Chapter 10: Structure and regulation of the accountancy profession Flashcards
1.1 Structure of the accountancy profession
You do not have to be a member of an accountancy bodies to call yourself an accountant. You can offer the full range of services except in statutory audit, investment business and insolvency, if you are not part of a body.
The consultative committee of accountancy bodies consists of the ICAEW, ICAS, Chartered accounts Ireland, ACCA and CIPFA. It provides a forum and representative of the profession. They are also members of the International Federation of Accountants which is an international organisation formed to promote high ideals of standards, ethics, and accountancy issues worldwide.
2.1 Regulation of the accounting profession in the UK
Regulation is needed to ensure the public interest is protected in areas that are too complex for the public to reasonably understand. Regulations can be either: direct government regulation via legislation, separate government agency, self-regulation by industry itself and a combination of them all. The government has overall responsibility for the effectiveness of regulatory framework but delegates statutory powers to the financial reporting council.
2.2 Self-regulation
The ICAEW has regulatory responsibility for supervising all members to maintain standards and the reputation of the profession. It is also a recognised professional regulator over members/firms acting in reserved areas.
2.3 The FRC’s oversight mechanism
The FRC oversight board has three main roles:
- Non-statutory: oversight of the accountancy bodies over there regulatory of members with regards to non-statutory audits
- Statutory regulation: oversight of accountancy bodies with regards to their responsibilities over the registration, monitoring and discipling of statutory auditors
- Independent monitoring: by audit quality review team of the quality of the auditing function relating to public interest entities (such as listed companies)
2.6 Regulation of financial services
The FCA regulates the financial services industry not covered by the PRA. It promotes effective competition, ensures the market functions, and regulates the conduct of financial service firms. The impact on accountants is regulations on investment business and corporate governance work on listed companies. Other financial regulators include the financial ombudsman (settles disputes between provides of financial services and their customers) and the Pensions Regulation (regulate work-based pensions).
3.1 Disciplinary procedures
The overview of the procedures is: complaint to PSD (part of the ICAEW), then investigation by the investigation committee and then disciplinary proceeding by the Disciplinary committee.
Anyone can complain to the PSD, usually about the conduct of a member firm. Complains usually cover regulation breach, departure from guidance and brining the ICAEW into disrepute. Complains over fee disputes are not covered and complaints already in the public domain and may impact reputation may be referred straight to the FRC’s accountancy scheme for investigation.
3.2 Initial investigation of complaints
Complaint, does it appear the accountant may not have complied with ICAEW regulations (if yes then dispute needs to be solved some other way), is it possible to solve the problem without the ICAEW disciplining the accountant (is yes, another resolution is found), the ICAEW gathered evidence from the accountant and the complainant, if there is sufficient evidence, they report the matter to the investigation committee.
3.3 Investigation committee
Consists of at least 14 people of whom at least 50% are not chartered accountants.
3.4 Disciplinary committee
They appoint a tribunal of three people (2 chartered accountant and one non-accountant). They can impose fines and reprimands, take away the practising certificate and exclude members from the ICAEW. Results are made public; an appeal must be made in writing within 28 days of the decision.
The appeal committee has five members (3 chartered accountants, one non-accountant and a chairman holding a legal qualification). If the appeal is successful, the decision is overturned, and the AC may ask the ICAEW to pay costs. If unsuccessful the AC may ask the member to pay any additional costs to the ICAEW.
3.6 FRC’s accountancy disciplinary scheme
FRC handles cases which can impact on the public interest. Referrals to them can be from accountancy bodies and also self-referral. The FRC’s executive council (usually a barrister) is responsible for preliminary enquiries and deciding if a full investigation is necessary. The council will then decide whether the person or firm should be subject to disciplinary proceedings. The disciplinary tribunal can be either 3 (chairman is a lawyer, one layperson and one accountant) or 5 (chairman is a lawyer, two laypersons and two accountants) person configuration.
To ensure independence, no member can be an employee of any accountancy professional bodies, nor the FRC or related bodies. Hearings are open to the public and after evidence is presented the tribunal will either uphold the compliant (fine the person or firm and make them pay investigation costs) or dismiss the complaint (the FRC pay costs). Finding can be appeals via an Appeals Tribunal, which will have the same set up as the disciplinary tribunal.
