The revised CPD Regulations, which come into effect in November 2023, recognise that a one-size-fits-all approach is no longer appropriate in a profession which is increasingly diverse.
The new requirements provide much stronger assurance to the public, oversight regulators and politicians that ICAEW Chartered Accountants are maintaining and enhancing their competence within increasingly complex professional and regulatory environments.
Under the new regulations, firms will be responsible for ensuring that their principals and staff are compliant with the new requirements and to maintain records which can be inspected by ICAEW’s Quality Assurance Department (QAD) on request. This reflects the existing obligations on member firms in the ICAEW Code of Ethics.
The changes originate from a wider initiative by ICAEW Council to restore public trust in the accountancy profession following a string of high profile corporate and auditing failures.
While she was vice-president of ICAEW, Julia Penny set up and chaired a Council Working Party to look at what ICAEW could do to reassure the public and reduce the risk of similar failures in future.
“We're in an environment, in a very general sense, where people don't automatically trust somebody just because they’re a professional,” she says. “But we're also in an environment where the nature of the work we do as accountants is very complex – business is very complex.”
“So we were looking at what we could do better in future,” she explains. “And we were asking: ‘Are we doing everything we should to ensure our members are competent to provide the best advice and the best service to clients?’”
One of the key themes to emerge out of these discussions was CPD. “The focus of ICAEW’s Charter is on the quality of chartered accountants – the quality of the work they carry out,” she says. “And the regulatory environment has been changing rapidly, so we wanted to ensure our requirements for CPD were keeping pace with those changes.”
One size doesn’t fit all
ICAEW’s broad membership means its approach to CPD must meet a wide range of needs, from sole practitioners to the Big Four firms, as well those working across different service lines and members working in business, the public sector or not-for-profit organisations.
“We’ve got CEOs and CFOs of major businesses, PIE (public interest entity) auditors and small High Street practitioners who do tax accounts for local businesses, so to expect the same of all of them is not sensible and would not reflect the different risks to the public in the nature of the work carried out,” notes Julia.
The revised CPD Regulations establish new CPD categories for practice and non-practice members and these categories will determine the minimum CPD requirements for members. Certain specified areas of work fall within CPD categories 1 and 2, with all members carrying out other work falling into CPD category 3.
“We wanted to come up with something which better reflects the roles of individuals,” explains Julia. And it soon became clear that it wasn’t the roles themselves, but the degree of risk to the public associated with those roles that was the critical issue.
“A driving factor for the CPD categories has been the degree of risk to the public in the service or work that's being undertaken,” adds Duncan Wiggetts, Chief Officer, Professional Standards Department, ICAEW who has co-chaired the CPD Steering Group which has worked on the revised regulations.
“If you're doing something that's very complex but it’s not going to have a big impact on the public then it’s unlikely to feature in CPD categories 1 and 2.”
ICAEW Council played a critical part in defining the CPD categories. More than 100 Council members in different roles around the UK and internationally were asked at the Council conference in November 2021 to rank a range of sample member roles in terms of the risk.
“We got a good feeling from this exercise of what a proxy of members felt were the risky roles and the not so risky,” emphasises Julia.
The process also led subsequently to a full consultation with ICAEW members and firms, which included questions about the appropriateness of the categories and role definitions.
“So, we got the original categorisation with help from Council, but we've also tested this, and we've listened, and we’ve changed things as a result.”
An example of the changes arising out of the consultation is the requirement for members only to fall into a higher CPD category if they spend more than 30% of their time undertaking work listed in those Categories.
Firms pointed out that a sophisticated audit, for example, can involve hundreds of people but some might only work on that audit for a day or even a few hours to offer expertise related to their main area of work.
“Firms said those individuals really should be categorised based upon what they do most of the time, not for 1% of their time and we considered that to be a fair push back,” explains Duncan.
Members will be required to identify which CPD category they belong to and complete the specified minimum number of verifiable and non-verifiable hours. Verifiable CPD is any activity which can be evidenced. This will capture much wider learning opportunities than just the traditional attendance on courses.
