining that an engagement team and client have correctly followed consultation advice when necessary. Our internal message consistently has been that no single client is more important than professional reputation – the reputation of Ernst & Young UK and the reputation of each of our professionals. “Quality In Everything We Do” is a message that we continually reinforce to our people and clients.

Code of conduct We promote a culture of integrity, as well as the performance of high quality audits, among all professionals. Ernst & Young’s Global Code of Conduct provides a clear set of the standards and behaviours that guide our actions and our business conduct. It is organised into five categories containing principles that are to be followed by everyone within Ernst & Young UK to guide behaviour across all areas of activity:

• Working with one another

• Working with clients and others

• Acting with professional integrity

• Maintaining our objectivity and independence

• Respecting intellectual capital

Through our procedures to monitor compliance with the Global Code of Conduct and through frequent communications, we strive to create an environment that encourages all personnel to act responsibly, including reporting misconduct without fear of retaliation.

We also have EY/Ethics, a global ethics hotline, to provide Ernst & Young UK people, clients and others outside of the organisation with a means to report confidentially activity that may involve unethical or improper behaviour that may be in violation of professional standards or otherwise inconsistent with the Global Code of Conduct. EY/Ethics is operated by independent external organisations that provide confidential and, if so desired, anonymous, hotline reporting services for companies worldwide.

In addition to the Global Code of Conduct we have specific anti-bribery and insider trading policies.

Our values: Who we are

People who demonstrate integrity, respect and teaming.

People with energy, enthusiasm and the courage to lead.

People who build relationships based on doing the right thing.

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Performing audits

Audit methodology The Ernst & Young Global Audit Methodology (EY GAM) provides a global framework for the application of consistent thought processes, judgements and audit procedures to all audit engagements. One of the cornerstones of the methodology is making (and reconsidering and modifying, when appropriate, throughout the audit) risk assessments and then determining the nature, timing and extent of audit procedures based on those risk assessments. EY GAM is based on International Standards on Auditing (ISAs) and is supplemented in the UK to comply with the local UK auditing, regulatory or statutory requirements. Enhancements to the audit methodology are made on a regular basis as a result of new standards, emerging auditing issues, or implementation experiences.

Ernst & Young’s audit methodology is organised into interdependent phases designed to focus on the client’s business and financial statement risks and the way in which those risks affect our audit of the financial statements. EY GAM reflects the typical flow of an audit’s execution. The methodology and related guidance is presented in a three layer format. The three parts of EY GAM consist of the GAM Framework, GAM Performance Guidance and GAM Enablers. The GAM Framework is a concise description of how Ernst & Young UK performs an audit and provides links to the GAM Performance Guidance. The GAM Performance Guidance is organised in exhibits and provides more specific guidance on how and why we perform the procedures outlined in the methodology. The GAM Performance Guidance also describes parameters for making audit decisions. The GAM Enablers consist of templates, examples, checklists, and leading practice illustrations for performing and documenting audit procedures.

As part of Ernst & Young’s audit methodology, there are procedures to assess and ensure independence from the audit client.

Technology enablers Numerous technology enablers are used by audit engagement teams to assist in executing and documenting the work performed in accordance with EY GAM. For example, GAMx is an audit support tool that drives uniform execution of EY GAM and appropriate audit documentation, strengthening our ability to deliver consistent, high quality audits. It provides linked access to knowledge databases (audit guidance and interpretations), professional standards, documentation templates and other tools necessary to execute and document a risk based audit effectively.

GAMx provides a team collaboration environment that facilitates sharing information and documents, as appropriate. GAMx also enables secure peer-to-peer communications so our people can work together as if they were in the same physical location. Audit engagement teams use other software applications, forms and templates during various phases of an audit to assist in making and documenting audit considerations and data acquisition and analysis functions.

Formation of audit engagement teams Ernst & Young UK policies require an annual review of partner assignments by our Assurance leadership and Professional Practice Director (PPD) to make sure that the professionals leading listed company audits possess the appropriate competencies, i.e. the knowledge, skills and abilities, to fulfil their engagement responsibilities.

The assignment of people to audit engagement teams is also made under the direction of our Assurance leadership. Factors considered when assigning people to audit teams include: competence, engagement size and complexity, specialised industry knowledge and experience, timing of work, continuity and opportunities for on-the-job training. For more complex engagements, consideration is given to whether specialised or additional expertise is needed to supplement or enhance the audit engagement team.

In many situations, internal specialists assist the audit engagement team in performing audit procedures and obtaining appropriate audit evidence. We use these professionals in situations requiring special skills or knowledge, such as information systems, asset valuation and actuarial analysis. In those situations where internal specialists participate in the audit, they become part of the audit engagement team.

Involvement of Partners and Managers in audit planning

Our methodology requires audit partners to lead team planning events on their audit engagements. Team planning events are attended by all team members (from audit partner to the most junior staff member, as well as tax, IT and other specialists). This is an opportunity for senior members of the team to share their knowledge of the client’s business and industry and to coach and mentor more junior staff. At these meetings the partner is required to lead a discussion as to the risk of fraud.

