ICAEW has launched new guidance for audit-registered firms to help ensure that their name is not mistaken for that of another audit firm. Our regulatory policy experts explain why the guidance is necessary and outline the simple checks that can help firms choose a distinct name.
“We’ve developed this new guidance specifically for audit firms to help them ensure the name they choose doesn’t give rise to confusion because it is the same as, or too similar to, the name of an existing audit firm,” explains Caroline Turnbull-Hall, Senior Regulatory Policy Advisor at ICAEW.
“It’s aimed at firms seeking to become audit registered or existing audit-registered firms that want to change their name,” she adds. “So, we expect that it will only apply to a limited number of current audit firms.”
By making simple checks against the Register of Statutory Auditors before applying for a new audit registration, or changing their name, audit firms can avoid any confusion and ensure prospective clients and the public are clear which firm they are dealing with.
“The Register of Statutory Auditors lists all audit-registered firms, irrespective of which body they are registered with,” says Caroline. “So, it offers a point of truth, giving firms a quick and simple way to check their proposed name.”
Why has ICAEW produced additional guidance on audit firm names?
ICAEW’s existing guidance, which applies to all firms, is aimed at making sure practice names are not misleading to the public.
This additional guidance, which is specifically for audit firms, focuses on reducing the risk of confusion between the identity of different audit firms. It has been developed in response to a recent high-profile case where press reports confused two audit firms with similar names, raising the risk of potential reputational damage to the firm with no connection to the reported issue.
“To address the issues that arose from this case, we explored several options,” explains Sophie Wales, ICAEW’s Director of Regulatory Policy. “And we decided the proportionate response would be to produce additional guidance to clarify our expectations for audit firms, rather than introduce a regulatory requirement for firms to ensure their name isn't the same as another firm.”
What does ICAEW’s existing, general guidance on firm names say?
Existing guidance on firm names, which applies to all firms, makes it clear that a practice name should not be misleading. Examples of names that might be considered misleading include:
- where a member firm with very few offices describes itself as 'international' merely on the grounds that one of them is overseas;
- if a sole practitioner were to add the suffix 'and Associates' to the name of their practice unless formal arrangements were agreed with two or more consultants or firms; and
- if there was a real risk that it could be confused with the name of another unconnected firm, even if the member(s) of the practice could lay justifiable claim to the name.
What are the additional expectations of audit firms to check names?
“The general guidance for all firms still applies,” stresses Sophie. “But, if you’re an audit firm applying for a new registration or changing your name, you should also check the Register of Statutory Auditors to make sure there isn't another firm with the same, or a very similar, name to the one you want to use.”
To help firms determine if their chosen name would be appropriate, the guidance includes useful examples. A name would be considered sufficiently similar in one or more of the following circumstances.
- It contains two or more identical words, not including “audit”, “services”, “LLP”, UK, Ltd, “partnership”, “and/& Co/Company”, “and” or “the”, eg, “Fred’s Excellent Audit Services” could be considered to be sufficiently similar to “Fred’s Excellent Audit and Assurance Services”.
- The difference is one of punctuation or the use of a character.
- Names are spelled differently but sound the same.
- The name would, if shortened or abbreviated, be likely to confuse the public.
“As an audit firm, it's your responsibility to check and assess whether you think your proposed name might be too similar to another audit firm’s name,” says Sophie. “If it’s obvious that it’s sufficiently similar, then we recommend you don’t use it.
“If you feel there’s a chance it could be considered sufficiently similar to that of an existing audit firm, it would be prudent to contact that firm to check that it has no objections,” she explains. “You can then have a conversation and see whether there is a workable position for you both.”
The guidance does not apply to firms in the same group or ownership structure, or firms that are otherwise connected. “If the firms are connected or related, similar names are fine,” emphasises Sophie. “We're not saying you can't have another firm in your group with a similar name because you’d expect that to be the case. This only applies where firms are completely unrelated.”
“It’s also only for firms applying to be audit registered or audit firms changing their name,” adds Caroline. “Existing audit firms don’t need to go back and look retrospectively at their chosen name.”
How does the new guidance on firm names protect audit-registered firms and the public?
“Our guidance is designed to protect the new audit firm, the audit firm with the existing name, and the public,” says Sophie. “We don't want the public to be under any doubt as to who they're dealing with.”
“The clarity benefits both firms,” adds Caroline. “If there were ever any reputational issues involving either the existing firm or the new firm, neither would want the risk of being associated with the other. It’s also in the interest of all firms to establish a unique identity and brand to distinguish themselves in the market to enable them to differentiate themselves to clients and potential clients.”
“Whether you’re a new audit firm, or existing audit firm planning a name change, this guidance is a helpful reminder to think carefully about whether your proposed name is too similar to another audit firm’s name,” says Sophie. “The name you choose is key to establishing your individual identity and providing clarity to the public about who you are.”
