Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

AccountingWEB quizzes Michael Izza

by
1st Dec 2011
Save content
Have you found this content useful? Use the button above to save it to your profile.

AccountingWEB caught up with ICAEW chief executive Michael Izza in Bristol on the day of the Autumn Statement and put to him a number of questions from our members.

Along with discussing the big news of the day prior to the speech, Izza spoke candidly about the state of the profession, a new Business Advisory Service and reaching out to smaller practitioners.

Is the Chancellor doing enough and what are the wider implications of the whole growth agenda?

“We at the ICAEW have been saying for a while that we always thought the Chancellor’s plans to deal with the structural deficit were ambitious for one parliament, we always thought this was a two-parliament task. What we’re going to hear today is going to reinforce that very strongly. Not only are we going to spend this parliament and perhaps the early part of the next parliament trying to remove the structural deficit, ie balance the budget, but at the end of that we’re going to have £1.4-£1.5 trillion (tr) of debt, and we’ve then got to start paying that down. So, this is a massive mindset for us and it’s hard to see the good news, because if we’ve got £1.4tr of debt by 2016 the interest charge on that alone is going to be over £70bn – twice what we spend on the Ministry of Defence. It is an enormous challenge and I don’t envy the Chancellor the task. The only way out of it is not by more and more cuts and more and more tax, it’s actually by stimulating growth. Could the government do more? Of course it could. They have made some good moves, particularly the emphasis they’ve placed on export, and that export should be focused on SMEs. Principally ‘M’s because there are more ‘Ms’ likely to do export than ‘Ss’. The more the government can do to make it easier for these businesses to export, the better. 

I think the Chancellor’s stimulus around infrastructure investment is to be welcomed, although I would like to see the detail because if actually what they are proposing are sweetheart deals for pension funds to invest in infrastructure, who’s going to pick up the tab on that? - the taxpayers. If they are proposing deals that are not going to go to pension funds, who’s going to suffer from that? Well, pensioners. So it’s a delicate balancing act. But in principle it’s great.

One of the things that we’ve gone back to Treasury on is the Chancellor needs to put a lot of emphasis on actually unlocking the amounts that are in corporate balance sheets. We did a piece of research that we shared with BIS last week ahead of the Autumn Statement, which showed that micros, SMEs, medium and large companies have all without exception got more cash in their balance sheets than they had in 2008. Now the good news is that their trading has been strong enough that they’ve been able to put that money away. The bad news is, they’re not spending it. So they’re not either using it to grow employment or to make more capital investment in their business, or indeed to seek overseas markets. The reason they’re not doing this is because they’re very worried about the economic outlook. Principally the Eurozone, but at the moment they don’t see the light at the end of the tunnel. They’re looking down, but it’s just dark. The amount of money out there varies in estimate, but I’ve seen in the FT there was an estimate of £600bn potentially being in the balance sheets of non-financial private sector companies. Large listed companies, and this is a Bank of England figure, are estimated at over £65bn. This is an enormous amount of money but people aren’t going to spend it until they’re reasonably confident about what the outlook is. I would like the Chancellor to be doing as much as he can to be encouraging that.

Do you think part of that would mean reducing regulation on small and micro-businesses?

I think that would be a good idea. This government has made the right noises about wanting to roll back some of the regulation that has come through and is particularly onerous on micro-businesses around employment and health & safety. Providing we don’t turn into a society where people can be hired and fired at will, and people are sent up chimneys again, I think a balance would be very welcome.

Have you got any inkling from Whitehall that they’ve taken on these suggestions that you’ve put forward?

We’ll have to wait until this afternoon! We’ve been told that what the Chancellor is going to try to do this afternoon is create the right environment. Specific changes, particularly around the taxation regime, we’ll have to wait until the Budget. One of the things that we’ve being doing, which has been warmly supported by government, is been our business advice service. Yesterday we heard that PwC are signing up to it as well which is great. We thought that it would principally appeal to our small and medium sized practices, but we’ve got two of the Big Four involved now as well. Giving a free consultation to SMEs on any issue that they want to talk about I think is a great way of making sure those SMEs in the first place get good advice and aren’t frightened of getting advice. Whether a commercial relationship comes from it depends on the chemistry between the two parties and the value of the advice. But clearly from our members’ perspective, we do hope that it will create a commercial relationship going forward. Only time will tell, but what we’re interested in doing is giving this more visibility and giving it a life.