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Review and consultation

Reviews of audit work Ernst & Young policies describe the requirements for timely, direct executive participation on audits and various levels of reviews of the work performed. Members of the audit engagement team perform a detailed review of the audit documentation while engagement executives perform a second level review. A tax representative reviews the significant tax and other relevant working papers. An independent review partner (described below) reviews certain working papers, as well as the listed company client’s financial statements and our report. The nature, timing and extent of the reviews of the working papers that are appropriate in a given instance depend on many factors, including the materiality, subjectivity and complexity of the subject matter; the ability and experience of the audit team member preparing the audit documentation; the level of the reviewer’s direct participation in the audit work and the extent of consultation employed.

These policies also describe the roles and responsibilities of each audit engagement team member and the requirements for documenting their work and conclusions.

Consultation requirements Consultation requirements and related policies and procedures are designed to involve the right resources so that audit teams can reach appropriate conclusions on relevant accounting, auditing, reporting, regulatory and independence matters. Consultation is a part of the decision making process, not just a process to provide advice. For complex and sensitive matters, we expect consultation outside of the audit engagement team with other personnel who have more experience or specialised knowledge, primarily Professional Practice and Independence personnel. We provide guidance on matters that require consultation.

Audit teams are required to consult with our technical specialists, the Financial Reporting Group, on complex UK GAAP and IFRS accounting and financial reporting matters. This group also performs a pre-issuance technical review of all UK listed company accounts. The Capital Markets Group performs a similar review of cross-border filings and transactions.

Ernst & Young policies also describe our requirements for documenting consultations, including the requirement to obtain written approval of the documentation from the person consulted to demonstrate the consultant’s understanding of the matter and its resolution.

Independent reviews Independent review partner involvement is required on all our listed and large public interest company audits. Independent reviewers are professionals with sufficient subject matter knowledge, independent of the engagement team and able to provide a further objective evaluation of significant accounting, auditing and reporting matters. In no circumstances may the responsibility of the independent reviewer be delegated to another individual. The independent review is an activity that spans the entire engagement cycle and is not limited to a review of the financial statements at the time of issuance of our report. Policies and procedures for the independent reviewer role provide guidelines on the nature, timing and extent of the procedures which depend on various attributes and risk characteristics of the client. Our PPD reviews and approves the allocation of all independent reviewers for listed companies.

Audit engagement team disagreement resolution process We have a collaborative culture and encourage our people to speak up if a professional disagreement arises or they are uncomfortable about a matter having to do with a client engagement. Policies and procedures are designed to empower our people by requiring members of an audit engagement team to raise any disagreements that are considered to be material or that may affect our opinion on the financial statements being audited. Such policies are introduced at the entry level and reinforced thereafter to instil in our people both the responsibility and authority to require a thorough hearing and vetting of differing viewpoints.

Differences of professional opinion that arise during an audit generally are resolved at the audit engagement team level. However, if any individual involved in the discussion of an issue is not satisfied with the decision, he or she has both the right and the obligation to see that the issue is referred to the next level of authority. If the independent reviewer makes recommendations that the engagement partner does not accept and the matter is not resolved to the reviewer’s satisfaction, the report is not issued until the matter is resolved by following the appropriate procedures for resolution of professional differences.

Major issues of principle or judgement arising on listed company audits and public interest entities are referred to a panel of independent experienced audit partners, the Professional Standards Panel (“PSP”). PSP consultations on going concern issues have risen significantly in response to the credit crisis, on both listed and unlisted entities.

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Document retention and data privacy Ernst & Young UK’s record retention policy applies to all engagements and personnel. The policy addresses UK legal requirements applicable to the creation and maintenance of working papers relevant to the work performed. This policy also emphasises that all documents are to be preserved whenever any person becomes aware of any actual or reasonably anticipated claim, litigation, investigation or other government proceeding involving us or one of our clients that may relate to our work.

Ernst & Young has a global policy on data privacy that sets out the principles to be applied to the use and protection of personal data, including that relating to current, past and prospective personnel, clients, suppliers and business associates. It provides a foundation for maintaining the privacy of all personal data used by Ernst & Young UK. Furthermore, Ernst & Young UK has a policy to address its specific UK data privacy requirements and business needs.

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Internal and external accountability

Audit partner rotation We comply with the audit partner rotation requirements of IFAC and the Auditing Practices Board’s Ethical Standard (ES) 3, “Long Association with the Audit Engagement”. Ernst & Young UK supports audit partner rotation because it provides a fresh perspective and promotes independence from company management.

To ensure our compliance with ES3, our Rotation and Succession Planning Board (RASPB) meets quarterly to discuss the succession planning for key roles on our largest listed clients. This process aims to ensure that the most appropriate individuals, with the necessary skills and experience are chosen for each role, on each engagement. The RASPB is also responsible, for example, for ensuring that following rotation (after five years for a listed client), the partner does not resume the lead or independent review role until a minimum of five years has elapsed.

For unlisted companies the UK Professional Practice Director (“PPD”) approves any lead engagement partner intending to serve beyond ten years, and ensures that appropriate safeguards are put in place.

