Professional qualifications (including audit)
Mutual recognition of qualifications underpins the continued mobility of professionals across the UK and EU27.
Why does it matter?
Mutual recognition of qualifications enables mobility within the accountancy profession to support audit quality and professionalism across the range of accountancy services. It also has broader relevance in relation to the international standing of UK professional qualifications. Legal uncertainty on recognition impacts individual professionals and firms, particularly with regard to statutory audit rights.
Professional recognition is a significant issue which is being dealt with both as part of the withdrawal discussions (in relation to citizens’ rights) and in the context of talks on a future UK-EU27 arrangement. It is important that a legal basis is also put in place for the future: unless addressed specifically in a UK-EU27 agreement, the current market access and system of mutual recognition will fall away after Brexit.
What are our key concerns and our asks?
Concerns exist in a number of areas, beginning with acquired professional recognition rights through the EU mutual recognition regime. They also include, more broadly, the rights in the future of individuals who acquired their qualifications under the current EU legal framework and those who are in the process of acquiring their qualifications and may be dis-incentivised from completing the qualification process.
In addition to the uncertainty caused to individuals, barriers to professional mobility will impact the ability of professional firms to share sectoral expertise across the EU27 and the UK, raising concerns particularly in the area of statutory audit.
In relation to broader areas of accountancy services where activities may be regulated, there is a risk of complexities, barriers (for example, in relation to diverse pre-qualification requirements) and dispersal of resources in the pursuit of bilateral agreements to achieve recognition across the EU27 and the UK.
We believe it critical for a EU27-UK agreement to include provisions on the recognition of professional qualifications covering:
- Professional qualifications, for those with or acquiring qualifications, as well as for those who will do so in the future, whether as UK or EU27 nationals. This should provide for the same access to aptitude tests / adaptation periods (rather than requalification) as well as enabling the cross-border provision of service rights.
- Statutory audit, through confirmation of EU27-UK reciprocity in relation to the approval of statutory auditors, also with the same access to aptitude tests / adaption periods (rather than requalification). Attention also needs to be paid to the pursuit of convergence in education requirements for statutory auditors by the EU27.
The current regime for the recognition of professional qualifications
Under the existing EU system, member states must take account of qualifications obtained in another member state when granting access to or pursuit of a regulated profession in its territory. It means that any professionals moving across the EU to undertake regulated activities are only required to take an aptitude test or fulfil an adaptation period instead of requalifying. The EU regime also includes arrangements for cross-border service provision, which applies differently across the range of accountancy services.
In addition, the EU Statutory Audit Directive contains the only common legal reference at European level for education and training in the accountancy sphere and is, therefore, generally used as benchmark across the profession as a whole.
While not perfect, the EU regime gives more certainty than professional recognition arrangements in existing EU free trade agreements with third countries (eg, Canada and South Korea), and is significantly more efficient than what is currently experienced with other major economies. The EU also has more liberalised domestic markets for accountancy services than is the case under WTO GATS. The WTO discipline on domestic regulation in the accountancy sector, which dates from 1998, has not been implemented.
What is being proposed?
Acquired professional recognition rights have been addressed in the context of the withdrawal discussions. The draft Withdrawal Agreement recognises the existing rights of individuals who have already successfully achieved recognition of their professional qualifications. It provides the opportunity for those individuals undergoing recognition procedures, including during a transition period, to conclude open procedures.
The UK Government White Paper, published in July 2018, proposes that recognition of professional qualifications should be included in a future UK-EU27 agreement. As noted above, provisions on recognition of professional qualifications are included in a number of EU free trade agreements. To date, however these provisions on recognition for third countries have been either ineffective or subject to potentially complex reciprocity arrangements.