How to keep the inspectors happy
Professional bodies are taking an increasingly rigorous, risk-based approach to compliance with practising standards and the media reports press about those who fall short. Steve Collings presents advice to help keep you in the inspectors' good books.
Under the Companies Act 2006, it is a legal requirement for recognised supervisory bodies, such as ICAEW and ACCA to license and monitor the statutory audit requirement. The professional press is regularly punctuated with reports about disciplinary hearings, many of which are due to various breaches in legislation, accounting and auditing standards and ethical standards.
A recent Any Answers question raised by Lorraine asked about the information she would need in order to survive the visit. There seems to be uncertainty as about how these visits will go, but the reality is that they can be quite constructive. In lots of cases practitioners who were nervous before the start of the visit often find that areas have been identified that not only improves their practice, but also helps them improve efficiencies in their day-to-day work.
Unfortunately, for some, these visits do not run smoothly and it is often the case that follow-up visits will be necessary so the monitoring officer can make sure that suggested improvements have been met. There could also be certain impositions such as mandatory hot reviews for a period of time until the reviews show that audit work has improved to an acceptable standard. In more serious cases disciplinary hearings can result, leading to sizeable fines, audit registration withdrawal and in the most serious of instances, expulsion from memberships.
This article will look at some of the things you can do in order to survive the visit – some of which are fairly routine, but it is surprising the number of accountants who forget! The article will concentrate mainly on audit clients, but you should also expect a request for the officer to review non-audit files. It will cover the following areas:
- Professional Indemnity Insurance (PII)
- Maintenance of Policies and Procedures
- Staff Training
- Audit Documentation
- Insufficient Work
- Consideration of ethical standards
- Client advice
- Management accounts
- Practice Records
- Key Areas on Client Files
Steve Collings is the audit and technical partner at Leavitt Walmlsey Associates and the author of ‘The Interpretation and Application of International Standards on Auditing’ (Wiley March 2011) and ‘The AccountingWEB Guide to IFRS’ (Sift Media May 2011). He also lectures on auditing and financial reporting issues.