To monitor requirements on partner rotation effectively, we have tools with which we track partner rotation. We also have implemented a process for partner rotation planning and decision making that involves consultation with and approvals by our Professional Practice and Independence professionals.

Client acceptance and continuance Ernst & Young’s client acceptance and continuance policy sets out principles to determine whether to accept a new client or a new engagement, or to continue a relationship with an existing client. These principles are fundamental to maintaining quality, managing risk, protecting our personnel and meeting regulatory requirements. The objectives of the policy are to:

• Establish a rigorous process for making decisions to accept/continue clients or engagements

• Meet applicable independence requirements

• Identify and deal appropriately with any conflicts of interest

• Identify and decline clients that pose excessive risk

• Require consultation with designated professionals to identify additional risk management procedures for specific high risk factors

• Comply with legal, regulatory and professional requirements.

In 2008, EYG member firms including Ernst & Young UK deployed the Global Tool for Acceptance and Continuance (GTAC). GTAC is an intranet based system for efficiently co-ordinating client and engagement acceptance and continuance activities in line with global, service line and member firm policies. GTAC takes users step-by-step through the acceptance and continuance requirements and connects to the resources and information needed to assess both business opportunities and associated risks.

The client acceptance process involves a careful consideration of the risk characteristics of a prospective client and several due diligence procedures. Before we take on a new engagement or client, we determine if we can commit sufficient resources to deliver quality service, especially in highly technical areas, and that the services the client wants are appropriate for us to provide. The approval process is rigorous, and no new listed audit engagement may be accepted without the approval of our PPD.

In our annual client continuance process, we review our service delivery and ability to continue to provide quality service and confirm that clients share Ernst & Young UK’s commitment to quality and transparency in financial reporting. The partner in charge of each audit, together with our Assurance leadership, annually reviews our relationship with the audit client to determine whether continuance is appropriate. As a result of this review, certain audit engagements are identified as requiring, and are then subjected to, additional oversight procedures during the audit, and some clients are discontinued. As with the client acceptance process, our PPD is involved in the client continuance process and must concur with the continuance decisions.

Both client acceptance and client continuance decisions depend on, among other things, the absence of any perception that a company’s management pressures the audit engagement team to accept inappropriate accounting and reporting or uses financial pressures to undermine audit quality. Considerations and conclusions on the integrity of management are essential to acceptance and continuance decisions.

When an engagement potentially poses more than moderate risk to the firm, it is designated for close-monitoring. The purpose of this designation includes ensuring that we fully understand the issue, our audit strategy addresses the risks, we assign the appropriate resources including specialists and

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the client understands the role they need to play in resolving the issue driving the higher risk.

A Close Monitoring Review Board considers and monitors the risks associated with the continuance of all close monitored clients, including the adequacy of the close monitoring procedures and the team allocated to such clients.

The Close Monitoring Review Board meets on a regular basis and is chaired by the PPD and attended by two members of the Professional Standards Panel and the Sub-Area Assurance Leader.

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Audit quality reviews

Ernst & Young UK executes the global Audit Quality Review (AQR) programme. The global AQR programme complies with guidelines in the International Standard on Quality Control No. 1, as amended (ISQC No.1) and is supplemented where necessary to comply with UK professional standards and regulatory requirements. The primary goal of the global AQR programme is to determine whether systems of quality controls, including those of Ernst & Young UK, are appropriately designed and followed in the execution of audit engagements to provide reasonable assurance of compliance with applicable policies and procedures, professional standards and regulatory requirements. The AQR programme also aids Ernst & Young UK’s continual efforts to identify areas where we can improve our performance or enhance our policies and procedures.

The engagements reviewed each year are selected on a risk based approach emphasising clients that are large, complex or of significant public interest, with the objective of covering engagements for approximately one third of audit partners. The AQR programme includes detailed, risk focused file reviews covering a large sample of listed and non-listed audit engagements to measure compliance with internal policies and procedures, EY GAM requirements and relevant local professional standards and regulatory requirements. In addition, practice level reviews are performed to assess compliance with quality control policies and procedures in the functional areas set forth in ISQC No. 1. The AQR programme complements external practice monitoring and inspection activities, such as regulatory inspection programmes and external peer reviews.

The professionals who serve as AQR reviewers and team leaders are selected based on their skills and professional competence in both accounting and auditing as well as their industry specialisation. Additionally, team leaders and reviewers typically work in the AQR programme over a period of several years and possess a high level of skill in the execution of the programme. Team leaders and reviewers are assigned to inspections outside of their home location and are independent of the audit teams reviewed.

Results of the AQR programme and external practice monitoring and inspection activities are evaluated and communicated so that quality improvement actions can be taken at the appropriate level. Measures to resolve audit quality issues noted from the AQR programme, regulatory inspections and peer reviews are addressed by our Assurance leadership and our PPD. The actions identified are monitored by the PPD. These programmes provide important practice monitoring feedback for our continuing quality improvement efforts.

