Protecting accountants from ‘accountants’: Accounting & Business

Posted on December 29, 2008 · Posted in Accounting & Business

 

Alan Shooter is fed-up. He is an FCCA and his central London firm Shooter Greene & Co is well respected. Yet he worries that clients are increasingly turning their backs on skilled and experienced firms such as his and taking their business to firms that call themselves ‘accountants’ – but are not qualified.

 

With the reduction in the number of businesses legally required to be audited, more clients are choosing to use firms that merely call themselves ‘accountants’ at the expense of the qualified profession. “Lawyers are protected,” Shooter explained to Accounting & Business. The accountancy profession has no such legal definition, even though, he believes, it is needed to protect both qualified accountants and their clients. Accountants are now fighting off unfair competition from “more and more people who are unqualified, who are competing against us on lower fees”, argued Shooter.

 

“They don’t have the costs that we do of the regulators, they probably haven’t got professional indemnity insurance, they don’t have CPD [continuing professional development], while the salaries for newly qualifieds are going up and we are being ‘low balled’ by people that have no qualifications. [Potential clients] see they are an ‘accountant’ or ‘business advisor’ and think that is acceptable. With a recession looming, [clients] are looking to cut costs.”

 

Robert Jackson feels similarly. He is an FAPA – Fellow of the Association of Authorised Public Accountants, which is part of the ACCA – and a registered auditor, operating through both RL Jackson & Co, accountants, and as a director of independent financial advisors Baronworth (Investment Services). Jackson’s firms operate from Ilford in east London, where a large number of ‘accountants’ and ‘financial advisors’ trade without the backing of professional qualifications. At the end of the day, says Jackson, many of the clients of these other firms end up very dissatisfied.

 

We are all tarred with the same brush,” says Jackson. “Joe Public often doesn’t differentiate between an authorised public accountant who is certified chartered or chartered and those who are just an ‘accountant’. People can be using other titles, for example ‘tax consultant’. But the institututes will not permit their members to use any title they want. For the unintiated, they are going to ‘an accountant’. As regulated professionals, we are heavily monitored.

 

Just as important, we have to have professional indemnity insurance, which is based on our gross fees. That gives a client comfort that they are not dealing with a ‘person of straw’. And they can go to an institute if there is an issue. People who are unqualified and unregulated can pop up and disappear – I have seen this. They just disappear and leave the mess with the client.”

 

These grievances against unqualified competitors led Alan Shooter to lodge an ‘e-petition’ on the 10 Downing Street website, urging the Government to propose legislation to protect the term ‘accountant’ and allow only people who are qualified and regulated to trade as ‘accountants’. More than 4,000 people gave their name to the online petition “to prevent unqualified accountants, tax and financial advisors providing services unless they have professionally recognised qualications”.

 

Large numbers of ACCAs and FCCAs signed Shooter’s petition, which was backed by ACCA. Andrew Harding, ACCA’s managing director of finance and operations, explained: “ACCA has watched Alan Shooter’s petition with interest. We are pleased to see it has done so well. Working with the Consultative Committee of Accountancy Bodies, ACCA is keen to protect the term ‘accountant. This is a very important issue for ACCA members and students alike.”

 

However, the petition was rejected by the Prime Minister’s office. In its response to the petition, 10 Downing Street said: “The Government is not persuaded that introducing statutory regulation of those who provide accountancy services would justify the costs to business. The Government is aware that the professional accountancy bodies have suggested that the term ‘accountant’ should be restricted to those who hold recognised professional qualifications.

 

“However, there are a number of potential drawbacks to introducing legislation to restrict the use of the term ‘accountant’. These include practical difficulties about who should be allowed to use the term, increased regulatory burden and increased costs for business and anti-competitive effects in the form of restricted choice, higher prices and reduced innovation in the supply of services. All of these consequences would particularly affect smaller businesses. As with most services, users may wish to check whether the provider is a member of an accredited professional body before making a decision on who to engage.”

