Firms are set for a major clash with the UK accounting regulator over plans to discipline members of the profession over breaches of guidance, as well as accounting standards.
The UK's major firms - believed to include the Big Four firms and the next tier down as well - have been in joint talks over the changes, which will also make it near impossible to reclaim costs from the Financial Reporting Council in the event of its charges not sticking.
The CBI is expected to be drawn into the issue over concerns about the likely impact the changes will have on company directors.
The change to the rules means that professionals could be reprimanded for breaches of 'guidance' as well as breaching standards, a move that some say is tantamount to introducing rules-based accounting. Until now, only a standards breach would have been punishable.
A Big Four source said: 'It appears they wish to make a new test, that if you breach guidance, you can be held at fault under new the new regime.'
'If you create an environment which makes a breach of guidance a cause for the Accountancy and Actuarial Discipline Board to follow up with action, then all you will do is force auditors to box tick against standards and guidance. It will result in greater costs and be part of a very worrying fundamental shift,' the source said.
A separate source at a firm outside the Big Four said: 'There's a balance to be struck for what's in the public interest. To allow the bar to be lowered so low that anything very minor is sufficient for complaint doesn't strike one as natural justice.'
The regulator is now creating an environment 'in which it can't lose', one source said, referring to the costs issue.
Deloitte audit partner Martyn Jones said costs awards were useful: 'This puts a check on actions being brought unnecessarily and the onus on prosecutors to really get their facts and their case straight before potentially wasting the money.'
Will Twidale of Farrers & Co, who acted for former Mayflower finance director David Donnelly - tried before the AADB and found innocent - said the costs changes would mean the accountancy profession was out of line with other similar disciplinary procedures.
On the question of guidance, An FRC spokesman said:'If you don't comply with principles, then don't you think you should be subject to disciplinary proceedings ultimately. There is a range of acceptable professional judgements but if you're outside that, we would argue you should be subject to disciplinary proceedings.
'If accountants choose to be very rigid in their behaviour as result of this then that’s something standard setters will have to take into account.'
The FRC also hit back over what it described as 'un-level playing fields' in relation to costs.
'There is a public interest in a regulator being able to bring cases which need to be brought and that the regulator not fear ruinous costs if he loses. That is why the Court of Appeal has made it clear that the normal concept of 'loser pays' does not apply in regulatory cases.
'We have put in place procedures to make sure that a defendant who can't afford to pay his legal support will have his expenses covered. We can say there is now an un-level playing field which pits us with £11m budget against big accounting firms with hundreds of millions in revenues and insurance to boot.
'If we behave badly we should be punished, that’s why we're saying misfeasance.
'But if we don't we should not be forced to hold back in pursuing public-interest cases out of fear of ruinous costs,' the spokesman said.
Further reading:
Read the AADB's proposal to change its scheme here
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