The Compulsory Membership Conundrum

 

AccountancyAge reports that research demonstrating the overwhelming support of MPs for introducing compulsory accounting membership has divided the opinion of industry bodies, including the Institute for Chartered Accountants (ICAEW) and the Association for Accounting Technicians (AAT).

In May, the AAT published the results of a survey it commissioned to YouGov, revealing that 78% of MPs would support increased regulation of high street accountants and tax advisers. The body is campaigning for compulsory membership to become a legal requirement.

“Mandating professional body membership provides a ready-made solution. There’ll be greater reliance on the support and guidance we can provide to our members, but also that commitment to the maintenance of high standards,

” says Adam Harper, director of professional standards and policy at the AAT.

Unregulated advisors make up a third of the sector, and two thirds of its complaints regarding compliance and reporting errors stem directly from this demographic, according to HMRC data.

“When things go wrong, this will give us a mechanism to investigate and impose relevant sanctions against those that fall short of the standards we expect.”

The MP survey follows a separate AAT study published in April. It found that, out of more than 1,000 respondents, 59 percent said they were unaware that no professional or formal qualifications were required, and 57 percent thought that membership should be mandated.

But ICAEW practice director Amanda Digne-Malcom argues that the industry may be too far gone to make such a seismic change.

“Once you’ve got that legacy, sometimes it’s hard to turn that. If you sought to make a change, you run the risk of putting some people at a disadvantage.

“You’ve got a whole cadre of people who are accountants and earning a living from it, who are not from a professionally qualified background. I think the perception would be that it’s unduly harsh.”

Digne-Malcolm also acknowledges industry trust as a key element of these proposals, but notes that professional membership can’t be viewed as the only criteria for attaining this.

“If you’ve had rigorous training and you’re subject to monitoring, that contributes to the trust agenda. But that doesn’t mean to say that anyone who doesn’t fall under that can’t be trusted – I absolutely don’t believe it can be that black and white.”

Were compulsory membership of a professional body to become mandatory, the key issues would be:

1 Which body was the best?

2 How much should each body charge?

3 What extra costs would be levied (and passed on to the hapless membership) by the government for regulation and control?

4 What happens to those people already practising but not members of any professional body?

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ICAEW Members Castigate ICAEW

 

On my HMRC site I have noted that the ICAEW have given HMRC a well deserved kicking for its appalling service levels:

"ICAEW members are reporting that poor performance is being experienced across almost all HMRC services and ICAEW has been pressing for greater transparency about the problems being experienced and for a clear recovery plan. The Tax Faculty outlines the problems that have been raised and the action it has taken..."

However, the membership of the ICAEW are also pissed off with the ICAEW over its light touch towards HMRC failures. 

As per AccountingWeb:

"However, many in the profession have expressed the view that these are ongoing problems date far beyond the events of the pandemic.

“None of this is to do with Covid, but it shows what happens to a system which is already broken when you give a huge kick, it just fragments and shatters,” commented AccountingWEB member irealyshouldknowthisbut.

“Covid-19 has provided the ultimate excuse for poor customer service to get even worse across much of the public sector and throughout the banking industry. We now see more clearly than ever the contempt in which we are held by these incompetent bullies,” added another member.

ICPA chair Tony Margaritelli concurred: “We hear that they value the work that agents do, but we don't actually see any real genuine evidence of it,” he told AccountingWEB. 

According to Margaritelli, the fact that ICAEW chose to publicly report on HMRC’s poor performance is significant in showing that people should be holding them to account more.

“They very seldom do [criticise] - they’re always very supportive, and rightly so,” he said. “But on both sides, when things are not right they need to be called out.”

Nicholas Smith, head of tax at Duncan & Toplis, concludes that enough members must have complained for the Institute to make such a public stance. “The one genuine bright spark that HMRC did was to have the agent dedicated helpline. And suddenly here we are two years down the line and we still haven’t got it back.”

It is a pretty poor reflection on the ICAEW that it needs a groundswell of negative comments from its membership to actually say something in public mildly critical of HMRC! 

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The Halcyon Days of Internal Audit

 I miss my time running an internal audit department, when I would refer to myself as "we" when writing internal audit reports.

Halcyon days!

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Restoring trust in audit and corporate governance

This white paper sets out proposals to strengthen the UK’s framework for major companies and the way they are audited.

Details

This white paper sets out proposals to strengthen the UK’s framework for major companies and the way they are audited. The proposals set out how:

• companies should report on their governance and finances
• reports should be audited
• audit and the audit market should change
• these should be overseen by a new regulator

The objectives of these reforms are to:

• restore public trust in the way that the UK’s largest companies are run and scrutinised
• ensure that the UK’s most significant corporate entities are governed responsibly
• empower investors, creditors, workers, and other stakeholders by giving them access to reliable and meaningful information on a company’s performance
• keep the UK’s legal frameworks for major businesses at the forefront of international best practice

The proposals respond to recommendations made by 3 independent reviews commissioned by the government in 2018:

• Sir John Kingman’s Independent review of the Financial Reporting Council
• the Competition and Market Authority’s statutory audit market study
• Sir Donald Brydon’s independent review of the quality and effectiveness of audit

Respond to the consultation

Please provide your views on these proposals: the consultation closes on 8 July 2021 at 11:45pm.

You can respond to the consultation online.