What else is keeping your members awake at night?

The top issue that members wanted to talk to me about today was access to finance. From discussions in other parts of the country I thought [this] was easing, but apparently not in the South West. Particularly access for the smaller end of the market - micros and small, anything below £30,000, it appears to be an equity and debt-free area. To tie that in with other things I’ve heard in other parts of the country, I understood that the angel community were getting increasingly active, and very interested in the sub-£25,000 investments. But apparently that’s not the case in the South West. So I don’t know if there’s an opportunity for us to work with local angel investors to actually give their desire to invest in these companies more prominence. Provide a broking service, if they work for a chartered accountant who can verify their business plan, their financial bona fides.

There are people out there with money to invest and they’ve got money that they need to grow, if we can help put the two together than that would be great. There isn’t any reason, particularly with new technologies, why they can’t reach a much greater audience than they have historically. One of the things we were talking about this morning was crowd source funding and that’s a very quick way of people to put investment into start-up businesses without risking their shirts, just risking whatever capital they can afford.

There’s a perception among our members that the institute is more interested in Big Four issues. By saddling up with the Big Four on things like the EU audit reforms, is the ICAEW in danger of losing touch with the grassroots in the profession?

I think since I became chief executive we’ve made great strides to make sure that we show in a positive way that we’re not just about the Big Four, and that small and medium sized practices are equally important to what we do. You say that we’ve saddled up to the Big Four on Europe, but I think we’re been taking quite a fine line on that because we haven’t said that the proposals put forward by Barnier are wrong, we’ve said there are some points he’s raised that are valid. Let me assure you that hasn’t endeared us to the Big Four but on the other hand we don’t think everything Barnier’s saying is sensible, because there are different solutions to some of the problems that he has identified. We are trying very hard to play low here, based on evidence.

Barnier says all the time that “investors want…”, so we’ve been asking investors what they want. They’ve been saying “audit committees want to see this…”, so we’ve been asking audit committees. So we are actually trying to get the factual basis for statements that we make. We expect now some of Barnier’s proposals to go forward in a modified form. We want to work with the commission to try and get sensible outcomes. But sitting above all of this, is the fact that accountancy in the UK is a world leader. We don’t have many industries or sectors where we can claim to be world leader, but accountancy is one of them – I would hate to see it destroyed.  

For the very small practitioner, ICAEW membership is a significant cost and brings with it plenty of regulation. How can the institute gain more credibility among smaller firms?

We are conscious, particularly in these hard times, that this is a cost that people look very carefully at. Regulation is an area that is self-financing so we only charge practitioners the cost of what it takes to deliver the regulation, to be regulator. But the important point is that we are trying to reinforce the fact that being part of a regulated community, a chartered accountant, comes with a business benefit. That’s things like the Business Advice Service, it’s the fact that members of the ICAEW are part of that community that are consulted by the Treasury minister. After the Chancellor has spoken he isn’t calling up the unqualifieds to ask what they think, or indeed any of the other professional bodies. The only one is the ICAEW. It is about being part of that badge and that club.

We also changed how you do practice assurance and from the feedback that I received members like our approach, which is more about giving them advice on how to run their practice in an efficient way rather than coming in and trying to find fault. So we are trying to be more value-orientated in those inspections that we make. But nobody likes paying for regulation.

We’ve also set up our practice centre in the last two years, and that is about making sure resources are available to our members through that. That’s been very warmly welcomed. But we are a broad church and when you’ve got 138,000 members there will be someone out there who isn’t happy and it can’t be personalised. Through different societies and group, through our various networking and monitoring of AccountingWEB, we do get a broad sense of what people think and take that into account. We regularly hold meetings at Westminster where we bring small practitioners and small entrepreneurs to meet with politicians. They get this opportunity through our officers to do that one a one-to-one basis.

