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A consultative document issued by the Office of Fair Trading

Comments from
The Association of Chartered Certified Accountants

  Executive Summary

• The Association of Chartered Certified Accountants (ACCA) is pleased to submit its comments on the Office of Fair Trading’s (OFT) consultative document on the review of competition in professional services.

• The OFT will wish to bear in mind that the accountancy profession as it is constituted in the UK differs from other professions in that entry to it, and the practice of it, has never been centrally controlled. In particular, there has never been a statutory definition of ‘accountancy’ or ‘accountant’. This has allowed a situation to develop whereby there is today a multiplicity of bodies offering qualifications in accountancy. It could fairly be said, therefore, that the accountancy profession is much less ‘restrictive’ than other professions.

• While the existence of so many professional bodies and so many different qualifications may be regarded, in principle, as being healthy in terms of consumer choice, the situation does carry with it certain dangers. It has always been the case that the qualifying and regulatory standards of the different bodies have varied quite substantially. Given the absence, for many years, of any legal restriction on the right of any person to present him/herself as being able to act as an accountant, the standing of the profession has always depended on the efforts of the professional bodies to associate themselves and their members with the highest professional standards. We believe that, in the main, these efforts have been successful in terms of protecting the consumer and promoting the integrity of the profession overall.
  
  
• ACCA itself was founded to provide the opportunity for people of ability, whatever their backgrounds to enter the accountancy profession. Until its establishment, entry to the accountancy profession was restricted to those who could afford to secure contracts of articled clerkship. ACCA remains committed to the principle of open access on which it was founded and sees no conflict between this and its responsibility to ensure that only those who are able to demonstrate an extensive knowledge and understanding of accountancy are finally admitted to membership.
  
  
• There are four instances in which ACCA’s rules restrict eligibility to conduct specified work to those members who have satisfied us as to their expertise, experience and fitness to carry out that work. Three of these restrictions are required of us by statute law, while the fourth, relating to the right of a member to offer his/her professional services to the public, is, in our view, a necessary protection for the public.
  
  
• ACCA imposes no restrictions on its members regarding how they organise their working structures or advertise and charge for their services. Such conditions as we do impose in these areas are related to the maintenance of high professional standards.
  
  
• Overall, in respect of the three generic types of restriction on which the OFT is focusing its review – entry, ability to carry out certain types of work and conduct of business – ACCA believes that its rules are entirely consistent with the public policy goal of free and open competition.

Background

1. The accountancy profession in the UK differs from most others in that there is no accepted, integrated collection of activities which is reserved, by law or other means, to members of that profession. Accountancy has always been broadly construed and, although attempts have been made in this direction, there has never been a legal definition of ‘accountancy’ or ‘accountant’ in the UK. Within what is generally regarded as the ‘accountancy profession’, a wide range of activities is routinely carried out. The conduct of most of these activities is not restricted by law to those with any particular qualifications. As a result, there has evolved in the UK a situation where there is a multiplicity of accountancy bodies, enjoying varying status, and large numbers of individuals are thought to be acting as accountants when they have no recognised qualifications at all.
   
   
2. The principle on which ACCA was founded, and by which it is still guided, was to provide professional opportunities for people of ability and application. This involves providing the opportunity for people from all backgrounds to prove that they are capable of passing ACCA’s examinations and meeting its other requirements for admission to membership. ACCA has a long tradition of open access to its qualification and this is reflected in its core values, which are opportunity, accessibility, flexibility, quality and integrity.
   
   
3. ACCA is one of six senior professional bodies in the UK, each of which has been awarded a Royal Charter. ACCA is the second largest of these bodies, with nearly 75,000 members and over 150,000 students. About a third of its qualified members work in public practice, while the remainder work in industry, commerce, the public sector, national and local government and education. 40% of ACCA’s members and students are based outside the UK, principally in Asia, Africa and the Caribbean. In recent years there has been a dramatic growth of membership in China, Eastern Europe and countries of the former Soviet Union.
   
