Pannells at odds with review body proposal

Pannell Kerr Forster has come out against the profession’s plan for a new regulatory watchdog – the third top-ten firm to do so.

In its response to the proposals set out in a consultation paper issued by the cross-institute working party Pannells said: ‘While we agree with the principle of independence for such a review body, we do not believe that the paper’s solutions match its aspirations.’

Deloitte & Touche and Ernst & Young have already expressed similar concerns in their submissions to the working party, chaired by English ICA vice-president Chris Swinson.

Under his recommendations, the six institutes would establish a new watchdog – the Review Board – to oversee professional regulation.

The Review Board’s independence would be maintained by a foundation, run by independent trustees. The Auditing Practices Board would also work alongside the Review Board and would be run by the foundation.

However, Pannells said it backed CIMA’s call for the Financial Reporting Council to assume the role envisaged for the Review Board.

The firm said: ‘CIMA’s position is more tenable than the working party’s.

It has fewer risks and answers more effectively the working party’s concerns on structure and inter-relationships.’

Pannells said it was concerned that the Review Board would not secure the external funding recommended by Swinson to ensure total independence, leaving the profession to ‘fund all the operation’.

The APB’s future ownership – the principal area of dispute between CIMA and the rest of the working party – also provoked a strong reaction from Pannells. It backed CIMA’s call for the APB to operate alongside the Accounting Standards Board under the FRC.

The firm said Swinson’s plans ‘to keep the APB within the accountancy profession ran the risk of overstating the importance of audit’.

‘Audit is there to add credibility to financial reporting. If accounting and financial reporting are under the aegis of the FRC, then, it follows, audits should be as well,’ said Pannells.

The firm was equally scathing about the working party’s claim that FRC’s common ownership of the ASB and the APB would inhibit competition between the two subsidiary bodies, and would pose a threat to the future of the Review Board itself.

Pannells’ criticism is further bad news for Swinson who, after leading two years of negotiations with the six institutes, had hoped to present to the DTI a picture of a profession united in support of the Review Board.

That expectation, shattered last October during the infamous spat with CIMA at the launch of the consultation paper, has now lost any chance of being reconstructed, thanks to Pannells adding its voice to those of Deloittes and E&Y.

CIMA and the working party are currently studying the responses to their consultation documents. No date has yet been set for the publication of the findings.

Accountancy Age has learnt, however, that the DTI and the Stock Exchange – the two most powerful external regulators to be asked to comment on the proposals – have refused to back either side.

The council of CIPFA, one of the six institutes on Swinson’s working party, has welcomed the new proposals. The institute said it was ‘satisfied that the proposed arrangements meet the two fundamental criteria that any system of professional regulation should meet, namely independence and the explicit recognition of the public interest’.