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The IC: ensuring accountants play by the book

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Published: 04 Nov 2021

ICAEW’s Investigation Committee (IC) plays a critical role in upholding the highest standards of practice and professional conduct. We look at the wide range of issues the committee deals with, how it functions on the ground, and the importance of protecting the public interest.

The IC’s role is to consider complaints against members, firms and ACA students across a broad range of issues. “As a committee, we’re there to focus essentially on matters where members or member firms have fallen short,” explains IC Chair, Paul Brooks.

“We look at a huge range of complaints,” he adds. “It can be anything from personal conduct that potentially brings ICAEW and the profession into disrepute, to breaches of audit or insolvency regulations, through to dishonesty.”

Complaints, which originate from members of the public or from ICAEW’s regulatory committees, come to the IC after being investigated by ICAEW’s Professional Conduct Department (PCD). So in effect, the committee’s title is a misnomer. “The one thing we don’t do is investigate anything,” explains Brooks. “And this can confuse people. PCD does the investigation and then we consider PCD’s report, and all the evidence. It’s our job to decide whether, on the face of it, there is a case to answer.”

Meetings in practice

Before the pandemic, the IC met once a month as a single committee in Chartered Accountants’ Hall in London. It currently meets online and splits members into two groups – a morning and afternoon panel, with the agenda divided between the two. “My prediction is that we will continue to meet largely online,” says Brooks. “But we will have physical meetings too, because it’s important that we get to know one another beyond working over a video platform.”

Each month the committee typically considers between 20 and 30 cases. “In the days leading up to the meeting, we will all have read the papers,” explains Brooks. “And at the meeting, we discuss each case. We start by asking whether we, as a committee, agree with the recommendation PCD makes in its report. If we do, then we will give our reasons why we agree, and likewise if we don’t agree.”

The committee doesn’t just take into account PCD’s views. It also considers what the respondent member or firm has to say, as well as the views of the complainant. Respondents and complainants do not appear in person at the meetings, however. Decisions are made on the papers provided.

Brooks emphasises that the committee’s role is not to decide whether a complaint is proven. “Our job is just to get to the point where we decide whether or not there is a case to answer; if there is, we are likely to offer a consent order – a sanction made with the agreement of the respondent. If there is no case to answer, we say so with our reasons and that’s the end of the matter.”

Consent orders are based on ICAEW’s Guidance on Sanctions [www.icaew.com/regulation/guidance-on-sanctions-and-fixed-penalty-process], and can include reprimands, fines and costs. In the most serious cases, the IC can refer the case on to the Disciplinary Committee (DC). “We only tend to do that where it is likely that a member could be excluded,” says Brooks. “We haven’t got that power, and if the guidance seems to indicate exclusion is a possibility and we can’t identify sufficient mitigating factors, we will send it to the DC for a full hearing.”

Irrespective of the IC’s decision, if a member or member firm chooses not to accept a consent order, they can always elect to have their case heard by the DC. “They will exercise that right if they don’t agree either that they there is a case to answer are guilty of what’s being said or if they don’t accept the sanction we are proposing,” says Brooks.

Range of issues

There are currently 22 members of the committee of which 12 are lay members and 10 are accountants. “One of the reasons the committee is so large,” explains Brooks, “is the range of issues we have to consider.”

To deal with complaints about incompetent work, the committee needs to include accountants with a variety of specialisations. “So we’ve got auditors, insolvency practitioners and accountants who specialise in tax; and we have to have that spread,” says Brooks.

The accountant members also need to be representative of the profession, so membership includes people working for small firms all the way through to the Big Four, as well as those not working directly in the profession but in the role of finance director, for example.

The IC is required to have either equal numbers of accountants and lay members or a lay majority. This is to ensure the necessary degree of independence and dispel any perception that the process is about accountants regulating accountants. “The need for the IC to be representative of professional specialisms and firm size, coupled with the requirement for an equal number of lay members, explains why the committee is so large,” says Brooks.

The IC’s lay members come from a variety of backgrounds but they must have experience of the accountancy profession, for example, having worked with or appointed accountants. “It’s important in the context of what we do, that ‘lay’ means not being an accountant but having a good understanding of what accountants do,” says Brooks. “Otherwise they might struggle with the material being presented.”

Current lay members include a medical doctor, several solicitors (some with insolvency expertise) and a vet. Brooks himself has a background in venture capital and private equity, so has worked extensively with accountant colleagues or has instructed them.

Recruitment challenges

As well as experience from different sectors, lay members often bring experience from working with other regulators, or sitting on tribunals or in the courts. “Many of our processes are very similar to those in a court setting,” says Brooks, “so such experience can be extremely useful. For example, our decisions can only be based on the evidence put in front of us: it can’t be based on anything else, and we must never do any independent research about a case, even where the material is in the public domain.”

All members are appointed initially for three years. Their tenure can subsequently be renewed for another three years and, in exceptional circumstances, for up to a further three years.
Brooks recognises it can be difficult to recruit people to join all the regulatory and disciplinary committees, and that is no different for the IC. The biggest challenge is finding accountant members to satisfy the need for expertise across the different areas.

Many join as a way of putting something back into a profession that has served them well. They then realise they are learning a lot of useful information that they can take back to their own firms. “So it can be very instructive for them,” emphasises Brooks.

The work is also interesting and challenging. Brooks particularly enjoys the process of looking at the evidence and deciding whether there is a case to answer. “There’s an intellectual challenge, even for the accountants, in getting our minds around the real issues,” he says. “So people get a lot of satisfaction, but it is a big commitment.”

Edward Rands, Director at ECR Professional and IC member, agrees the commitment, particularly in terms of time, can be significant. But he wouldn’t hesitate in recommending the work. “The benefits are huge and you’ll get more out of it than you put in,” he says. “You get to see and deal with a lot of interesting cases and it’s also an enjoyable experience.”

He especially appreciates the interaction with other committee members, whether lay or accountant. “You get lots of different insights,” he explains. “But it’s also always striking how everyone is dealing with the same or similar problems whatever profession or area they’re working in. And that can help give you different ways of looking at the issues you face in your own profession.”

Public and professional interest

The regulatory and disciplinary functions of ICAEW sit outside of, and are independent of, its membership and professional development activities. So, alongside the other committees, the IC is constituted and overseen by ICAEW’s independent Regulatory Board.

“One of the most important aspects for any committee member – whether lay or accountant – is that they recognise they are there to protect the public and ensure that everything is done in a transparent way,” says Brooks. “Members serve for a variety of reasons and people get different things from it. But I think ensuring that the public interest is looked after is really important, certainly for me and I know for other members of the IC.”

A challenge ICAEW has, in common with all professional bodies, is in countering the possible perception that they are self-regulatory, without proper outside scrutiny. “That’s a notion we’ve constantly got to dispel,” says Brooks. “So that the public understands that, when it comes to disciplining and sanctioning accountants, at least half and often the majority of the people involved in the process are not accountants.”

“It’s important that accountants, as with members of any profession, play by the book,” he emphasises. “And it’s important both to the public and other members of the accountancy profession that those who don’t play by the book are properly and fairly dealt with.”

Resources

Read more information on the IC and other professional standards committees.
The IC is currently recruiting accountant and lay members - view details.

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