‘A yes vote on practice assurance is key’

As ballot papers hit the doormats, chief executive Eric Anstee explains why he believes a ‘yes’ vote on practice assurance is key to the institute’s future. Read his comments below and also click on the links for views from others in the profession, similar schemes from the past, and comment from our own editorial

Link: RIGHT TO REPLY – the practitioner’s view

Link: FOLLOWING THE CROWD – schemes from the past

Link: OPINION – Assurance: only one way to go

I believe passionately in practice assurance. Put simply, it will enable members to demonstrate that they work to the highest professional and ethical standards, that we as chartered accountants are at the forefront of our profession because we are committed to quality above all else.

The institute is a democratic organisation and it is right that significant initiatives such as this are put to the vote. It is also right that as an organisation we show leadership, particularly where the issues at stake are as important as the ones members will be asked to decide upon when ballot papers land on doorsteps over the coming week.

Inevitably, with a membership of 126,000, we will not reach consensus on everything. Moreover I believe a healthy level of public debate between the institute and its members is a positive sign that we as a profession are confident enough to deliberate on matters where there may be a divergence of views.

At the same time, what we are asking you to vote for with practice assurance is something on which there should be broad unanimity, because it goes to the very heart of what it is to be a professional.

In an age of increasing public scrutiny and competitive threat, there is a need to impress upon the wider world just what it means to be a practising chartered accountant.

Intuitively, when asked this question I want to point to values such as professionalism, excellence and integrity, and suggest that these as well as our technical skills and business acumen mark us out from the crowd. Indeed they do. But they can no longer be taken as a given.

Public, regulatory and business pressures demand, not just that we maintain and improve standards of service, but that we actively demonstrate we are doing so. Equally, we owe it to ourselves as professionals to be able to show we are better than our unqualified competitors, that these core values differentiate us positively within the market.

Many of you may remember that the initial proposals for practice assurance were withdrawn a couple of years ago because we wanted to consult further to ensure the final model was not just fit for purpose, but capable of providing a benchmark against which other schemes would be judged.

In the interim, the majority of other accountancy bodies have introduced similar initiatives. To those who accuse us of being behind the game, I would say that it is better to take the time to get it right than to rush through a model that simply will not provide the right level of support.

We have come a long way in the last two years and, following extensive member consultation, I believe that we now have the right model.

So what are we asking our members to sign up to? In practical terms, all those members who hold a practising certificate will be asked to submit a single annual return covering all areas of work undertaken.

These return forms will be available online and in hard copy, and there will be some flexibility in submission dates to ensure intense periods in the business cycle are not disrupted.

More than 2,000 firms will then be visited every year, giving an average visit interval of six years. Six to eight weeks’ notice will be given in advance of each visit, with a clear indication of the documents and records that may be needed during the visit, as well as the areas likely to be covered in the opening meeting. For the majority of small firms, the visit should take no longer than one day.

Importantly, the emphasis will be on supporting firms and identifying sources of guidance to enable members to address areas of potential risk or concern.

Of course many firms already have quality-control procedures in place and these will be taken fully into account during the review process.

Moreover the initiative, which has been designed by members for members, recognises that each firm is different and that a ‘one size fits all’ approach will not work. Instead, principles-based standards will be applied to ensure your practice is in good shape.

What the scheme is designed to do is provide you with the confidence that your practice is in robust health, and provide the public with the assurance that using the services of a chartered accountant means the quality of financial and business advice they receive remains second to none.

FOLLOWING THE CROWD – Similar schemes put forward by other institutes

The ICAEW’s attempts to introduce a quality assurance programme for member firms have already suffered a series of false starts. Initial proposals for practice assurance were withdrawn a couple of years ago, the institute claims, to allow for further consultation to produce a benchmark against which other schemes would be judged.

In reality, it received a pretty frosty response from members concerned about the disruption caused by what they perceived to be time-consuming and costly inspections. The council originally intended to submit its proposals for member approval at a special meeting in June last year, but this was delayed following concerns about the scheme’s unpopularity.

And yet the concept is by no means new. Other professional institutes have had schemes similar to the one being proposed by the ICAEW in place for some years, leading some to suggest that the ICAEW is behind the game.

ACCA – Quality Checked Seal

ACCA adopted its quality assurance scheme for practising accountants in 2000. It is mandatory for ACCA member firms in the UK and Ireland to have quality assurance visits. These are normally combined with ACCA’s established and regular monitoring visits.

To qualify for the Quality Checked Seal, a firm must be able to demonstrate that it applies appropriate ‘best practice’ procedures in its business, from practice management and accounts preparation to filing and compliance work. In addition, where firms are subject to statutory monitoring for audit or insolvency work, the monitoring visits must have satisfactory outcomes for the firm. Once the kitemark has been awarded, standards are monitored on a routine basis.