How do you see the future of the small practitioner?

Well the small practitioner is doing pretty well, our numbers are going up. We’ve got over 12,000 firms now registered with the ICAEW - that of course doesn’t mask a change because fewer firms are doing audit now. I think that audit will continue to contract for a while, but more and more people are providing tax, financial management, outsourcing, consultancy - anything an accountant can turn their hand to. We’re getting around 200-250 new firms being created each year, and something that we’ve had in the last two years are ‘new firm roadshows’. We had around eight of those in 2010 and a similar number this year and we tend to get between 30 and 40 come along. The idea is that at an early point to convince them that the ICAEW is there to help and not just there to make their lives difficult. I think it’s done a lot to change to temperature and the mood music.

To what extent do accounting bodies work together on addressing common issues such as educating small businesses on the differences between QBE (qualified by experience), QBF (qualified by franchisors) and qualified? What is ICAEW doing?

The accountancy bodies do work together on professional issues through the CCAB, and while CIMA decided it was going to leave, the other five decided they were going to continue going forward. The government, for a lot of things could just go to one body or a group for a view, but they don’t always want to talk to half a dozen. We often submit responses to things collectively, but if we don’t we will also put forward individual responses because there are differences in views between the bodies. So we find our common group but we also find out distinct position.

On the issue of qualification, when I became chief executive this was one of the two top issues for members. What are you doing about the unqualifieds? [The other was HMRC service standards]. We spoke to the government and they said, “We don’t propose to do anything on a legislative basis about unqualified accountants unless you bring us some evidence that the public are not being well served by people who are not qualified.” That was the sentiment and we asked for feedback from our membership of examples of poor work from unqualifieds, because what we had to do was fill MPs letterboxes with these.

Do you know how many we got? Zero. ACCA got two or three and ICAS got less than 10, and collectively we had no evidential base to go forward. With HMRC going through the tax agent consultation, my personal view is that tax agents will be regulated. I think at that point in time you then have an opportunity to look at the quality of tax agents as a community. The RSBs [Recognised Supervisory Bodies] could potentially act as supervisory bodies for the unqualifieds. Now some of the membership think that would be a terrible thing to do, but I think if effectively what happens is that over a period of time you determine who makes the cut and who doesn’t. You end up with a better market at the end of it. I can see that happening over the next couple of years.

Is a merger of accounting bodies off the radar now?

I can’t see it anywhere on the horizon.

December will be the final date when ACCA/CIMA accountants could apply for membership for ICAEW. Why have they made the process so long-winded. The fact you are a member of the same level accounting body should be enough?

What we’re seeking to do for CCAB members is recognise the fact that they have a qualification and then look at what they’ve done post qualification to see what sort of experience they’ve had and whether or not that would in our view cover the difference from being a chartered and certified accountant, to take one example. Now we believe that the difference in our mind comes from the fact that you can have the same syllabus, but how you examine it is different. We think that we examine it in a different way, and that’s what we’re seeking to by the examination experience. That’s why ACCA members are choosing to join the ICAEW through that route. It’s not something we did to drive revenue. It’s something we did because practitioners in small and medium sized businesses said that “we’ve been trained certifieds now for 15 years”. They’ve been trained to be accountants in a chartered accountants practice, and as far as we’re concerned, they’re chartered accountants. So can’t we give a mechanism that brings them into membership without them having to do loads of exams?

How has the recent ICAEW advertising campaign on radio gone?

It seems to be well received by members. They like the fact that what we’re talking about are chartered accountants, rather than advertising the ACA or ICAEW. That’s what our marketing is going to be about going forward – chartered accountants. The downside of that is that others benefit from that, like our friends north of the border. It’s gone down pretty well with the membership. In terms of hits on the member firm site, that’s people seeking a chartered accountant - that has gone up quite significantly. What we can’t tell though is whether it’s the benefit of that or whether it’s the benefit of the business advice service because we’re marketing that as well.

Is a Tesco accounting service likely?

