Relief among accountants at being saved from statutory regulation began to sour last week (30 November – 4 December) as the profession digested trade minister Ian McCartney’s plans for a radical shake-up of the profession’s regulatory regime.
Concerns were voiced about whether there are enough suitably qualified non-accountants to sit on the four boards and new overseeing body proposed by the government. Resentment was also expressed at what was perceived as the ‘get tough’ way in which the minister presented the proposals.
English ICA president Chris Swinson, who led the profession in negotiations on the issue, says he is pleased the government has taken up most of the profession’s ideas about regulation. But he adds: ‘I have misgivings about the proportion of non-accountants on certain of the boards. I am not sure suitably experienced people will be found in the numbers necessary.’
Swinson fought for a 50:50 balance of accountants and non-accountants on some of the boards, but was overruled by the government, which has insisted that at least 60% of members be from outside the profession.
The Foundation, as the overseeing body is to be called, is to consist entirely of non-accountants. A single accountant is to be allowed onto a new review board, which will scrutinise the activities of the other boards and the professional bodies. The whole structure is to be financed by the accountancy profession through a ‘no strings endowment’.
Swinson concludes: ‘The professional bodies will have to think carefully about how they react to the consultation paper.’
Douglas Llambias, an English ICA council member and chief executive of the Business Exchange, is rather less diplomatic about the proposed regime.
He says: ‘What we will have is the self-financing of government-controlled regulation. By changing the rules, they have taken total control but left us with an open pocket to pay for it.’
‘I also think the government has been very one-sided and unfair in the way they have presented the proposals as “kicking the profession into shape”. We were the first of the professions to respond positively to calls for greater openness and have treated this as a partnership with the government to try and bring about positive change.’
Llambias has called on the profession to mirror the robust approach of McCartney, who says he will review the effectiveness of the new regime after five years. ‘It is now time for us to go back to the government and lay down measures of minimum performance we expect from it. If the government doesn’t meet our requirements and the scheme doesn’t work, then we should withdraw,’ he adds.
The extent of the proposed changes is also illustrated by the reaction of those who support the end of self-regulation for the profession.
Ernst & Young chairman Nick Land expresses clear support for the proposals.
‘The firm has been calling for the end of self-regulation for the profession for a number of years. We believe it is vital for the profession as a whole to demonstrate total transparency,’ he says.
Other firms were less welcoming. PricewaterhouseCoopers comments: ‘We need to be satisfied that the quality and calibre of those policing the new arrangements will justify the regulation being put in place.’
Richard Pearson, chairman of Pannell Kerr Forster, takes a pragmatic view. ‘The profession should be reasonably pleased and we should try to make the new system work. It’s a good deal better than statutory legislation.’
In what could be construed as a warning to the profession, the consultation paper outlines the possibility of using legislation to create an independent regulatory body, making comparisons with the Financial Services Authority, also paid for by those it regulates.
Unveiling the framework last week, McCartney said: ‘The government’s proposals will deliver an independent non-legislative approach. If it becomes clear that a move to a legislative regime is required, however, we shall have a structure to build on.’
‘Although the profession has taken to heart the message that a strong dose of independence is essential, the government believes that in some areas it is necessary to go further. These changes are reflected in the consultation document and I am pleased the profession is rising to the challenge,’ adds McCartney.
But the profession has very little time to adapt to the changes. McCartney hopes to get the new system up and running in time for millennium celebrations at the end of next year.
COUNTDOWN TO INDEPENDENT REGULATION
January 1999: deadline for responses to consultation paper
May 1999: constitution for new boards to be agreed
July 1999: nomination of members to new boards
October 1999: recruitment of staff of new boards and location of premises
December 1999: transfer of responsibilities to new boards
These dates are estimates based on DTI information.
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