According to CIPFA, companies can learn from the public sector requirement that local government chief financial officers must be qualified members of one of the six accounting bodies. This would ensure CFOs were bound by an ethical code, enforced through a disciplinary scheme overseen by their institutes, CIPFA argues.
Under current company law, there is no requirement for a CFO to be a member of an accountancy institute and there has been a growing trend to take on MBA graduates to fill the post of finance chief. ‘If you are looking at a regulatory system to bring pressure to bear on individuals, then if you are only an MBA you don’t have the ethical code, you won’t be disciplined by a professional body and you can move on elsewhere,’ said Vernon Soare, CIPFA’s policy director.
The recommendation formed part of CIPFA’s submission to the Accountancy Foundation review board which will be passed on to the government’s co-ordinating group on audit and accounting issues in November.
Colin Reeves, director of the review board, said the CIPFA report as ‘extremely helpful’ and that he was sympathetic to the proposal. He said: ‘One option could be for the audit committee to have responsibility for ensuring there exists within the company an appropriately qualified individual to prepare the financial statements and discuss matters of accounting policy with the committee and the auditors.’
CIPFA’s report, which assesses the possibility of applying public auditing standards in the private sector, pulled back from recommending audit firm rotation, a system that is in common use throughout the public sector.
According to Soare there would be a supply-side problem now that choice was restricted to the Big Four global firms for the large multinational companies.
‘If you could do it, it would be helpful, but we don’t think practically it is a runner at this time,’ Soare said.
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