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The reliability and usefulness of audit reporting

Our audit report

Audit reports issued by Ernst & Young UK conform to the requirements of International Standard of Auditing (UK & Ireland) 700 “The Auditor’s Report on Financial Statements”.

The wording of our standard ‘unqualified’ audit reports is largely dictated by regulation.

Changes to audit report wording as a result of legislative or regulatory updates are made promptly and with full and detailed training given to all practitioners.

Our audit methodology and the consultation processes described in previous sections of this report provide us with the ability to properly conclude on the truth and fairness of the financial statements, and ensure that our audit reports are written in a clear and unambiguous manner.

Communications with the audit committee

The Firm’s policy is to communicate in writing with the audit committee of all clients at the completion stage of the audit (for our largest clients we also communicate in writing at the planning stage of the audit). These communications include, at a minimum, those items which we are expressly required to communicate in writing according to International Standards on Auditing (UK & Ireland) and the Auditing Practices Board’s Ethical Standards.

It is our policy to consider all audit matters of governance interest that arise from the audit of the financial statements and communicate them on a timely basis to the audit committee.

Our communication and discussion with the audit committee falls broadly into four categories:

� planning matters including the scope of the audit;

� audit findings and results including the key financial reporting risks identified and judgements made in reaching the audit opinion and the qualitative aspects of the entity’s accounting and reporting and potential ways of improving financial reporting.

� internal control matters; and

� independence.

Whilst our internal policies as well as market regulation requires a certain minimum level of written communication between ourselves and the audit committee, the belief at Ernst & Young is that effective two-way communication with the audit committee is essential to the achievement of an efficient and effective audit, and is a specific consideration when we perform our audit planning work and client continuance assessments.

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Factors outside of our control affecting audit quality

There are three contributors to an effective audit and the related audit process:

� the auditor who carries it out;

� the company that supports it; and

� the regulator that oversees it.

The global regulatory environment is changing with unprecedented pace. We respond to these changing regulations with speed and clarity by having teams of in-house technical resource dedicated to influencing, analysing and implementing regulatory change, and providing appropriate technical training and guidance material for our staff and our clients.

Notwithstanding the resources, policies and procedures that we have in place internally to ensure that our audits are executed consistently to a high quality standard other external factors also play a part in determining the quality of an audit.

The quality and robustness of our clients’ financial reporting systems, their internal control environment, the effectiveness of their internal governance processes, the quality of client personnel and the nature of the macro-economic and political environment are also key contributors to audit quality. We of course work with our clients to identify and recommend improvements in their control and governance procedures, but the ultimate outcome is outside of our control.

We set out below some of the activities undertaken by the Firm that help promote good corporate governance, audit quality and overall confidence in the capital markets.

Reporting deadlines

Whilst we seek to accommodate required reporting deadlines within our audit planning process, in order to be effective a certain proportion of our procedures cannot be performed before the year end date. Aggressive reporting timetables therefore mean that the quality and quantity of work that can be performed can be at risk of compromise. Where we identify potential issues in this regard, we raise this with our client and seek a solution that is acceptable to all. The appropriateness of reporting deadlines is a consideration in our annual client continuance assessment.

Other activities

As a Firm we are actively involved in shaping and influencing better financial reporting, corporate governance and overall confidence in the capital markets. For example:

� by responding to consultations on auditing, corporate governance, financial reporting and relevant legal changes issued by various regulatory bodies such as the Financial Reporting Council (FRC) and its component bodies including the Professional Oversight Board, the Department of Business, Innovation and Skills (formerly Department of Business, Enterprise and Regulatory Reform), and the EC.

� in sharing best practice and awareness on corporate governance, regulatory and financial reporting matters via Ernst & Young forums such as:

� The Independent Director Programme which offers technical workshops, thought leadership and tips and tools on how to handle the latest regulatory and technical issues, and

� The Audit Committee Chair Forum which acts to influence the direction of regulation as it impacts on audit committees and also act as a vehicle to develop points of view and best practice.

The Firm is also represented by partners and senior professional staff on various accounting and auditing professional bodies and organisations such as:

� The Institute of Chartered Accountants in England and Wales (ICAEW)

� The Institute of Chartered Accountants in Scotland

� The Accounting Practices Board

� The Accounting Standards Board

� Confederation of British Industry

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External quality assurance review

Ernst & Young UK’s audit practice is subject to annual inspection by the Audit Inspection Unit (AIU) of the FRC, and the Quality Assurance Department (QAD) of the ICAEW. As part of its inspections, the AIU evaluates the Firm’s quality control systems and reviews selected engagements.

The final public report on the AIU’s 2007/8 inspection was issued on 8 December 2008. The last quality assurance inspection by the AIU took place in 2008/9 and a public report is expected to be issued in late 2009. The 2009/10 inspection is currently in progress.

Information on the AIU, along with publicly available inspection report, can be found on:

http://www.frc.org.uk/pob/audit/firmreports.cfm

For audits reviewed by the AIU after 1 January 2008, an engagement findings letter is prepared. Our policy is to share this letter on a confidential basis with the directors of the company whose audit was reviewed.

The last QAD inspection took place in 2008, and their private report was issued on 14 May 2009.

