The long-awaited Department of Trade and Industry’s LLP Bill, revealed in this week’s Accountancy Age, offers innocent partners financial protection from the mistakes of their colleagues. The move, part of a major shake-up of the accountancy profession, was broadly welcomed by the leading accountants.
Trade secretary Peter Mandelson also outlined the government’s plans for independent regulation of the profession, but stepped back from a fundamental review of the law of joint and several liability. Instead, he said the matter would be covered by the on-going review of company law.
Under the government’s proposals, which closely mirror those of the profession, a series of independent bodies will be created to monitor the ‘public interest’ activities of accountants.
A revamped Auditing Practices Board will operate alongside an Ethics Standards Board. Both will be overseen by a Review Board, while an independent foundation – funded by a ‘no-strings’ endowment from the professional bodies – will make appointments to all three boards. At least 60% of the bodies’ membership will consist of independents, representing consumers and the public interest.
New LLPs, which are expected to be rapidly adopted by firms, will continue to operate as professional partnerships, but they will be forced to disclose plc-style accounts and introduce appropriate insolvency arrangements. A clawback measure has been included to ensure that a partnership’s assets cannot be distributed if insolvency is looming.
Chris Swinson, the English ICA president who has led the profession’s regulatory review, welcomed the government’s consultation document. ‘I’m pleased we put up something the government felt able to go with. It is saying that a profession that thinks hard about its professional duty will be taken seriously.’
Swinson argued that a 50:50 split of independents to accountants would be more appropriate to avoid ‘nervousness’ about where ethical standards will go.
Nick Land, Ernst & Young’s senior partner, added: ‘It’s time for the profession to demonstrate total transparency and openness in a way that can only be truly achieved if it moves away from the current regime of self-regulation by a number of separate bodies that have little or no contact with each other.’
Land said his firm was still considering the possibility of registering as a Jersey LLP, but would study the draft legislation closely.
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