AAT and ICAEW tussle over calls for compulsory membership

AAT and ICAEW tussle over calls for compulsory membership

“It’s unduly harsh”

AAT and ICAEW tussle over calls for compulsory membership

Research demonstrating the overwhelming support of MPs for introducing compulsory accounting membership has divided the opinion of industry bodies, including the Institute for Chartered Accountants (ICAEW) and the Association for Accounting Technicians (AAT).

In May, the AAT published the results of a survey it commissioned to YouGov, revealing that 78% of MPs would support increased regulation of high street accountants and tax advisers. The body is campaigning for compulsory membership to become a legal requirement.

“Mandating professional body membership provides a ready-made solution. There’ll be greater reliance on the support and guidance we can provide to our members, but also that commitment to the maintenance of high standards,” says Adam Harper, director of professional standards and policy at the AAT.

Unregulated advisors make up a third of the sector, and two thirds of its complaints regarding compliance and reporting errors stem directly from this demographic, according to HMRC data.

“When things go wrong, this will give us a mechanism to investigate and impose relevant sanctions against those that fall short of the standards we expect.”

The MP survey follows a separate AAT study published in April. It found that, out of more than 1,000 respondents, 59 percent said they were unaware that no professional or formal qualifications were required, and 57 percent thought that membership should be mandated.

But ICAEW practice director Amanda Digne-Malcom argues that the industry may be too far gone to make such a seismic change.

“Once you’ve got that legacy, sometimes it’s hard to turn that. If you sought to make a change, you run the risk of putting some people at a disadvantage.

“You’ve got a whole cadre of people who are accountants and earning a living from it, who are not from a professionally qualified background. I think the perception would be that it’s unduly harsh.”

Digne-Malcolm also acknowledges industry trust as a key element of these proposals, but notes that professional membership can’t be viewed as the only criteria for attaining this.

“If you’ve had rigorous training and you’re subject to monitoring, that contributes to the trust agenda. But that doesn’t mean to say that anyone who doesn’t fall under that can’t be trusted – I absolutely don’t believe it can be that black and white.”

A string of events in recent history has placed the professional services sector under the microscope. Most notably, scandals surrounding construction firm Carillion (2018) and café chain Patisserie Valerie (2019) were largely attributed to reporting malpractices. Scathing criticism of the wider audit industry has also emerged, including one report published in April arguing that the sector is “failing society”.

“That further reinforces why this is important. Where there have been high-profile failures in audit, accounting gets wrapped up within that,” says Harper.

“It’s been a source of frustration that this has taken so long. With HMRC’s desire to ensure that all taxpayers are paying the right amount of tax at the right time, there’s a reliance upon people who are suitably qualified to provide that advice and guidance. It’s not a great leap of logic to understand the relationship that exists there.”

Drew Cullen, director of policy and membership at the Chartered Institute of Public Finance and Accountancy (CIPFA), concurred with this, also noting trust as a key area.

“Recognising the profession and introducing compulsory membership are key steps to building public trust,” he said in an email, adding that CIPFA fully supports the AAT’s campaign.

Whilst HMRC has not yet acted on the AAT’s proposals, it recently unveiled alternative plans to help tackle the issue – a new consultation proposing compulsory professional indemnity insurance.

Under these rules, clients would be covered for various levels of loss in the event that negligence by an unregulated advisor causes them financial damage.

“In many ways this is addressing the symptom rather than the cause of the problem,” says Harper.

“There are deep concerns from insurers that all it’s doing is pushing the role of regulation onto the insurance market. That’s not their role, and the government should be taking this step for themselves and actually legislating for that change.”

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