   
4. In the UK, ACCA is supervised by three regulators - the Department of Trade and Industry in respect of audit, the Financial Services Authority for investment business and the Insolvency Service for insolvency. In order to become a recognised licensing body for each of these purposes, ACCA had to satisfy the regulator concerned that its qualifying, licensing, monitoring and disciplinary arrangements met statutory requirements. All these regulators receive annual reports on ACCA’s conduct of its statutory responsibilities and undertake monitoring visits to satisfy themselves that ACCA is carrying out those responsibilities to appropriately high standards.
   
   
5. As a global organisation, ACCA is particularly mindful of the point made in paragraph 3 of the consultative document that this is a period of increasing globalisation. The technical and ethical standards expected of accountants are increasingly being set by international bodies. This is resulting in a convergence of standards, and national rules and restrictions which are out of step with external developments are looking increasingly inappropriate.

Comments on Specific Questions

Our comments on individual questions set out in the consultation document are set out below:

Entry Restrictions

1. What qualifications/training must a potential entrant to the profession possess? In addition to qualifications and training, are there any requirements for entry (e.g. periods of work experience, membership etc.)?
   
   As already stated, ACCA has a long-standing policy of open access to its qualification. While 31% of ACCA students are university graduates, the basic requirement for registration is the same as for entry to a UK university. Students who do not meet this basic requirement may enter the profession through ACCA’s Certified Accounting Technician qualification, the successful completion of which entitles the student to transfer to the ACCA professional examinations.
   
   ‘Mature’ students (those who are at least 21 years old) who do not meet the standard entry requirements may register under ACCA’s Mature Student Entry Route (MSER). MSER students who pass papers 1 and 3 of ACCA’s professional examination scheme within four sittings of registration are then allowed to attempt the remainder of the examinations. Currently, 5% of ACCA’s total student population enters via MSER.
   
   The ACCA professional qualification requires students to complete three stages of examinations (14 papers in total) and obtain three years of relevant work experience. The experience element requires students to demonstrate competence in a range of activities. The successful completion of the examination and experience requirements entitles an individual to become an ACCA member.
   
   
2. Does the profession on which you comment impose any obligations in relation to continuous professional development or any other requirement as a pre-requisite for continued practice? What are these?
   
   ACCA requires all of its members who engage in public practice to meet continuing professional development (CPD) targets. In order to secure authorisation to engage in public practice, a member must obtain a further period of relevant post-qualification work experience and complete successfully an orientation course and test. ACCA has three categories of practising certificate: practising certificate (audit); practising certificate (general practice); and practising certificate (accounting and consultancy). The continuing obligations which must be met in order to be eligible for such certificates are as follows:
   
   
   • the member must complete 35 hours of relevant Continuing Professional Development (CPD) a year, 21 of which must be acquired through attendance of structured courses
     
     
   • the member must hold appropriate Professional Indemnity Insurance (PII) cover
     
     
   • the member must make continuity of practice arrangements in the event of his/her incapacity or death
     
     
   • the member must undertake to co-operate with ACCA’s monitoring unit
     
     and
     
     
   • the member must ensure that his/her audit firm remains under the control of qualified persons.
     
     
   In addition to the above, there is an overriding requirement that a member who applies for a practising certificate satisfies ACCA that he/she is a fit and proper person to provide professional services to the public. The detailed provisions governing the authorisation of ACCA members to engage in public practice are contained in the ACCA Practising Regulations 1998, as set out in the Rulebook 2000, a copy of which is attached.
   
   ACCA members who wish to act as insolvency practitioners under the Insolvency Act 1986 must successfully complete the examinations of the Joint Insolvency Examination Board. Those who wish to conduct discrete investment business must successfully complete the Chartered Insurance Institute’s Financial Planning Certificate examinations.
   
   
3. What do you think are the objectives for any such requirements? Do you think these objectives are justified? Do you think that these requirements are more onerous than necessary to achieve the objectives? If yes, please give reasons for your view, along with any proposed alternative(s) to the present requirements (e.g. the approach adopted in another jurisdiction). What are the effects of entry requirements on: (a) the profession in question; (b) the clients and the general public; (c) the range, quality and price of services available?
   