Where firms fall short of the minimum standard set by ACCA, but still want to participate in the Quality Checked Seal scheme, compliance officers advise and guide them until they reach the standards required to be awarded the kitemark. The procedures which firms establish to control their businesses are expected to be appropriate to the size, nature and structure of those firms.

ICAS – Quality Review

The Scottish institute introduced its Quality Review in January 2000.

Member firms are subject to a periodic review of the work they commonly undertake – accounts preparation, tax compliance, business services and investment business – by suitably qualified and experienced reviewers appointed by the institute.

Halfway through the five-year cycle in 2002, the Quality Review team reported that out of a total of 482 visits, 444 practising units had acceptable standards, representing 92% of total visits. ICAS firmly believes introduction Quality Review has made a real difference.

The Quality Review is mandatory for all firm principals that hold a practising certificate from ICAS. The review visit itself takes the form of discussion with the practitioners and file reviews. Members are required to meet best practice standards and comply with the institute byelaws.

The programme is cyclical with visits tailored to suit the nature of firms and the services provided by them. Firms are also required to comply with the review findings. In some cases, a follow-up visit is carried out. They are also revisited in the future to monitor standards.


Across the Atlantic in the US, the AICPA has adopted a very different approach in its quest for quality. Its Peer Review Programme, originally established in 1977, was put in place to monitor the profession and establish a layer of public protection to improve firms’ accounting and auditing practices.

It requires a peer review of the firm’s accounting and auditing practice every three years to identify CPA firms that have inadequate systems of quality control and detect non-performance in according to professional standards, and impose remedial action to correct deficiencies.

AICPA members – or the firms they work for – must be enrolled in an institute-approved practice monitoring programme if they perform compilation, review or audits.

Engagements are selected for review based on a risk assessment, which heavily weighs high-risk engagements. But as part of the selection process, a peer reviewer must select at least one governmental audit, one employee benefit plan audit, and one depository institution audit if certain dollar thresholds are met.

RIGHT TO REPLY: the practitioner view on quality control

GORDON GILCHRIST: director of The 20/20 Group
I’m worried that the quality-control aspect of practice assurance will be determined by bureaucrats and not by the customer.

There is plenty of legislation for quality control already in place and many firms do good quality control already and have excellent procedures.

There are common sense business reasons for that.

There is no evidence to suggest that entrepreneurial-facing accounting firms will benefit from practice assurance. Their clients don’t care that they do really good audits and tax returns. They go through the process under duress and given a choice they wouldn’t pay for them.

If we are not careful, this whole procedure could reinforce the feeling that accountants give clients services they don’t want anyway.

If, on the other hand, we base quality control on what clients want, the profession stands to gain credibility in the business community and it would be better paid.

We need quality control, but we need to use it in a way that shows we’re thinking about keeping the customer happy.

PETER MITCHELL: chairman of the Society of Professional Accountants
The SPA recognises that in today’s business environment public statements are expected on the quality of professional work of all practices. But for small practitioners, voluntary regulation is seen to provide little benefit. Widespread damage in our profession occurs at the very top within the plc audit sector, and this despite their quality controls already in place.

Therefore it seems unlikely that much client or practice benefit can be gained through this exercise.

All principal institutes except the ICAEW have introduced practice quality schemes, but initial proposals required extensive rework by the SPA and GPP representatives among others. What is now being offered is not perfect, but it is flexible and supportive, and offers the safeguard of an oversight committee containing peer practitioners.

While real benefits may be few, it is a scheme small practitioners can live with, but they must decide for themselves having gone through the latest standards and annual return to see what is personally involved.

It may not be as bad as they imagined.

TONY BENNEWITH: Immediate past president of South Eastern Society of Chartered Accountants
Nobody could have been more against practice assurance than I was. Even though I am an ICAEW council member, I hated the whole idea. But I am old and also hate things like engagement letters and client identification.

When I was a student nobody was ever ‘negligent’, but every now and again someone made a ‘mistake’.

Now, I must bow to the inevitable. We are the only body without a system of practice assurance. I have experienced a trial visit and found it extremely useful, albeit slightly artificial – we all knew it was only a trial.

I was picked up on our new client procedures so the JMU inspector emailed a new client acceptance form that he found helpful.

Why should we bow to the inevitable? Because eventually, the government will impose its own scheme. If you want an idea of what that will be like, just look at the money laundering regulations.

I still do not like the idea any more than you do, but it is essential for our protection, the protection of all our colleagues, the protection of our professional standing and the protection of the public.

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