10 practice regulation things you really need to be aware of
When you are starting up in practice it is important that you are aware of the options to consider. Often the first steps are the most difficult ones. Our Setting up in practice pages will help by pointing you in the direction of answers to some key questions.
It is important that you have a practising certificate before you commence. You have to have two years relevant post- qualification experience and need to apply for a practising certificate. If you are not entitled to one, you cannot enter public practice while a member.
It is important that you also have appropriate professional indemnity insurance (PII) cover in place. The Professional Indemnity Regulations set out certain minimum levels of PII. Focus on the risk to your practice of the work you are carrying out and ensure that you have sufficient PII to cover the risk profile of your clients. This may change as your practice expands so needs regular review.
It is also important to be aware of the requirements to notify your PII insurer of a notifiable event (as defined in your policy) in order that you make timely disclosures, where required.
As a firm in public practice you will need to comply with the ICAEW Practice Assurance Standards. Periodically you will be subject to monitoring by ICAEW’s Quality Assurance Department (QAD). These Standards should not be onerous and should be the sort of good practice that you would apply.
If you carry out regulated work (registered auditor, DPB, insolvency or probate) you will need appropriate registration with ICAEW and will be subject to periodic monitoring by QAD.
ICAEW applications for work in the registered areas will take time to process. Clearly that is kept to the shortest possible time but there are forms you will need to fill in and a process within ICAEW which has to be followed. If you intend to become registered for any of these areas make sure you have allowed sufficient time for the application to be processed.
The regulated areas are outlined below.
If you intend to carry out regulated audit work, you will need to apply for registration which can be obtained from ICAEW
DPB stands for a Designated Professional Body licence issued by ICAEW to carry out a range of regulated investment business work. This does not include the full level of work which can be carried out by a FCA-regulated firm of investment advisers (see DPB licence and FCA authorisation).
If you intend to be an insolvency practitioner, you will need an insolvency licence.
A new area of registered work is in the area of probate. ICAEW is an approved regulator.
If you hold client money, you need to comply with the Client Money Regulations. These require, among other things, that this money is held in a separate bank account designated as a client account. If the money is above a certain amount, it may need to be held in a specific interest-bearing designated account with the name of the client.
These client bank accounts need to have trust status. This is clarified in the Regulations.
If you are a sole practitioner, you need to appoint an alternate (see Practice structure considerations, Appointing an alternate).
As a firm in public practice, if you are engaged in accountancy, audit, tax or trust and company service provider, you will need to comply with the Money Laundering Regulations. Bear in mind ICAEW’s definition of accountancy in the Council Statement.
As a sole practitioner you will be the Money Laundering Reporting Officer (MLRO). If you are one of a number of principals, someone will need to be appointed as MLRO.
CCAB bodies have a technical release which clarifies the guidance in this area. You should refer to this document for clarification as to the relevant requirements. ICAEW’s Money Laundering helpline can provide help if you have queries (01908 248250).
In the event you come upon a reportable instance of suspected money laundering report it to the National Crime Agency (NCA). The NCA site also provides top tips as well as reporting requirements.
As a member firm your supervisor for money laundering will be ICAEW. Monitoring will be carried out during the periodic Practice Assurance visits. If you are not a member firm, ICAEW can, under certain circumstances, provide contractual money-laundering supervision.
The Bribery Act 2010 introduces definitions of, and prohibitions in relation to, bribery (as defined). If you have staff or sub-contractors, a defence is that you have appropriate corporate procedures preventing your staff and sub-contractors and agents from undertaking bribery. This is laid out in s9 of the Bribery Act.
More information about the Bribery Act can be found on ICAEW's Bribery Act 2010 page.
Members in practice are required to comply with the Code of Ethics and by doing so to demonstrate the highest standards of professional conduct and to take into account the public interest. Code A refers to general guidance, Code B relates to public practice, Code C refers to members in business and Code D relates to insolvency. So various areas may be relevant, depending on which strands of practice you are involved in.
ICAEW has arrangements in place to enable firms to provide consumer credit services without the need for authorisation from the Financial Conduct Authority (FCA). Your firm can provide these services if it meets the eligibility criteria and undertakes this activity as set out in the DPB (Consumer Credit) Handbook. Please view the consumer credit regulation section for further information. If you have specific enquiries on this matter, please contact our ICAEW Technical Advisory helpline.
This is the review process prior to issuing a report or tax return.
Poor service may not be immediately realised by clients but it may well become apparent at a later date and result in complaints, regulatory action or, at worst, professional indemnity claims.
Therefore, effective review procedures on the work carried out are important. The best way to quality control your own work is to put it to one side and review it at a later time. In that way you will avoid the ‘wood-for-the-trees’ situation.
The Practice Assurance Standards and regulated areas regulations refer to quality control procedures.
This is a cold review at a later point, after the professional work has been completed.
Typically, a cold file review will address the different elements of the work you have carried out and the intention is to ensure that you are applying the appropriate procedures. Regulated areas and Practice Assurance Standards refer to this process. But it is a key risk management tool.
If a problem is identified, the important questions are:
- Why did it arise?
- Is it systemic?
- What impact does it have from a wider perspective?
- Has anything has been done to prevent it?
- What needs to be done?
Use ICAEW’s helpsheets on compliance reviews, available from the members’ section of the website. Practice Support Services and other commercial organisations can provide external consultancy to undertake compliance reviews.