Big Five pressure gets results

The members voted against electives, and now Ernst & Young and PricewaterhouseCoopers have put their money where their mouth was and led an exodus to the Scots institute – a dramatic defection that has left the long-term future of the English ICA in doubt.

But the issue of electives seems to have been all but forgotten. Elizabeth MacKay explores the real reasons for the run to Scotland.

Less time out of the office for trainees and control over the syllabus

Training business advisers

A short history of the defections

Is the move to the Scots a bluff?

Will this lead to an institute merger?

Graduates want to work for the Big Five, rather than just be accountants

What should the English ICA do?

Less time out of the office for trainees and control over the syllabus
One important motive is the amount of time that students have to spend out of the office, and the English ICA is trying to keep up with Scots institute in that respect.

There are some other obvious answers. The Scots institute is a lot smaller than both the English ICA and ACCA, and while it is a robust organisation, the Big Five are certainly in a position to exercise some influence over it.

Training business advisers
The Scottish institute has also gone further down the ‘business adviser’ route than the other bodies and it has stated (in a recent press release) that employers are best placed to define and assess the specialist competencies to be achieved by students.

This is exactly what the Big Five want to hear, because this way they can have the qualification they want without interference from the professional body – a reflection of the rather inequitable relationship between the bodies and the firms they serve.

Is the move to the Scots a bluff?
However, the move in favour of the Scots institute may yet turn out to be a bluff, not least because the Scots don’t yet have the capacity to deal with large numbers of defecting Englishmen – but the gesture is more than a token and there is no doubt that a mass defection by the Big Five to the Scots institute, or any other body, would do serious damage to the English ICA.

Do the Big Five really want to destroy the English ICA?
In an attempt to stem the loss of students, the English ICA has offered to pull the introduction of its new syllabus forward to September this year. This is a tall order.

Materials have to be prepared, examiners appointed, pilot papers tested. It is to be hoped this effort will not be in vain. It seems unlikely the Big Five would wish to destroy the body that most of their senior partners qualified with, but they have much to gain by taking a divide and rule approach.

Will this lead to an institute merger?
If the English ICA is unable to pull the Big Five back into the fold, it may be time to think again about whether small firms, large firms and business members should all be housed under the same institutional roof.

Members of all the bodies training auditors also need to think carefully about whether they want to be members of some sort of Institute of Business Advisors, because they are being pushed in that direction by the big firms

All of the professional bodies currently require that their members learn the basics of accountancy: double-entry book-keeping, the rudiments of tax, management accounting, audit, and elements of business and company law – and this has traditionally been regarded as one of the great strengths of the profession in the UK. But these basics are regarded by many as unimportant, if not irrelevant, skills.

The Big Five long ago stopped emphasising their status as ‘chartered accountants’ and the firms and students are much more concerned about the ability to provide business advice because that, at the moment, is what brings big money in. No student with any imagination admits to wanting to be ‘just an accountant’, in much the same way that it is unfashionable for medical students to admit to being interested in general practice.

But medicine and accountancy are not the same. It is simply not possible to perform surgery safely without a thorough grounding in general medicine.

It is possible to provide business advice without a rounding in accountancy, and while the Big Five are unlikely to want to sever the connection with accountancy altogether, they want accountancy to become an optional element of a broader qualification. They need accountants and auditors to provide the basic services that others cannot provide, but they don’t want all of their intake to go down that route because it is expensive, and they would prefer that the costs of basic accountancy training be borne elsewhere, as in the US.

Graduates want to work for the Big Five, rather than just be accountants
Furthermore, those who insist that the compulsory accountancy element should be retained forget that the vast majority of graduates hired by the large firms believe that training with a Big Five firm is at least as important as obtaining their qualification. The Big Five control so many students they have it in their gift to make or break a professional body. To argue that they are destroying the mainstay of the profession, cheating their students by not providing them with a basic set of skills, or are bullying the professional bodies into providing them with a cheap qualification in the interests of their own profitability, is pointless.

What should the English ICA do?
If the Big Five want a business, rather than an accountancy qualification, they will have one.

The English ICA has to try and find a middle way between the needs of the firms that provide the bulk of its intake and the misgivings of members who fear that their qualification is being dumbed down.

Members have a choice between going with the Big Five, and maybe eventually becoming members of an Institute of Business Advisors, or remaining members of an institute crippled by loss of income and vulnerable to take-over. The only alternative is the formation of yet another professional body, and there are already too many of those.

Elizabeth MacKay has worked for the Big Five and for regulators in the UK and abroad. She writes and lectures on gloal audit and regulation.

This is part of a longer which appeared in Accountancy Age. To read the full version click here.

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