 

ACCA has also worked with Liberal Democrat Deputy Leader and Shadow Chancellor Vince Cable, who tabled an Early Day Motion in the House of Commons, backing Alan Shooter’s petition. The motion was supported by another 55 MPs, from each of the major parties.

 

Vincent Cable told Accounting & Business that he was fully behind the campaign. “I had been approached by people in the profession who were concerned that the term was open to misinterpretation and abuse and who felt there should be clarity in defining the professional status,” he said. “I have subsequently talked to other groups like tax accountants, who feel similarly. So many people are using this term loosely. In the case of a doctor there is a clear definition of who a doctor is and who isn’t and similar clarity would be useful for accountants – achieving clarity of their status.”

 

However, Cable conceded that not all his Parliamentary colleagues had been persuaded by the arguments. “There have been some critics of this,” he admitted. “Not everyone agrees with this motion. Some people opposed it because of their own experience of dealing with professional accountants. But I think on balance there are advantages in defining professional status clearly.”

 

Despite the failure of the e-petition and Early Day Motion to persuade the Government and Parliament, this is not the end of the matter. A spokesman for the Institute of Chartered Accountants in England and Wales, speaking also on behalf of the Consultative Committee of Accountancy Bodies (CCAB), indicated that they continue to support the call for regulation and protection of the term ‘accountant’, but had to recognise that the case had yet to be made sufficiently effectively.

 

The issue is more about tactics and approach rather than policy,” said the ICAEW spokesman. “The CCAB’s position is that protection of title is something we would like to obtain. But we recognise that is not that easy to obtain. You have to persuade policymakers and government there is a public interest case.

 

Building examples of why title protection is in the public interest is key to achieving this. That is the steer we have had from the Department for Business, Enterprise and Regulatory Reform. Where we are is about how we build that case, about making this argument. This is not something that is going to happen overnight, but will take some time. You can’t rely on the self-interest argument, you have to demonstrate the public interest case.”

 

Box

The Early Day Motion from Vincent Cable MP

That this House notes that the term `accountant’ is not defined or protected by law and that thousands of small businesses and individuals, believing they have engaged qualified accountants, are at risk from harmful and costly business advice from unqualified, unregulated, possibly uninsured advisers; observes that although some unqualified accountants may do good work, an unqualified accountant is not answerable to any regulatory body and so cannot be disciplined; further notes that legal protection of title is viewed as essential in professions where there is a substantial degree of public interest, for example for doctors, barristers, solicitors and auditors; feels that greater accountability needs to be introduced; and urges the Government to consider introducing legal protection for the term `accountant’.”

 

 

The ‘leading firm of accountants’

 

Abbaci Associates and its two partners Amjad Malik and Tahir Mahmood were banned by the Financial Service Authority earlier this year from acting as mortgage brokers. This followed an FSA investigation that found that Abbaci had submitted applications to mortgage lenders containing false information. In one instance, the firm submitted a mortgage application for a client that was backed by false statements of income and wrongly stated that the applicant was an employee of Abbaci. Prior to the ban taking effect, Abbaci agreed last October, at the request of the FSA, to cease conducting FSA-regulated activities.

 

Despite the FSA ban, Abbaci continue, perfectly legally, to trade as accountants. According to its website – www.abbaci.co.uk – the firm offers a range of corporate and personal tax advice, book-keeping, accountancy services and cross-border tax advice. It is, claims its website, “considered a benchmark for quality”. It is also, according to its advertisement on the ukaccountingfirms.co.uk website, a “leading firm of accountants”.

 

Abbaci does not state on it website what, if any, accountancy qualifications the partners hold. Accounting & Business phoned the firm repeatedly. The receptionist did not know their qualifications, the partners were unavailable and they failed to return requests to speak to them.

 

We do not know whether Abbaci’s principals are qualified. But there is nothing legally preventing people trading as ‘accountants’ and promoting themselves as such, whether they are qualified or not.