ICAEW is a Recognised Supervisory Body (RSB) under the Companies Act 2006. This RSB status allows ICAEW to approve and authorise accountancy firms to carry out audit work. It is also responsible for the monitoring of the quality of audit work among its audit-registered firms. With over 2,600 audit-registered firms, ICAEW is the UK’s largest RSB.
As an independent committee, the Audit Registration Committee (ARC) has a scrutiny and overview mandate. The committee is responsible for ensuring audit quality is maintained, and for safeguarding consumer interest.
Rama Krishnan has served as a member of the ARC for over four years, the last 18 months of which has also been spent as the committee’s first lay Chair.
The ARC’s main work involves reviewing Quality Assurance (QAD) monitoring reports on visits to registered audit firms and deciding if any regulatory action is needed. The committee also deals with new applications from firms that apply to become registered auditors.
“We’re presented with a series of reports where the QAD has identified concerns around the quality of audit work,” says Rama.
ARC members receive the reports a week in advance, with information from the QAD on what has gone wrong and typically with some form of recommendation on what level of sanctions to consider. “We’re given recommendations of suggested ways forward but ultimately it’s up to the committee,” adds Rama.
The ARC has a range of options at its disposal, including imposing conditions to monitor firms’ progress, restrictions such as not allowing a firm to take on any new audits without the ARC’s approval, regulatory penalties or, in the most serious cases, withdrawal of a firm’s audit registration.
“The ARC tries to be as fair as possible,” says Rama. “We take into account the individual situations of each firm when considering what action to take.”
Each firm is given an opportunity to comment on the report that is due to come before the committee and their comments are incorporated into the final report that the ARC sees. If a financial penalty is given, the committee will outline its reasons for this to the firm. Firms have a right to appeal against the penalty or sanctions imposed.
The ARC is an independent committee with at least eight members, half who must be lay members (non-accountants). At present there are six lay members, including Rama, and five chartered accountants.
“It’s important to highlight that our accountant members represent firms of all sizes, from sole practitioners to the Big Four, while our lay members come from a range of backgrounds.”
Prior to joining the ARC, Rama managed the regulation of care services, then held various roles undertaking inspection and improvement work with public sector bodies, and was a policy lead for older people and adult social care in London before becoming a charity director. She currently holds a portfolio of independent roles with a variety of professional regulatory bodies.
Rama is of the view that for accountant members, the ARC offers a chance to give back to the profession and do their bit to raise standards amongst auditors, but also to gain an insight into some of the challenges they may come up against in their professional lives.
From a lay perspective, Rama says the committee’s work is challenging but rewarding. “Speaking as a lay person, the lay person’s role is to work with accountant members on the detail but not get too bogged down – to give a wider lens and make sure that public interest considerations are met. It is also good to learn about how the profession operates.”
“Most committee members serve their full term, which is always telling,” she continues.
The committee usually meets 11 meetings a year, approximately once every five weeks. Previously these meetings took place at Chartered Accountants’ Hall in London but are taking place virtually for the foreseeable future. The meetings usually last about four hours, with time also required to read the agenda papers before each meeting.