Ernst & Young UK is also registered with the Public Company Accounting and Oversight Board (PCAOB) in the US, who conducted a joint review with the AIU of the UK Firm in 2006. Their reporting has not yet been finalised and published in its final form.

Additionally, Ernst & Young UK is in the process of registering with the Japanese Financial Services Agency and the Netherlands Authority for Financial Markets.

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Independence practices

Ernst & Young’s independence policies and processes are designed to enable Ernst & Young UK and our professionals to comply with the independence standards applicable to specific engagements, including, for example, independence standards under the International Federation of Accountants (IFAC) Code of Ethics and the Auditing Practices Board Ethical Standards. All professionals and certain other employees are required to participate in annual independence learning, to help maintain our independence when performing services for audit clients. The goal is to help our people understand both their personal and Ernst & Young UK’s obligations to be free from interests that might be regarded as being incompatible with objectivity, integrity and impartiality in serving an audit client.

We consider and evaluate independence from several relevant perspectives including the financial relationships of both our Firm and our people (as required by applicable professional standards), employment relationships, business relationships, the potential non-audit services we provide to audit clients, partner rotation, fee arrangements, Audit Committee pre-approval where applicable and partner remuneration and compensation.

A professional’s failure to comply with applicable professional independence requirements will generally factor into promotion and compensation decisions, and may lead to other disciplinary measures.

We have implemented several Ernst & Young global applications, tools and processes to support us, our professionals and other employees in complying with independence policies.

Global Independence Policy Ernst & Young’s Global Independence Policy contains the independence requirements for member firms, professionals and other employees. It is a robust policy predicated on IFAC independence rules, with more stringent requirements where prescribed by applicable regulators. The Global Independence Policy also contains helpful supplementary guidance on a wide range of topics to aid professionals and other employees in applying the complex independence rules. The Global Independence Policy is readily accessible through our intranet.

Global Independence System Ernst & Young’s Global Independence System (GIS) is an intranet based tool that helps us, our professionals and other employees determine the listed entities from which independence is required and the independence restrictions that apply to each one. Most often these are listed audit clients and their affiliates, but they can be other types of attest or assurance clients. The tool includes family tree data relating to affiliates of the listed audit client and is updated by client serving engagement teams drawn from data provided by our clients. The entity data includes notations that indicate the independence rules which apply to each entity so our professionals can readily see both the entity and the independence notations. GIS is frequently used by our professionals to determine the type of services that can be provided to the client based on the independence notations.

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Global Monitoring System Ernst & Young’s Global Monitoring System (GMS) is another important global tool that assists us and our professionals in identifying proscribed securities and other financial interests that are not permissible to own. GMS requires professionals with certain seniority to report all securities held by them or their immediate families, as an aid to monitoring their personal independence. It also permits annual and quarterly confirmation of compliance with Ernst & Young independence policies.

Independence Compliance Team Ernst & Young’s Global Independence Compliance Team (GICT) conducts an array of testing and member firm visits to assess compliance with several independence matters, including reviewing for non-audit services, business relationships with audit clients and financial relationships of member firms. The GICT also oversees a worldwide programme of testing compliance of personal investments with independence requirements.

Ernst & Young UK confirms that the GICT completed an internal review of independence compliance during 2009.

Service Offering Reference Tool We assess and monitor our portfolio of services on an ongoing basis, confirming that they are permitted by law and professional standards, and to make sure that we have the right methodologies, procedures and processes in place as we develop new service offerings. When appropriate, we exit or restrict services that could present independence or other risks. During 2008, Ernst & Young deployed the Service Offering Reference Tool (SORT) which provides our people with information about our service offerings. SORT includes guidance around which services can be delivered to audit and non-audit clients, and independence and other risk management issues.

Business relationship evaluation tool We oversee compliance with business relationships independence requirements through our business relationships evaluation tool. Our Firm, our professionals and other employees are required to evaluate and obtain approval of potential business relationships with audit clients and other entities in advance so that our business relationships are consistent with applicable independence professional standards.

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Continuing education of statutory auditors

Recruitment and hiring A strategic objective is to attract and build life-long relationships with talented audit professionals. Recruiting for the Assurance practice is performed primarily on university campuses and supplemented, when necessary, by hiring people with prior work experience.

Candidates are evaluated based on the following competencies:

• Technical skills and knowledge

• Intellectual competence

• Leadership skills

• Team/personal skills

• Motivation

• Communication skills

• Administrative skills

Professional development and performance management This year marked the launch of EYU, Ernst & Young’s globally consistent career development framework. Through EYU, we provide our people opportunities for the right experiences, learning and coaching to help them grow and achieve their potential. EYU also provides a structured learning curriculum that offers content to help our people develop their skills and accelerate their careers. EYU expands the commitment to coaching via various forms of counselling and mentoring, from the moment people are recruited through the various phases of their careers.