   We consider that the objectives of the requirements set out under question 2 above are to:
   
   
   • ensure that individuals have and continue to have the appropriate knowledge and skills necessary to carry out specialist work
     
     
   • ensure that competence is maintained through lifelong learning (CPD)
     
     
   • protect the interests of clients and ensure that continuing obligations to them can be met
     
     and
     
     
   • ensure that practitioners are able to comply with professional standards and meet ACCA’s own obligations as a regulator to monitor the continuing competence and fitness of its members
     
     
   We consider that these objectives are justified as it is essential that clients and the public should have confidence in the practitioner.

   Demarcation Restrictions

4. Is the provision of certain services reserved to members of one or more of your professions or to groups of members within a profession who have particular qualifications or a certain level of seniority? What is the nature of the relevant restriction (professional rules, a National or Community legal requirement, etc.)?
   
   Because of the broadly-based character of accountancy, the restrictions which have been placed, over the years, on the work which accountants are able to perform have tended to focus on specific activities which are considered to be particularly sensitive, rather than on the activities of accountants as a whole. These restrictions, as they now exist, fall into two categories: legal restrictions and professional ones. ACCA members are currently subjected to the controls described below.
   
   
   • Members who wish to act as auditors must meet the relevant requirements of the ACCA Practising Regulations 1998. These incorporate the statutory requirements of the Companies Act 1989, which themselves implement in the UK the requirements of the EU Eighth Directive.
     
     
   • ACCA members who wish to act as insolvency practitioners must meet the relevant requirements of the ACCA Practising Regulations 1998, which are based on the requirements of the Insolvency Act 1986. These regulations are subject to regular review by the Insolvency Service. The regulations stipulate that applicants for an insolvency licence must meet specified minimum requirements such as having obtained at least 600 hours’ insolvency experience in the three years immediately preceding the application.
     
     
   • ACCA members who wish to undertake investment business must meet the requirements of the Financial Services Act 1986. Detailed regulatory provisions are set out in ACCA’s Investment Business Regulations 1996, contained in the Rulebook.
     
     
   An ACCA member who wishes to conduct practice work outside of the areas restricted by statute is required to hold a practising certificate (general practice). The eligibility requirements for this certificate are included in the Practising Regulations and will typically require a member to obtain two years’ post-qualification experience and to complete a practice orientation course and test.
   
   The third ACCA practising certificate is the practising certificate (accounting and consultancy) which allows members who have had careers in the commercial sector and do not meet the criteria for the other two categories of practising certificate to engage in a limited range of public practice work.
   
   
5. Are members of the profession on which you comment restricted as to the kind of organisation through which they may provide their services (e.g. prohibition on partnership or fee sharing with members of other professions, stipulations in professional rules or legal requirements as to the appropriate business arrangements etc.)? Please give details of the extent and origin of any such restriction.
   
   There are no restrictions as to the kind of organisation through which a practitioner may provide his/her services.
   
   
6. What are the objectives of the restriction? Do you think these objectives are justified? If yes, please state the justification. Do you think that the restriction is more onerous than necessary to achieve the objectives? If yes, give reasons for the view, along with any proposed alternative(s) to the present requirements (e.g. the approach adopted in another jurisdiction). What are the effects of this restriction on: (a) the profession in question; (b) clients and the general public; (c) the range, quality and price of services available?
   
   This question is not applicable to ACCA.
   
   

   Conduct Restrictions

7. Does the profession on which you comment involve itself in any way with the level or structure or structure of charges levied by its members for their services? Is there a scale of charges in operation in relation to any of these services? If so, please state if this is mandatory (including maximum or minimum prices) or recommended. If the scale is recommended, please provide details, in so far as is possible, of the extent to which members adhere to the fee scale and of the relationship between scale prices and prices actually charged.
   
   There is no scale in operation with respect to the charging of fees.
   
   
8. Please provide any details of any rules, regulations, codes of practice, guidance, standard forms of contract, other publications, conventions or conduct which directly or indirectly with charges for services.
   
   ACCA advises practitioners that letters of engagement should state the general basis on which fees are computed. The guidance contained in ACCA’s Rules of Professional Conduct includes advice on areas such as management buy-out and raising venture capital, fee disputes and fee quotations. Detailed regulatory provisions are contained in section 3.12 of ACCA’s Rules of Professional Conduct, found in the Rulebook. In the case of insolvency appointments, Statement of Insolvency Practice 9, drafted by the Society of Practitioners of Insolvency, contains guidance on how the statutory rules governing the remuneration of insolvency office holders should be interpreted and brought to the attention of creditors.
   
