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POB report to Secretary of State: complaints, mistakes, contradictions

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7th Aug 2007
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The Professional Oversight Board (POB) has published its report to the Secretary of State of Business, Enterprise and Regulatory Reform for the year ending March 2007. The POB, part of the Financial Reporting Council (FRC), said the work proves UK auditing is “fundamentally sound”, yet it also shows increasing levels of audit complaints for almost all accountancy bodies. Rob Lewis reports.

With the exception of ACCA, the accountancy bodies have actually received increasing numbers of complaints about auditors every year since the POB was created. Nobody appears eager to say why. An ACCA spokesperson said the Association’s falling numbers were “impossible to explain.” Similarly, the Institute of Chartered Accountants of Ireland (ICAI), with the highest complaint levels of all the bodies, was equally at odds to account for the figures.

“We have no way of assessing why complaints are increasing,” said a spokesperson from the Chartered Accountants Regulatory Board (CARB), regulators for the ICAI. The situation was complicated further by inaccurate information. The figures originally provided to the Secretary of State by CARB were “incorrect due to an administrative error on our part.”

The average time taken to deal with complaints has also grown considerably, with the ICAEW now regularly taking over 20 months to close a case. Another worrying trend is the number of accountancy bodies graded A or B for audit quality by the POB in 2006, which fell universally; almost by a third for ACCA, and by over half for ICAI.

The POB declines to name the bodies at which specific issues have arisen, but do outline their concerns. These include a body that doesn’t request sufficient information from partnerships to determine ownership, as well as more general concerns about training and CPD across the profession. The report also lists the Board’s recommendations from 2005/06, and the extent of their implementation.

Previous recommendations include an increased flow of information between the accountancy bodies; although this has not occurred as much as has been hoped, in part due to the competition between the bodies themselves. CPD based on training hours rather than competencies achieved was offered as a superior model, and a number of new CPD schemes have since been implemented.

One area of particular concern lies in the use of databases. Monitoring staff at the bodies and at POBA have identified cases where member firms submit “incomplete information” with respect to their number of audit clients. Understating the number of audit clients reduces the chances of a firm’s visit from the bodies’ monitoring units, and a POB spokesperson confirmed it was legitimate to infer these were instances of deliberate omission. Recommendations that instead of going to their own members the bodies collate reliable information from Companies House have so far come to naught. Worries about “audit identity theft” are also still ongoing.

One of the bodies also appears to have a gang of rebels on its hands. “A very small minority of registered auditors were found not to be taking the authority of their body’s regulatory function as seriously as POB would expect,” the report admonished.

“External monitoring is always likely to identify areas of relative weakness,” offered POB director Paul George, undaunted by the numerous issues raised in the report. “We consider that our work provides a substantial body of evidence that the regulatory changes introduced following the collapse of Enron are proving effective.”

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By damien Roche
27th May 2010 11:37

The Public Oversight Board and Statutory Recognition of the term
I am very pleased that the POB have issued a Report on monitoring by the professional accountancy institutes in the UK of their
members. The 8 recommendations are as follows:

1 One body should either amend its website or allocate additional resources to ensure that effective monitoring, as it claims.

2 They should ensure that the nature and frequency of their monitoring work is clearly and accurately explained on their websites.

3 The determination and assessment of best practice should be consistent across all types of practice.

4 They should carry out a comprehensive review of ethical matters during visits, in line with the code of ethics.

5 The bodies should review the internal complaints policy and a sample of complaints received by the firm.

6 They should consider the benefits of tailoring their monitoring visits to address areas of risk inherent to specific members.

7 The bodies should require the member to respond to all points and take appropriate action raised during monitoring.

8 Review the responses they receive from members in practice in order to confirm that these satisfactorily address the matters raised.

The POB should now undertake an independent assessment of the syllabi of the various bodies to ensure they are adequate for
continuing RQB recognition. Many of the CCAB bodies have applied for Masters degree grading from the National Qualifications Body.
I believe all RQBs should be obliged to have this grading otherwise they should lose their RQB recognition.

As the POB is now providing evidence of the supervision of the professionalism of the provision of non regulated services by the RQBs,
is it now time for a statutory definition of the term accountant to be introduced so that the public will know that when someone holds themselves out to be an accountant a certain level of training and regulation can be guaranteed.

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