Documents

Restoring trust in audit and corporate governance

Ref: ISBN 978-1-5286-2401-5, CCS0221978662 03/21, CP 382 PDF, 1.53MB, 232 pages

Order a copy

Restoring trust in audit and corporate governance

Ref: ISBN 978-1-5286-2401-5, CCS 0221978662 03/21, CP 382 HTML

Order a copy

 

Every few years we go through the motions of "restoring trust", yet somehow or another never manage to achieve that "trust"!

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Big Four To Have Their Wings Clipped - Nothing New Under The Sun!

 

Proposals to reduce the dominance of the "Big Four" accountancy firms and scrap the industry regulator have been unveiled by the government.

The theoretical aim is to improve regulatory standards after high profile corporate failures such as Carillion and BHS.

Also, company directors will face more responsibility to ensure accounts are accurate, or face tougher penalties.

Business Secretary Kwasi Kwarteng said the changes would help restore confidence in business.

There will now be a 16-week consultation on the proposals.

The BBC reports that the business of auditing companies' accounts, and ensuring they are a fair reflection of their financial health, is dominated by four accountancy firms: KPMG, Deloitte, PwC and EY.

However, there is concern that providing both accountancy and auditing services creates a conflict of interest.

Under the new rules, large companies would be required to use smaller auditing firms to conduct part of their annual audit, in an attempt to dilute the Big Four's dominance.

The new proposals would require KPMG, Deloitte, PwC and EY to make their audits more rigorous.

They could face a cap on the number of companies on the FTSE 350 index they may audit, if those improvements don't go far enough.

The government said last year almost a third of audits inspected on the FTSE 350 were in need of improvement.

All of this is rather amusing, given that when I was studying to be an FCA (back in the late 80's) these issues were very much "hot topic" issues at the time.

Seemingly nothing changes, no matter what regulatory shake-ups occur!

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ICAEW Recruiting Full-time #VAT and Duties Manager

 

The Tax Faculty is recruiting

The Tax Faculty is recruiting for a full-time VAT and Duties manager to lead on our work in the areas of both VAT and an expanding portfolio covering Customs Duties and international trade.

The VAT and Duties Manager role involves two aspects. Firstly, the management of ICAEW's policy and reputational work in these areas, which are overseen by the Tax Faculty's VAT & Duties Committee. Secondly, the production of high quality member services in these areas which will include presentations, webinars and the authoring of guidance notes etc.

This is an important role sitting right at the heart of the Tax Faculty’s activities. We would expect that the successful applicant will have a professional qualification and have detailed experience of VAT.

In addition, the role has been expanded to cover the growing importance in our work of customs duties and international trade related issues. While existing knowledge of the latter would be advantageous, we would welcome applications from suitable specialists who can display a determination to learn and upskill in this area as the UK moves to establish an independent trading policy. 

The faculty is seeking a full-time, permanent staff member based in London, but is willing to be flexible for the right person. Salary is c£70,000 FTE. Download a copy of the role profile, 

If you believe that you have the skills and experience we are seeking for this important role, please send your CV and a covering letter to hrapplications@icaew.com.

The closing date is 26 February 2021.

KPMG Goes Into Meltdown - #MoanGate

 

The fallout from Bill Michael's (UK Chairman of KPMG) #MoanGate video continues.

The Telegraph reports that relationships at the top of the firm became so toxic under Bill Michael that it was forced to pay for an external coach to sit in on meetings to ensure senior managers would be civil towards each other, according to insiders.

KPMG's leaders were also asked to hand over their phones to investigators trying to root out the source of suspected leaks as the firm’s reputation took a battering over regulatory probes, alleged bullying and aggressive cost cutting, sources said.  

Unsurprisingly he has now resigned. Bina Mehta has stepped in as acting chairman, and Mary O'Connor has taken over Michael's day-to-day executive responsibilities as acting senior partner.

A pretty poor state of affairs by anyone's standards, and not how the firm used to be run when I was a member of staff in the late 1980's!

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"Stop Moaning" - Message To Staff From KPMG Chairman

KPMG’s UK chairman, Bill Michael, has come in for heavy criticism after he told staff to ‘stop moaning’ about their working conditions during the lockdown.

In a virtual meeting with around 500 staff Michael reportedly told staff to ‘stop moaning’ and to ‘stop playing the victim card’. They had raised concerns about pension contributions, pay and bonuses. Questions were also asked about the ranking system of staff performance – from best to worse.

A Financial Times story revealed that Michael later apologised for his choice of words. He told the paper: 

“I am sorry for the words I used, which did not reflect what I believe in, and I have apologised to my colleagues. Looking after the wellbeing of our people and creating a culture where everyone can thrive is of critical importance to me and is at the heart of everything we do as a firm.”

KPMG wasn't like that in my day!

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Which of The Big Four Accountancy Firms Broke Lockdown?

The Big Four accountancy firm whose staff decided they were above the rules and had a Covid regulation-breaching Christmas bash. More in new ⁦@PrivateEyeNews⁩. pic.twitter.com/9IhWXW3D6g

— richard brooks (@rbrooks45) February 4, 2021

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Good Luck #ICAEWStudents

Good luck to all of our Professional Level #icaewStudents who are receiving their results today.

View your results via your online training file > https://t.co/Nm3gFzVSdJ pic.twitter.com/oqoDvURrri

— ICAEW (@ICAEW) January 22, 2021

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Tax Investigation Insurance is an insurance policy that will fully reimburse your accountants (your tax return agent) fees up to £100,000 if you are subject to enquiry by or dispute with HMRC.

A Solar Protect policy will enable your Accountant (your tax return agent) to:

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• Appeal to the First-tier Tribunal or Upper Tribunal
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Please click here for details.