ICAEW is regularly made aware of problems that have occurred when a sole practitioner has become unwell and is consequently unable to continue to manage their practice, or when the practitioner has died without making adequate arrangements. The following guidance is intended to assist sole practitioners in planning to prevent these issues from happening. It also sets out the scenarios when sole practice auditors are required by relevant regulations to appoint an alternate.
General considerations for sole practitioners
All practitioners have a duty to ensure that their practices are properly supervised and conducted, including implementing arrangements to cover their holidays and sickness. Serious problems will inevitably arise however, if a sole practitioner ceases to be able to conduct their practice because of sudden or ongoing incapacity or death. The interruption of services in particular due to mental incapacity or death may cause considerable difficulty and inconvenience to the practitioner's clients, additional anxiety for their family and reduction in the value of the practice or even its disintegration.
It is therefore vital for a sole practitioner to confront and plan for these situations, preferably when they first enter into practice, and to make arrangements appropriate to each of the following circumstances to enable the practice to be carried on with a minimum of dislocation:
- continuing physical incapacity;
- mental incapacity; or
- death.
The arrangements should provide, as far as is possible, for the practice to be continued as a going concern by the alternate until such time as the sole practitioner recovers or a decision is made to dispose of the practice.
Where the office has been authorised under the Education and Training Regulations as an Authorised Training Employer, these arrangements should include provision for notification of death or anticipated prolonged absence of the sole practitioner to the Education and Training team of ICAEW. This will enable a provision to be made to ensure that approved training status is not at risk.
Appointing an alternate
There is a regulatory requirement for alternates to be appointed under both the Audit Regulations the Client Money Regulations. Even if appointing an alternate is not a regulatory requirement, it is highly recommended that a sole principal appoints an alternate in order to meet public interest considerations, to protect the consumer, ensure continuity of service and to preserve the goodwill of the practice.
Arrangements may be made with another sole practitioner or with a firm to act as the alternate.
More information can be found in the following helpsheets:
Requirements and considerations for those working in reserved areas
Audit
The UK Audit Regulations effective from 1 June 2025 require all ICAEW-registered sole practice auditors to appoint an alternate. A six-month transition period is in effect which will end on 1 December 2025. All sole practice auditors need to have an alternate in place by this deadline.
The role of the alternate is to ensure continuity of services and to effect a transition of clients to another auditor. There is no requirement for the alternate to undertake the business of the sole practitioner.
- The alternate can be an ICAEW, ICAS, CAI, or ACCA member.
- The alternate does not need to be a responsible individual.
- The alternate does not need to hold a practising certificate.
Complete this form and email it to annual.returns@icaew.com to notify ICAEW about your alternate.
An audit appointment is of a firm or, in the case of a sole practitioner, an individual by the audited company, and the Companies Act 2006 requires the senior statutory auditor, ie, the sole practitioner, to sign the audit report for a company, and certain other entities, in their own name. If an alternate is already licensed to undertake such work in their own firm, this licence is not transferrable and an application will have to be made if the alternate is to undertake audit work when acting as an alternate. However, such applications should be more straightforward than if the alternate was not already licensed for the work in their own practice.
If a sole practitioner auditor dies, there is no facility for the alternate to sign the audit report without being licensed by ICAEW to act as a responsible individual.
Client money
Complete this form and email it to annual.returns@icaew.com to notify ICAEW about your alternate.
Insolvency
Insolvency is a personal appointment. Although during the course of an insolvency appointment a practitioner frequently employs managers and other staff to carry out certain work on his behalf, it would not be possible for an alternate to be appointed to act, save by the court or other relevant entity empowered under the Insolvency Act 1986. An alternate could however be appointed to deal with the purely administrative matters arising from a sole practitioner's resignation or vacation of office, if the latter became incapacitated, physically or mentally. If an insolvency appointee dies, the appointment is automatically vacated.
Investment business
If the sole principal is authorised by the Financial Conduct Authority (FCA) to provide investment business advice or corporate finance services, then the FCA should be contacted and their advice taken.
Where a Designated Professional Body (DPB) Investment Business licence has been issued to the firm by ICAEW, the incapacity or death of a sole principal would be considered a change in circumstances under the Investment Business Handbook. The alternate would need to notify ICAEW as soon as practicable but not later than 10 business days after the occurrence. ICAEW will then reassess the firm’s eligibility, including whether the alternate has the competence to undertake this work.
Legal measures to ensure effective arrangements
Whilst an agreement can take any form, and could be a verbal agreement, it is good practice to have a legally binding written agreement and to seek legal advice. One advantage of a written agreement is that in the event of the death or incapacity of the sole practitioner the alternate will be able to demonstrate that they are acting with proper authority.
The legal measures that can be used could consist of:
- valid Power of Attorney (to deal with incapacity), plus
- 'Special Executor' clause, for inclusion in the sole-practitioner's will to cover the possibility of the practitioner's death.
The following helpsheets give further details of what should be included in an agreement between a sole practitioner and an alternate:
- Arrangement for alternates – guidance for sole principals
- Arrangements for alternates – guidance for alternates
Members are recommended to seek legal advice.
For further assistance please contact the Technical Advice Service on +44 (0)1908 248 250 or via webchat.