A comprehensive performance management process requires our people to set goals, have clear work expectations, receive feedback and talk about their performance. The Performance Management and Development Process (PMDP) is designed to help our people grow and succeed in their careers. Under the PMDP, periodic job performance reviews are combined with annual self-appraisal and annual reviews. As part of the annual review process, each professional, in conjunction with his or her counsellor (an assigned, more experienced professional), identifies opportunities for further development. Professionals and their counsellors are guided by a set of service line competencies that articulate the knowledge and skills that should be maintained and developed for the respective rank.

We offer an extensive array of formal learning programmes for all levels of professionals. The core audit training courses are supplemented by learning programmes that are developed in response to changes in accounting and reporting standards, independence and professional standards, and emerging practice issues. A comprehensive learning and development framework outlines the experiences, learning and coaching required for continuing education. We require our audit professionals to obtain at least 20 hours of continuing professional education each year and at least 120 hours over a three year period. Of these hours, 40 % (eight hours each year and 48 hours over a three year period) must cover technical subjects related to auditing and accounting.

In addition to formal learning, professional development occurs through coaching and experiences our professionals receive on the job. Coaching helps to transform knowledge and experience into practice. Experienced professionals are expected to coach and develop less experienced personnel to create a continual learning environment.

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Financial information

This financial information presented below includes expenses billed to clients and revenues related to billings to other EYG member firms. Financial information for the year ended 3 July 2009 Service Revenue (£m)

2009

Percent

Assurance 360 26%

Advisory 342 25%

Tax 392 28%

Transaction Advisory 289 21%

Total 1,383 100%

Assurance includes statutory audit, accounting advisory and other assurance services. Advisory includes actuarial, business risk (including internal audit), information security, forensics and performance improvement services. Tax includes business and personal tax, indirect tax, human capital and international tax services. Transaction Advisory includes M&A advisory, project finance, transaction real estate, restructuring, transaction support and integration, valuations and business modelling services.

Service Revenue (£m)

2009

Audit Clients Non-audit Clients

Assurance 330 30

Advisory 29 313

Tax 122 270

Transaction Advisory 48 241

Total 529 854

Service Revenue (£m)

2009

Audit Clients Non-audit Clients

Statutory audit 302 -

Other assurance 28 30

Total assurance 330 30

Financial information for the year ended 30 June 2008

Service Revenue* (£m)

2008

Percent

Assurance 368 29%

Advisory 294 23%

Tax 369 29%

Transaction Advisory 251 19%

Total 1,282 100%

*Some elements have been reclassified from the 2008 Transparency

Report to be consistent with current year classifications.

Service Revenue* (£m)

2008

Audit Clients Non-audit Clients

Assurance 352 16

Advisory 41 253

Tax 134 235

Transaction Advisory 67 184

Total 594 688

Service Revenue* (£m)

2008

Audit Clients Non-audit Clients

Statutory audit 332 -

Other assurance 20 16

Total assurance 352 16

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Partner remuneration

Quality is at the centre of our business strategy and a key component of our performance management systems. Partners and other professionals are evaluated and compensated based on criteria that include specific quality and risk management indicators, covering both actions and results.

The Global Partner Performance Management (GPPM) process is a globally consistent evaluation process for all partners in Ernst & Young member firms around the world. It reinforces the global business agenda by linking their performance to wider goals and values. GPPM is an ongoing cyclical process that includes goal setting, personal development planning, performance review and recognition and reward. It is used as the cornerstone of the evaluation process to document our professionals’ goals and performance.

We prohibit evaluating and compensating audit engagement partners, key partners involved in the audit (including specialists designated as such), and other members of the audit team based on the sale of non-audit services to their audit clients. This reinforces to our people their professional obligation to maintain our independence and objectivity.

Specific quality and risk management performance measures have been developed to take account of:

• Technical excellence

• Living our values as demonstrated by behaviours and attitude

• Demonstrating knowledge of and leadership in quality and risk management

• Compliance with policies and procedures

• Compliance with laws, regulations and professional duties

• Contributing to protecting and enhancing the Ernst & Young brand

Our partner compensation philosophy calls for meaningfully differentiated rewards based on a partner's level of performance, as measured by the GPPM process. To recognise different market values for different skills and roles, and to attract and retain high performing individuals, the following factors are also considered when calculating total reward: stewardship, role and responsibility, long term potential and mobility.

Instances of non-compliance with quality standards result in remedial actions, which may include compensation adjustment, additional training, additional supervision, or reassignment. A pattern of non-compliance or particularly serious non-compliance may result in actions that include a partner to withdraw from the Firm.

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Appendix: Public interest entity audit clients In the financial year ended on 3 July 2009, Ernst & Young UK performed statutory audits of the following public interest entities.

“Public Interest Entity” as defined by the Statutory Auditors (Transparency) Instrument 2008, means an issuer:

a) Whose transferable securities are admitted to trading on a regulated market; and

b) The audit of which is a statutory audit within the meaning of section 1210 of the Companies Act 2006;

“issuer” and “regulated market” have the same meaning as in Part 6 of the Financial Services and Markets Act 2000 (see sections 102A to 103);

“transferable securities” means anything which is a transferable security for the purposes of Directive 2004/39/EC of the European Parliament and of the Council on Markets in Financial Instruments.