We’ve got 12,000 firms in this country, ACCA has got 4,000, ICAS has got a couple thousand, this is a very well-served market, plus the unqualifieds. I think Tesco won’t see this as being a particularly lucrative add-on to the stuff that they already do. 

Does the ICAEW consider that it is an equal opportunities organization? If yes, why does the ICAEW refuse to alter its disciplinary processes for members who suffer from mental health issues - particularly the case of Albert Camus.

[The ICAEW responded collectively to this question, rather than  a personal response from Izza.]

Disciplinary Byelaws state that ICAEW cannot comment on whether any matter may or may not be the subject of consideration by our Professional Conduct Department. However if, after consideration, it is decided that disciplinary action needs to be taken then a public announcement is made. Although we cannot comment on individual matters, those same byelaws state that a member shall be liable to disciplinary action if he or she commits any act or default likely to bring discredit on himself, the Institute or the profession of accountancy. It is also important to point out that we will always give members every opportunity to provide us with evidence of medical difficulties and will take account of such evidence received before the hearing in question. If a member has a medical problem which has prevented them from telling us they want to appeal they can ask to appeal out of time provided they can provide proof of their condition.

Tags:

Replies (1)

Please login or register to join the discussion.

avatar
By Steve McQueen
25th Jul 2012 23:09

Reply to ICAEW regarding Albert Camus

 

 

Firstly, I would like to thank Robert Lovell for raising the case of Albert Camus with the ICAEW. I have only just seen this post which is why I am only replying now, but as someone who knows - and has worked extensively with - Albert regarding his case over the last 4 years, I would like to follow up on the reply Robert received.

The ICAEW state in their answer: "If a member has a medical problem which has prevented them from telling us they want to appeal they can ask to appeal out of time provided they can provide proof of their condition."

While it cannot be disputed that the member can ask, the reply received by Albert who provided 2 (expensive) psychiatric reports regarding his mental state both during the initial complaint and subsequently during the appeals window was "no appeal can be considered... as the Institute must be allowed to continue with its work..." 

When pressed further, the ICAEW insisted that it was not prepared to discuss the matter and would only do so through the medium of a Judicial Review. Whilst we would have liked to have this referred to a JR, we could not, as we had several quotes from lawyers that the starting price of a JR was £50,000, that they could not offer any form of contingency fee funding and that they would need the money upfront.

Unfortunately, Albert was rendered penniless by the ICAEW removing his right to work (and his business partners throwing him out of his business as a result of the ICAEW ruling, without any compensation in any form whilst leaving him with the business debt) and what limited funds were available needed to be put towards living expenses and creditors.

The ICAEW knew this – for they had asked about Albert’s financial position regularly (and sort to punish him further for it) – and we cannot but believe that the use of the JR mechanism was a neat blocking tactic by someone within the ICAEW who knows that they got it wrong in Albert’s case, but need to prevent it coming back to them lest they themselves get in trouble.

Anyway, leaving aside the past, Albert’s life continues and he works with me on a daily basis in a new business that is driven by accountancy but is not in the mainstream of it. I know however, that he was always very proud of his membership of the ICAEW and would like to rejoin them if peace could be reached.

He has asked about this on several occasions and has been sent many forms for completion. However, the ICAEW insist that Albert must submit further (expensive) psychiatric reports regarding his health before he will even be considered for a reapplication to membership (he must also have successfully completed his litigation against his former partners).

If the ICAEW is an equal opportunities organisation why do they need this?

They do not recognise Albert’s condition as being a cause of the disciplinary action they brought against him – for they refused him an appeal which would have allowed him to present this evidence – so why must Albert tell the ICAEW personal, intimate and complete medical detail about a disability he suffers to be eligible for membership? – would anyone expect this of someone who uses a wheel chair who applied for membership? Of course they would not.

In other words - and in summary- despite the eloquent paragraph provided to Robert regarding equal opportunities, as someone who knows (very well) a disabled (former) member of the ICAEW, I can say that I do not accept that the ICAEW is an equal opportunities organisation as the evidence I have does not support it for those with mental health problems.

 

Thanks (1)