Institutes block watchdog's bid for increased powers

The audit watchdog's push for expanded powers has been blocked by the top accounting institutes which want to be kept informed of potential investigations.

The Accountancy and Actuarial Discipline Board (AADB), the investigative and disciplinary body for accountants, has been locked in a 22 month tug of war with the UK's six professional accounting bodies over a new power which would allow it to make enquiries before proceeding to a full blown investigation.

The power to conduct preliminary investigations is already enjoyed by the professional accounting institutes themselves and under the AADB's actuarial investigation rules.

It requires changes to the Accountancy Scheme which means the AADB needs agreement from all accountancy institutes. The AADB believes the new power would highlight and safeguard its independence from the accounting institutes and inform internal decisions about whether to proceed with investigations.

However, the AADB failed to receive the required support due to 'strong reservations' among the accountancy institutes. A proposed compromise position is being discussed which would force the AADB to inform the relevant accounting institutes about its desire to conduct a preliminary inquiry.

The institute can then seek the information itself and pass on its findings, or alternatively ignore the request which allows the AADB to move in itself. The institutes are also defending their veto power for any potential changes to the arrangement.

In its statement, the AADB said the situation was "unsatisfactory," but believes "it is preferable to have a preliminary enquiry power, albeit one that is constrained, than to have none". The statement added: "The board considers that as the disciplinary body for public interest cases it has a duty to ensure that it retains its ability to act at its own instigation ...however, the [Accountancy institutes] insist future changes to the protocol should be possible only with their agreement, thereby giving them a veto," the body said.

Vernon Soare, executive director of professional standards at the ICAEW, said it was more "efficient" to keep the preliminary investigation power within the institutes.

"This is a highly complex area, involving a lot of legal principles dovetailing with the public interest, dovetailing with the statutory responsibilities of the professional bodies," he said.

He added that "public interest matters" are routinely passed on to the AADB. 'We have public interest cases taken outsideÉwell before the AADB came on to the scene.'

Vivienne Muir, executive director of regulation and compliance at ICAS, said the relationship with the AADB was not in trouble and that there was broad agreement with the outcome.

"The relationship is absolutely fine with ICAS and we are continually trying to improve our relationship with the AADB," she said. "ICAS is happy where we are with the scheme, subject to the protocol being agreed."