In addition to entities which meet the above definition, we have also included audit clients of the UK Firm which have transferable securities listed on a regulated market, but which are incorporated in overseas jurisdictions including Jersey, Guernsey and the British Virgin Islands.

3i Group Plc 3i Infrastructure Limited 3i Quoted Private Equity Limited Aberdeen Asian Income Fund Limited Aberdeen Asian Smaller Companies Investment Trust PLC Aberforth Geared Capital & Income Trust Plc Aberforth Smaller Companies Trust plc Absolute Return Trust Limited Acal Group Plc Active Capital Trust plc AGA Rangemaster Group plc Aldersgate Finance Limited Antonov plc Aqua Resources Fund Limited Asda Group Limited Assura Group Limited AVEVA Group plc AVIVA plc Baker Street Finance Limited Baker Street USD Finance Limited Bennelong Asia Pacific Multi Strategy Equity Fund Limited BlackRock Commodities Income Investment Trust plc BlackRock Greater European Investment Trust plc BlackRock New Energy Investment Trust plc Blackrock New Energy Technology plc BlackRock World Mining Trust plc Bluecrest Allblue Fund Limited

Boussard & Gavaudan Holding Limited BP Capital Markets Plc BP plc BPP holdings plc Brit Insurance Holdings Plc British Airways Finance (Jersey) LP British Airways Plc British Assets Trust Plc British Empire Securities and General Trust Plc Britvic Plc Brixton Plc Cairn Energy plc Cazenove Absolute Equity Limited CeDeOs 1 Limited Ceres Agriculture Fund Limited Chaucer Holdings plc Chiswell Street Finance Limited City Merchants High Yield Trust Plc Clarkson Plc Clifton Street Finance Limited Close Fund Management Portfolios II PCC Ltd Communisis plc Computacenter plc Core VCT I Plc Core VCT II Plc Core VCT III Plc Core VCT IV Plc Core VCT V Plc Cranswick plc Czech & Slovak Investment Corporation Inc Dairy Crest Group Plc Dana Petroleum Domino's Pizza UK & IRL plc Dorset Street Finance Limited Dynaso 2002-1 Limited Dynaso 2004-1 Limited Dynaso 2005-1 Limited Dyson Group plc DZ Bank Perpetual Funding Issuer (Jersey) Ltd e2v technologies plc EcoBat Technologies Ltd Ecofin Water & Power Opportunities plc Economic Lifestyle Property Investment Co Limited Edinburgh New Income Trust Plc Electric & General Investment Trust plc Enterprise Inns PLC EP Global Opportunities Trust plc Erste Finance (Jersey) 2 Limited Erste Finance (Jersey) 4 Limited Erste Finance (Jersey) 6 Limited ETFS Commodity Securities Limited ETFS Metal Securities Ltd ETFS Oil Securities Limited Eurocastle Investment Limited European Capital Limited European Prime Real Estate No 1 Plc F&C Event Driven Limited F&C Managed Portfolio Trust plc F&C Private Equity Trust plc F&C UK Select Trust plc

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Ferrexpo Plc Finsbury Worldwide Pharmaceuticals Trust Foresight 2 VCT Plc Foresight 3 VCT plc Foresight 4 VCT plc Foresight VCT Plc Free Mobility No 3 Limited Fresnillo Plc Fulham Road Finance Limited Fuller Smith & Turner Plc Gartmore Fledgling Trust Gartmore Irish Growth Fund Plc GB Group Plc Gem Diamond Ltd Glasgow Income Trust Plc GLC Gestalt Europe Fund Limited Global MENA Financial Assets Limited Go Ahead Group plc Goals 2006-1 Limited Greene King Plc Gresham Computing PLC Hanover Street Finance Limited HarbourVest Global Private Equity Partners Limited Haus 1998-1 Limited HDF (UK) Holdings Limited Hemisphere Defensive HF (USD) Limited Hemisphere Defensive HF PCC Limited Henderson Far East Income Limited Henderson Global Property Companies Ltd Henderson Group Plc Herald Investment Trust Heywood Williams Group plc Highway Management (City) Finance Plc HMV Group plc Hochschild Mining HT Finanzanlage Limited Huntsworth plc IG Group Holdings plc Impax Environmental Markets plc Independent Investment Trust plc Innovation Group plc InterContinental Hotels Group PLC Invensys plc Invesco - Perpetual European Absolute Return Trust plc Invesco - Perpetual European Investment Trust plc Invesco English And International Trust Plc Invesco Perpetual AIM VCT plc Invesco Perpetual Select Trust Plc Investec plc Investors Capital Trust plc IRP Property Investments Limited ISIS Property Trust 2 Limited ISIS Property Trust Limited Japanese Accelerated Performance Fund Limited John Hancock Global Funding Ltd JPMorgan Claverhouse Investment Trust plc JPMorgan Elect plc JPMorgan European Investment Trust Plc JPMorgan Global Convertibles Investment Company Limited JPMorgan Income & Growth Plc