   
9. In relation to any price guidance on which you have submitted observations, please give details of any objectives which you think the guidance pursues. Do you think these are justified? Is the price guidance necessary to achieve these objectives? If yes, please give reasons for your view along with any proposed alternative (e.g. the approach adopted in another jurisdiction). What effect does the price guidance have upon: (a) the profession and its members; (b) clients and the general public; (c) the range, quality and price of services available?
   
   Section 3.12 of ACCA’s Rules of Professional Conduct attempts to ensure fair dealing between the practitioner and client and to minimise the opportunity for misunderstanding and conflict to occur. This serves to protect the interests of the client and the practitioner and has a neutral effect on the price of services.
   
   The guidance is designed to contribute to maintaining quality and ensuring that a range of services appropriate to the client’s expectation is provided. Charging fees on a time basis can create transparency, which helps the client and practitioner see that value is achieved.
   
   
10. Where members of a profession are restricted in their freedom to advertise any aspect of their services through any medium, please provide details of the nature and the extent of the restriction.
    
    ACCA members are free to advertise their services through any medium, subject to the general requirement that the advertisement and the medium should not reflect adversely on the practitioner, ACCA or the accounting profession. ACCA’s guidance states that advertisements should not:
    
    
    • bring ACCA into disrepute or bring discredit to the member, firm or accountancy profession
      
    • discredit the services offered by others
      
      
    • be misleading
      
      or
      
      
    • fall short of the requirements of the British Code on Advertising Practice and the IBA Code of Advertising Standards and Practice.
      
      
    There are clear requirements placed on the advertising of fees to ensure that these are clear and will not mislead current or potential clients. Detailed guidance is set out in section 3.6 of ACCA’s Rules of Professional Conduct.
    
    
11. What are the objectives of any such restriction? Do you think these are justified? Is the restriction more onerous than is necessary to achieve the objectives? If yes, please give reasons for your view, along with any proposed alternative (e.g. the approach adopted in another jurisdiction). What effect does the restriction have upon: (a) the profession and its members; (b) clients and the general public; (c) the range, quality and price of services available?
    
    ACCA’s rules on advertising result in:
    
    
    • the profession and its members maintaining acceptable standards in advertising, with practitioners being guided away from areas of conflict and dispute
      
      
    • clients and the general public receiving clear and unambiguous information from which they can make well informed choices and decisions
      
      and
      
      
    • the range of services being clearly presented to potential clients, thereby enabling them to make comparisons between practitioners, resulting in a competitive market.

    General Questions

12. Are there any other ways in which you consider the delivery of professional services to be restricted?
    
    ACCA does not consider that there are other ways in which the delivery of professional services is restricted. There are many unqualified accountants in the market who provide services to SMEs and the public but who are not subject to any regulation or scrutiny. This may represent a significant risk to their clients, who will often labour under the misapprehension that all those who practise as accountants are qualified and regulated.
    
    
13. What do you think are the objectives of the restriction? Do you think these purposes are justified? If yes, please state the justifications. Do you think that the restraints more onerous than is necessary to achieve any justified purposes? If yes, please give reasons for your view, along with any proposed alternative(s) (e.g. the approach adopted in another jurisdiction). What are the effects of the restrictions on: (a) the profession and its members; (b) clients and the general public; (c) the range, quality and price of services available?
    
    ACCA’s views on this question are encapsulated in its response to Question 12 above.
    
    
14. Do you feel that the governing body(s) of the profession on which you comment is (are) representative of the profession as a whole? Do you feel that the balance of interests represented within the governing body(s) is appropriate? If certain interests within or beyond the profession are, in your view, over/under represented, say what these are and provide details of the nature of any restriction which contributes to this.
    
    ACCA’s Council, which is elected by the membership, has 36 members; at least 12 of these must be eligible for appointment as a company auditor. The balance broadly represents the functional and geographic distribution of the membership. An International Assembly, comprising elected representatives from over 50 countries and regions, advises Council on strategy.
    
    

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