PracticeAccounting FirmsFDs: unwelcome distraction

FDs: unwelcome distraction

Overworked FDs face reputational risk from new rules

As if FDs don’t have enough to deal with, the Budget threw up an unwelcome
surprise for many in the guise of clause 92 of finance bill 2009: the duties of
senior accounting officers of large companies.

In short, the senior accounting officer, the FD in most instances, is to be
made personally responsible for ensuring that the accounting arrangements are
adequate for the purposes of accurate tax calculations.

Failure to do so could not only result in financial penalties for the
company, but also for individuals.

The personal responsibility aspect of these measures is unexpected and will
no doubt be of concern to those identified as SAOs, although the threat of a
financial penalty appears to be the least of their concerns.

According to a recent poll by Deloitte of more than 100 senior finance and
tax figures from leading UK businesses, only 3% believe they would have to pay
the penalty out of their own pocket. In most instances, it seems likely that the
company would pick up the bill for any penalty levied at its SAO. What is far
more telling is that half of those surveyed believe that being penalised would
have a negative impact on their career and reputation. In other words, FDs
really could be putting their reputations on the line.

While I should make clear that the legislation will broadly affect companies
with a turnover of £200m upwards, that still means a major headache, additional
workload and further cost burden for thousands of FDs. The ‘self reporting’ of
inadequacies places yet another responsibility on the company’s governance
processes and it is likely there will be significant additional internal
procedures and documentation required in order to report the SAO’s
certification.

Half of those surveyed are concerned that their companies may not be
immediately compliant with this new measure, and nearly nine out of 10 believe
achieving compliance will cost their organisations in excess of £50,000.

The only silver lining is that reviewing the accounting process may identify
tax savings, because they will be better able to identify and then support tax
deductions.

But the bottom line is that this legislation will require considerable focus
from a large number of FDs over the coming months, at a time when their full
attention is needed to steer their companies’ through these choppy economic
waters.

Margaret Ewing is is a partner and vice-chairman at
Deloitte

Related Articles

Training and graduate intake increase across Top 100 firms

Accounting Firms Training and graduate intake increase across Top 100 firms

4y Rachael Singh, Writer
Boom in accountant hires expected before end of 2013

Accounting Firms Boom in accountant hires expected before end of 2013

4y Rachael Singh, Writer
E&Y economic advisor heaps scorn on recession figures

Accounting Firms E&Y economic advisor heaps scorn on recession figures

6y Richard Crump, Writer
Regions in recession: is the worst over?

Accounting Firms Regions in recession: is the worst over?

8y Wilf Altman
Marketing: winning tactics

Accounting Firms Marketing: winning tactics

8y John Timperley
Practices in distress - waving not drowning

Accounting Firms Practices in distress - waving not drowning

8y Ron Goldsmith
Downturn sees boom in audit tendering

Accounting Firms Downturn sees boom in audit tendering

8y Mario Christodoulou, Writer
Video: Preparing for a recovery

Accounting Firms Video: Preparing for a recovery

8y rumo, Writer