Simple changes could significantly improve regulation of accountants

Accountants have been in the news recently and in a way that everyone from the man in the street to the US senate now has a view about tax structures for Irish entities. Similarly, the role of bank auditors and the work of our members in insolvency practice are never too far from the news pages, sometimes for reasons that are less than comfortable for us and that shine a light on how accountants are regulated.

There are two serious issues in this area that, taken together, risk further damage to Ireland’s reputation abroad and are creating consumer protection issues at home. In both cases implementing simple changes (and in most cases agreed changes) could significantly improve the regulation of accountants.

International issue
The international issue is the way we regulate and supervise the auditors of our biggest and riskiest companies. Why does this matter? As citizens we have learned to our cost that often these companies are underwritten by the State. In most other countries, there is a public regulator of these auditors who can directly inspect files and hold auditors to account for the quality of their work. Unlike the US and the UK, this is not the case in Ireland. Our structure is out of tune with international practice and is not sustainable. Indeed, the US public regulator – the Public Company Accounting Oversight Board – has highlighted Ireland on a list of countries with which it has a structural problem in relation to the supervision of such auditors. We cannot afford to be on any list of errant countries in the markets where we source a significant amount of our capital.

In fairness, all parties in Ireland agreed in 2009 how to solve this problem. The Irish Accounting and Auditing Supervisory Authority agreed to directly inspect the auditors of big companies. The profession, which had long argued for this change, agreed. The audit firms – most of whom are part of the Big 4 global audit firms – agreed and also agreed to fund the change. In 2009 the previous government agreed.

Unfortunately, the task has remained in a “not completed” category in the inbox of various departments, despite the efforts of the profession and the authority. The matter now rests with Minister for Reform Brendan Howlin to make the arrangements to have direct public supervision in this area. Action is required now. We cannot afford to wait for additional negative exposure for Ireland before we implement this important change.

Supervision
The second problem is more surprising. Despite having a well-regarded statutory body in the authority, regulation of accountants who offer their services to the public in Ireland is essentially voluntary.

The authority supervises regulation within nine professional bodies in our industry. However, if you are not a member of these bodies or if you are expelled, you are outside the scope of the regulation or the authority’s supervision. In these circumstances there is no statutory constraint on the way one can describe oneself or offer one’s services. This is an important consumer protection issue as, in these testing times, many citizens are contacting accountants who never had a practical need to do so before.

The good news is that this issue can be resolved as part of the companies Bill to be enacted this autumn. Anybody who offers accountancy services to the public ought to be required to submit to regulation by one of the bodies and therefore come under the authority’s supervisory ambit.

Brendan Lenihan is president of Chartered Accountants Ireland, the largest body of professional accountants in the country