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When the ICAEW practice assurance inspector calls. By Richard Murphy

25th Jul 2006
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No one is delighted about being told they are to face an inspection. I certainly was not when I got a letter from the ICAEW advising me that it was my turn for a Practice Assurance review. But it's been and gone now, so I can reflect on the lessons learned.

I admit that my practice is now only a part time activity, and in that context completing much of the documentation needed for the Practice Assurance process seemed a bit tedious on occasions. By chance (well, I think it was chance) the request for the review meeting came shortly after I had finished my most recent ICAEW annual return. Rarely can the time invested in completing the necessary paperwork have seemed so worthwhile.

Lets be clear what the practice assurance visit is. First of all, mine covered Designated Professional Body (DPB) issues as well as practice assurance matters as I retain DPB registration as a precaution. It could also cover auditing issues, bit I no longer have audit registration. So it is intended to be comprehensive, and I think it fair to say that within the scope of the activities I undertake, it was.

Second, this is primarily a systems based inspection. If you've done your annual return properly and have the paperwork to support it, if you have done your annual investment business compliance review, a practice assurance review, a CPE review and have all the evidence in place to support these things then you're going to be a long way down the line. I had.

But you're also going to be asked about other important systems issues, such as being registered with the Data Protection Registrar (because I see no way on earth that you can practice and not do so, so I think this is right), PII (of course), whether you have appropriate IT systems and security systems in place, and how you manage and control the firm and its finances. So this is more than just about ICAEW-imposed regulation.

Once that lot has all been dealt with client files will be inspected. Mine were picked to cover corporate work, a large personal tax case and a recent new client. The new client check was to confirm that all the appropriate identifcation procedures had been followed - although in this case I explained that having a copy of the client's passport on file might not have proved much, since I had known her for many years and signed her passport application. I have done this for at least half of my current clients, which reduces their value for the purpose of proving client identity in my opinion.

Questions were raised and answered on the audit trail of the workflow, but not on the quality of the work itself. This process is all about paperwork, not whether what you have actually done is any good! But be warned ' part of the company work is to check that the accounts comply with the Companies Act. The ICAEW is worried that work done by members appears no better than that done by non-qualified firms and is specifically looking at this issue.

At which juncture, in my case, and after my bank records had been inspected to make sure there was no sign of money laundering going on, the visit come to the closing meeting.

I can write quite happily about this. My inspector, who was courteous, charming even, competent and experienced in these issues (having done more than 200 of these visits) was pleased to note that I was only the second practice he'd visited where he was able to say there was nothing I either had to deal with to meet the requirements of practice assurance standards, or that he could recommend I dealt with to improve the quality of what I am doing.

All of which only proves that I am really competent at ticking all the right boxes and filling in the right forms at the right time. Regrettably, and however important I think this might be (and I do, or I would not willingly do it or expect others to do the same) I had one closing comment to make on the visit. And this was that I was advised in writing, and as part of the closing meeting notes (which you are given there and then) that: "This practice assurance visit does not include an assessment of the technical quality of the firm's advice to clients."

Which, in my view is just not good enough. Knowing your client and so on is important. But if you're either incompetent or are plain straightforwardly offering crooked advice, then both should also be the subject of review. After all, do the public want accountants who can photocopy their passports as supposed proof of identity or do they want accountants who are 1) straight 2) competent? I think it's the last two things.

And why, did my Inspector opine, is the institute unable to undertake review on the quality of work done? Because the members of the ICAEW don't want that to happen, that's why.

Which begs the question in whose interests is this exercise being done? It may just be to cover the institute's backside. One would hope it's not for the benefit of the members, although I am told that many problems are found on such inspections and so perhaps that is what this is really about. But I would have hoped it's for the benefit of the public. Yet, given the scope I doubt that this can be true. In which case, whilst I might feel mildly pleased with myself, I have immense disquiet about the system itself.

Richard Murphy

Lessons learned from the practice assurance visit
  1. Doing the reviews required by the practice assurance regime is vital. These need not be long (my investment business review was less than a typed page, my CPE review a one side, hand written note ' but each was done, and that was the key thing).
  2. The ICAEW is concerned about risk ' your engagement letter has to cover this and when you're asking the client to sign accounts and tax returns they want to see that you have passed the risk to them, and not kept it yourself.
  3. Update your engagement letters, every three years seems acceptable.
  4. Have audit trails for all your work; I don't use a standard checklist for producing accounts and tax returns, but do have a standard pattern of working which results in an audit trail. Again, this reduces risk and so the chance of a PII claim ' which seems to be a major ICAEW concern.
  5. Do ensure you have all appropriate IT security in place, from firewalls and anti-virus checking to back up; you can't claim to be largely paperless (as I do) and then lose the lot because of poor housekeeping.
  6. If you have staff or subcontractors make sure you know what they're doing. It's not good enough to 'trust them'. Their work has to be monitored and controlled by the ICAEW principle.
  7. Check your company accounts before sending them in! The ICAEW don't want to be embarrassed by them.


Replies (3)

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By Taxi
26th Jul 2006 10:36

I wonder if they are targetting tax writers and academics
at present?
I had my visit last December, and a golly good old experience it was too. The chap was somewhat bewildered with what I do, but not there to check that I am handing out the right advice. He gave me some good advice regarding the Data Protection Act that I had overlooked.
I think this type of visit is a great idea. Unsure how easy it would be to check the quality of the actual work done though.

Thanks (0)
By alasdairmacg
26th Jul 2006 12:50

I couldn't agree more, Richard
I too have had a QAD visit within the last month, and am in a very similar position to Richard. I agree wholeheartedly with his "Lessons Learned".

Whilst I would also like the quality of work to be taken into account, my only reservation on this is how long a visit might then take.

I am one man and his dog, but without the dog - I have no employees or sub-contractors.

I am not registered for audit/investment work, and have no limited company clients.

The inspection visit began at 9.45 am with the opening meeting, and the closing meeting finished at around 4.00 pm.

If quality of work was also being considered, this would presumably involve more client files being looked at, or at least the same number but in much more detail.

If this means that at least a full day (and probably more)is required for a practice such as mine, how long would it take for a firm with employees and/or sub-contractors etc?


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By JSJ54
26th Jul 2006 10:38

Thanks Richard
I want Practice assurance to check the quality of advice given. Which other ICAEW members do?

Surely if enough of us demand it then it will be introduced. Or am I being naive?

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