On dealing with unauthorised auditors – time to get tough.

This paper has been campaigning assiduously during the last few months for an improvement in the disciplinary regime of accountancy bodies. In particular, in the aftermath of the Tim Smith incident there have been questions raised over whether the punishment meted out by the English ICA always fits the professional crime.

The Smith affair was a one-off, but a regularly abused area where the institute could get tough is where members carry out work without proper authorisation. Out of 28 recent disciplinary cases given publicity by the institutes, two involved members acting as auditors when they were not registered.

On both occasions, not only had the guilty members failed to be properly registered as auditors but there was also a string of deficiencies in the actual work performed. Both times they were let off with a reprimand, a #1,000 fine and a few hundred quid in costs.

Of course, the majority of audits are carried out by registered auditors, and they pay for the privilege with fees, insurance, monitoring and training.

When qualified but ineligible accountants perform an audit, not only are they taking work away from fellow professionals who have bothered to comply with company law and their institute regulations, but they are also acting contrary to the public interest. An audit report from an unregistered auditor is not worth the paper it is written on.

We are talking about qualified accountants who have chosen not to register as auditors or who have allowed their registration to lapse. If would-be auditors do not genuinely know they were meant to register, then such woeful ignorance of current company law makes them unfit to be a member of the institute. If the audit was a deliberate deceit, then such a fraud also suggests that they no longer deserve the title of chartered accountant.

Either way, the institute has power to exclude its members who pose as auditors. To restore public confidence in the audit’s worth, to defend public interest and to protect the vast majority of honest, registered auditors, expulsion in this instance must become the norm.

Peter Williams, chartered accountant, is editor of the newsletter Electronic Finance.

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