Julia believes the requirement for some CPD hours to be verifiable is a positive step forward in terms of helping to boost the quality of members’ learning.
It's not just about sitting in your seat somewhere and listening to a lecturer. “It might be that,” says Julia. “But it might be e-learning, reading a document, or producing your own summary paper on a technical issue. So, we need to recognise what learning is all about today and give credit for it when assessing what’s been done.”
“A requirement to undertake verifiable hours is also not a new concept but one which has been increasingly required by other regulators, including other accountancy bodies” Duncan adds.
One of the biggest concerns being voiced by members during the consultation was the concern about the cost of complying with the new requirements. However, this was something which both Council and the CPD Steering Group have been conscious of right from the start of this project.
ICAEW has always provided a large amount of free online learning content and this has increased substantially in recent years with the proliferation of live and recorded webinars. And, since the beginning of January, all members now have free access to additional content from the Audit and Assurance, Financial Reporting and Tax faculties, and all of our communities. “ICAEW Council approved the removal of the paywalls for these faculties and communities at the same meeting as it approved the key cornerstones of the new CPD framework, and this was deliberate” Duncan recalls. “Council wanted to ensure that members can obtain CPD by reading all of the technical material available on their area of expertise, reducing the cost of compliance.”
ICAEW is now looking at technology solutions which will allow us to capture time spent by members reading technical articles and joining webinars, and crediting that time as verifiable CPD in members’ CPD accounts.
Mandatory ethics training
The type and content of CPD members choose to undertake remains left to their discretion as long as it is relevant to their role, with one exception: they must complete mandatory annual training aligned to ICAEW’s Code of Ethics.
As a former chair of ICAEW’s Ethics Advisory Committee, this aspect is close to Julia’s heart. She points out how ethical issues have been “at the core” of many recent failures, whether this be in audit or insolvency or other areas.
“Even before we had this working party, there was a feeling that we needed to do more on ethics training and that we needed to ensure this was happening on a regular basis which, under the old rules, we couldn't see,” she explains. “Although people should have perhaps been assessing themselves as needing ethical training on a regular basis, they might not have done so.”
“While Council supported this requirement too, it made it clear that it would expect us to produce free ethics training so that there is no added expense for members and no excuse for anyone not engaging in annual ethics training.” adds Duncan. “So, every year we will produce a one-hour module for ethics training, which will be free to all ICAEW members and work is already under way on the first modules.”
Members don't have to use this training. They can attend equivalent training through their firms or an external provider, as long as it meets ICAEW’s learning objectives.
Supporting members carrying out pro bono work in their communities
Many ICAEW members work on a voluntary basis or carry out pro bono work in their communities or for the public good. If a member only does voluntary work, then in most cases they will be exempted from the minimum hours CPD requirement. Instead, they will be required to reflect on their developmental and training needs and to act accordingly.
“We’ve stayed true to the principles in looking at the risk to the public, but also not wanting to discourage members by requiring them to do a minimum amount of CPD that might be disproportionate to the time they spend helping those organisations,” says Duncan.
The only exception is for those who work pro bono for charities or who act as unpaid charity trustees where there is clearly risk to the public attached to that work. Members in these roles will be required to complete, as a minimum, a new ICAEW Charity Trustees Essentials CPD course (which will be provided free of charge) or undertake similar training that meets ICAEW’s learning outcomes.
Right time for a reset
At its core, the new CPD framework is about offering members the opportunity to step back and think about their professional development and drive themselves forward. It also offers firms the chance to review their current processes, reassess the CPD needs of staff, and enhance their practice risk management.
“That should be the positive outcome of regulation,” suggests Julia. “Ultimately, the benefit to everybody is that members and their firms will be trusted.”
“And for the individual, it’s about pressing them to be the best that they can be. And if they are the best they can be for their clients, their businesses should do much better too. It's a huge opportunity.”
Further details of the changes will be provided in the coming months, including full details of the CPD categories, the definition of verifiable CPD, and illustrative case studies.
In future articles, we will look at what the new regulations mean for firms and how ICAEW is using technology to support firms and members as they navigate the new requirements.