Chapter 10: Structure and Regulation of the Accountancy Profession

Question 1

Who can call themselves an accountant?

Answer 1

• The term accountant is not legally protected - you do not need to be a member of an accountancy body

Question 2

What are the three reserved areas of services?

Answer 2

Effectively anyone can call themselves an accountant and offer the full range of services apart from:

• Statutory audit
• Investment business
• Insolvency

Question 3

What is the Consultative Committee of Accountancy Bodies? (CCAB)?

Answer 3

• Consists of five major accountancy bodies (ICAEW, ICAS, Chartered Accountants Ireland, ACCA< CIPFA) who came together in 1974
• Provides a discussion forum and representative of profession (e.g. to government)

Question 4

What is the IFAC?

Answer 4

International Federation of Accountants (IFAC): An international organisation to promote high ideals of standards, ethics and accountancy issues worldwide
- The accountancy bodies in the UK and Ireland are also members of the IFAC

Question 5

Who can describe themselves as a Chartered Accountant?

Answer 5

Only full qualified members of chartered accountants can describe themselves as a Chartered Accountant:

• ICAEW
• ICAS (Scotland)
• The Institute of Chartered Accountants in Ireland

Question 6

Why is regulation needed?

Answer 6

Any profession needs regulation to ensure that the public interest is protected in areas that are too complex for the public to reasonably understand (actuaries, accountants, surveyors, doctors)

Question 7

What are some types of regulation?

Answer 7

• Direct government regulation via legislation
• Separate government agency
• Self-regulation by industry itself
• Combination

Question 8

What is the role of the government in the regulation of the accounting profession?

Answer 8

The government has overall responsibility for the effectiveness of the regulatory framework of the accountancy profession but delegates certain statutory powers to the Financial Reporting Council (FRC)
- The FRC also sets the Corporate Governance and Stewardship Codes

Question 9

What is the role of the ICAEW in regulation?

Answer 9

• Self-regulation: The ICAEW has regulatory responsibility for supervising all members to maintain professional standards and the reputation of the profession
• ICAEW (via CCAB) is also a ‘recognised professional regulator’ over members/firms acting in reserved areas (audit, insolvency, investment business)

Question 10

What are the three main roles of the FRC Professional Oversight Board?

Answer 10

• Non-statutory: regulation of members with regards to matters not relating to statutory audits
• Statutory Regulation: registration, monitoring and disciplining of statutory auditors
• Independent Monitoring: by the Audit Quality Review Team of the quality of the auditing function in relation to major public interest entities (such as listed companies)

Question 11

What are the three main roles of the FRC Professional Oversight Board?

Answer 11

• Non-statutory: regulation of members with regards to matters not relating to statutory audits
• Statutory Regulation: registration, monitoring and disciplining of statutory auditors
• Independent Monitoring: by the Audit Quality Review Team of the quality of the auditing function in relation to major public interest entities (such as listed companies)

Question 12

What is the FCA?

Answer 12

The Financial Conduct Authority is an independent body regulating and supervising the financial services not covered by the PRA (such as asset managers and independent financial advisors)

Question 13

What are the main roles of the FCA?

Answer 13

• Promote effective competition
• Ensuring that markets function well
• Regulating the conduct of all financial services (prevent market abuse)

Question 14

How does the work of the FCA impact accountants?

Answer 14

• Regulations on investment business (‘a reserved area’)

- Corporate governance work on listed companies

Question 15

Who are the other financial regulators?

Answer 15

Other financial regulators include:

• The Financial Ombudsman: settles disputes between providers of financial services and their customers
• The Pensions Regulator: regulates work-based pensions

Question 16

What’s the difference between statutory and non-statutory?

Answer 16

Statutory to: require audit firms to amend procedures, recommend appropriate regulatory action to recognised supervisory powers

Non-statutory to: Recommendations on education, training and continuing professional development, ethical matters (non-audit), professional conduct and discipline, registration, monitoring

Question 17

What is the PSD?

Answer 17

The ICAEW’s Professional Standards Department: seek to investigate complaints and taken appropriate action to maintain public confidence in ICAEW and the accountancy profession

Question 18

What is the overview of the PSD procedure?

Answer 18

1. Complaint to PSD - part of ICAEW
2. IS resolution/conciliation possible?
3. Investigation by Investigation Committee (IC)
4. Disciplinary proceedings by Disciplinary Committee (DC)

Question 19

Who can complain to the PSD?

Answer 19

Anyone can make a complaint.

Firms, clients, other accountants, the public Department for Business Innovation and SKills, other regulators and even the ICAEW itself

Question 20

Who can complaints to the PSD be about?

Answer 20

Complaints will usually be about the conduct of a member or firm

Question 21

What complaints does the PSD deal with?

Answer 21

Complaints dealt with usually cover:

• Regulation breach
• Departure from guidance
• Bringing the ICAEW into disrepute

Question 22

What complaints does the PSD not deal with?

Answer 22

Complaints over fee disputes are not covered by the procedures. The Institute instead offers a fee arbitration service on a voluntary basis.

Complaints in relation to a very serious matter which is already in the public domain and which may affect the reputation of the accountancy profession may be referred straight to the FRC’s Accountancy Scheme for investigation

Question 23

What does the Investigation Committee (IC) consist of?

Answer 23

The Investigation Committee consists of at least 14 people of whom at least 50% are not chartered accountants

Question 24

What is the Disciplinary Committee?

Answer 24

The Disciplinary Committee (DC) appoints a tribunal of three people

Two chartered accountants and one non-accountant member

Has the power to:

• impose fines and reprimands
• take away a member’s practising certificate
• exclusion of members from the ICAEW

The results of DC hearings are made public - can appeal to the Appeal Committee within 28 days

Question 25

What is the Appeal Committee?

Answer 25

The Appeal Committee consists of 5 members

3 chartered accountants, one non-accountant and a chairman who holds a legal qualification

Question 26

If an appeal is successful what happens? What about if it is unsuccesful?

Answer 26

Successful: The decision is overturned and the AC may ask ICAEW to pay costs

Unsuccessful: the AC may ask the member to pay any additional costs to the ICAEW

Question 27

What is the FRC’s Accountancy Disciplinary Scheme?

Answer 27

The FRC’s Accountancy Scheme handles important cases which can impact on the public interest

Referrals to AS:

• From accountancy bodies (significant public interest concerns)
• Self-referral - the FRC can decide to investigate an issue without referral from an accountancy body

Question 28

What is the FRC’s Executive Council?

Answer 28

The FRC’s Executive Council (usually a barrister) will be responsible for making preliminary enquiries into significant referrals and deciding if a full investigation is necessary; if so, this too will be conducted by the Executive Council

Based on the findings of the investigation the Executive Council will then decide whether the person or accountancy firm in question should be subjected to disciplinary proceedings

Question 29

Who forms the Disciplinary Tribunal?

Answer 29

3 or 5 person configuration:

• 3: Chairman a lawyer, one layperson and one accountant
• 5: Chairman is a lawyer, two laypersons and two accountants

No member can be an employee of any accountancy professional bodies, nor of the FRC or related bodies

Question 30

What is the Disciplinary Tribunal process?

Answer 30

• Open to the public and conducted like a court hearing, though less formal
• Evidence is presented and the subject has an opportunity to defend themselves, then either
• Uphold the complaint: fine the person or accounting firm and order them to pay investigation costs
• Dismiss the complaint: the FRC can be ordered to pay costs

Findings can be appealed via an Appeals Tribunals within 28 days