JPMorgan Mid Cap Investment Trust plc JPMorgan Russian Securities plc JPMorgan US Discovery Investment Trust plc Jupiter Dividend & Growth Trust Plc Jupiter European Opportunities Trust Plc Jupiter Second Enhanced Income Trust PLC Jupiter Second Split Trust PLC JZ Capital Partners Limited JZ Equity Partners Plc Kazakhmys Plc Kent Reliance Building Society Keystone Investment Trust plc KGR Absolute Return PCC Limited Kofax Plc Konsus 2004-1 Limited L Bonds Plus Limited Ladbrokes Group Finance Plc Ladbrokes PLC Lafayette Sovereign CDO 1 Limited Laird Plc Lancaster Place Finance Limited Landmark Mortgage Securities No 2 Plc LCP Proudreed Plc League 2004-1 Limited League 2005-1 Limited LSL Property Services Plc Luxfer Holdings PLC M S INTERNATIONAL PLC Magnolia Finance Limited Majedie Investments plc Mapeley Limited Marble Arch Residential Securitisation No 2 Limited Marble Arch Residential Securitisation No.3 Limited Martin Currie Pacific Trust Martin Currie Portfolio Trust Mecom Group Plc Melchior Japan Investment Trust MetLife of Connecticut Institutional Funding Limited Midas Capital plc Midas Income & Growth Trust plc Midgaard Finance Limited Mitchells & Butlers PLC Mizuho International Plc Montanaro European Smaller Companies Trust plc Montier Long Short Equity Fund of Funds Limited Montier Multi-Strategy Fund of Funds Limited MS International Plc Murray Income Trust Plc Murray International Trust Plc MW TOPS Limited National Express Group PLC New Hospitals (St Helens and Knowsley) Holdings Ltd New India Investment Trust New Star Investment Trust Plc New Star RBC Hedge 250 Index Exchange Traded Securities PCC Limited Newcourt Street Finance Limited NEXT plc Nomura Bank International plc Northumbrian Water Group plc

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Omega Insurance Holdings Limited Optos Plc Oxford Street Finance Limited Pacific Horizon Investment Trust plc Pembridge Square Finance Limited Personal Assets Trust plc Peterborough (Progress Health) Holdings Ltd Petrofac Limited PGI Group plc Phaunos Timber Fund Ltd Pinewood Shepperton plc Piraeus CDO 1 Limited Premier Energy & Water Trust plc Premier Renewable Energy Fund Limited Primary Health Properties PLC Private Equity Investor PLC Punch Taverns Regent Street Finance Limited Renold Plc Rente Plus Company Limited Rente Plus Limited Resolution Limited Road Management Consolidated Plc Road Management Group Ltd Road Management Services (A13) Holdings Limited Road Management Services (Darrington) Holdings Limited Road Management Services (Finance) Plc Royal London UK Equity and Income Trust plc Rutley European Property Limited Schroder Emerging Markets Fund Schroder Institutional Developing Market Schroder Oriental Income Fund Schroder UK Mid and Small Cap Fund plc Scottish Power UK plc SDL Plc Sherwood Castle Funding Series 2002-1 plc Sherwood Castle Funding Series 2002-2 plc Sherwood Castle Funding Series 2003-1 plc Sherwood Castle Funding Series 2003-2 plc Sherwood Castle Funding Series 2004-1 plc Sherwood Castle Funding Series 2004-2 plc Sherwood Castle Funding Series 2004-3 plc Sherwood Castle Funding Series 2005-1 plc Sherwood Castle Funding Series 2006-1 plc Sherwood Castle Funding Series 2003-A Ltd Sherwood Castle Funding Series 2003-B Ltd Shore Capital Group Plc Skyepharma Plc Smith & Nephew plc SOMF Limited South East Water (Finance) Limited Spirent plc Spring Group Plc Standard Life UK Smaller Companies Trust plc Stobart Group Limited Strategic Equity Capital Plc Styx 2005 - 1 Limited SVG Capital Plc SVM Global Fund Plc SVM UK Active Fund

SVM UK Emerging Fund Sydney Street Finance Limited T R Property Investment Trust Plc Temple Bar Investment Trust plc Tempo CDO 1 Limited The Advantage Property Income Trust Limited The Capita Group Plc The Commercial Property Growth Fund Limited The Commercial Property Income Fund Limited The Defined Capital Return Fund Limited The Egyptian Growth Investment Company Limited The Horizon Fund The Horizon Fund PCC Limited The Prospect Japan Fund Limited The Society of Lloyds The Weir Group PLC The Westbury Commercial Property Fund Limited Theatre (Hospitals) No.1 Plc Third Point Offshore Investors Limited Tyseley Finance Plc (listed debt) UBS Capital Securities (Jersey) Limited UBS Preferred Funding (Jersey) Limited UK Commercial Property Trust Ltd Uni-Hedge Diversified IC Limited Uni-Hedge GBF Alternative IC Limited United Business Media Urenco Ltd UTV Media Plc Virgin Media Finance Plc VTB Bank Europe plc Waveland - INGOTS Limited Whitbread PLC White Tower 2006-3 Plc Xaar Plc Xstrata plc