A: Well, "excited" might be a bit of an exaggeration. But there has certainly been a lot of discussion about it these past few days.
Q: Yes. So I thought. But what's it all about?
A: Well, at the beginning of last week the Chartered Association of Certified Accountants - or the "certifieds", as we call them in the profession - announced their intention to leave the Joint Disciplinary Scheme, which investigates the most serious complaints against accountants in Britain. Then, the next day, the Institute of Chartered Accountants of Scotland - "the Scots", to us - came up with its plan for reforming the regulation of audit, the trickiest bit as far as the rules go. And finally, the day after that, the Institute of Chartered Accountants in England and Wales - "the English institute" - published a long-awaited consultation paper on the future of self-regulation.
Q: Hang on. Who are all these different groups? I thought there were qualified accountants on the one hand, and, on the other, blokes who didn't have all the bits of paper but were quite good with figures and you could go to them when the VAT man was breathing down your neck.
A: Ah. If only it were so simple.
Q: But there was that awfully witty poster campaign a few months back. A bit racy for accountants, I thought, but it seemed to be making the point that there were these guys who might appear to be sorting you out but would instead be giving you sleepless nights, while the qualified ones ... well, you could sleep with them, so to speak.
A: That was the English institute's attempt to leave the John Cleese image behind. The only problem was that the certifieds thought it could be construed as implying it was they who were the dodgy ones, while the institute boys were squeaky clean. Which brings us back to the events of recent days. Q: Oh. Why's that?
A: Well, the reason why the certifieds want out of the JDS is that they say they pay a lot of money to it and get little or nothing in return. Despite that poster campaign, they say it is always the English institute guys who are up before the beak and not their modest brethren.
Q: Is that right?
A: Strictly yes. It is apparently about a decade since the certifieds referred a case to the JDS. But, like most things in accountancy, it is even more complicated on close examination than it at first appears. Fittingly, it has a lot to do with numbers.
Q: How do you mean?
A: Well, the English institute - even without its planned merger with the Chartered Institute of Management Accountants (which is a story for another day) - is by far the biggest of the professional bodies, so statistically there is a bigger chance of them getting trouble. Also, most of the people working in the big firms - ie, the ones that do the "public interest" jobs that get reported to the JDS if they go wrong - belong to the institute.
Q: So who are the certifieds?
A: Well, most of the people who run it are British. The main offices are here. And there is this great dinner every year at the Guildhall in the City, where people are invited from Africa and China and the like.
Q: Pretty good move, though, getting into the developing world?
A: Oh, yes. It's pretty lucrative, and of course it means that the officers have lots of excuses for trips. But they are not the only ones going abroad.
Q: What do you mean? Surely, the English institute isn't at it as well?
A: Well, yes it is. It's brought a couple of retired civil servants in to ease its way into Eastern Europe - and that's upsetting the certfieds a bit.
Q: I can imagine. But what's this got to do with regulation?
A: Well, it gives you an idea of how they disagree on just about everything else. So it really shouldn't surprise you that they disagree on this.
Q: Oh. Have the certifieds got a view on regulation?
A: Most assuredly. A few months back they devised a plan based on the General Medical Council designed to separate regulation from representation of members' interests, which is widely reckoned to be the nub of the problem. And they were pretty amused when, at the end of last year, the first institute working party chaired by Chris Swinson came up with something pretty much like it, but not called that.
Q: So they haven't got much time for this latest effort?
A: Er, no.
Q: And what about the Scots? Where do they fit into this?
A: Well, they are also members of the JDS. And like the certifieds, they don't refer many cases to it. This is also partly because they are even smaller than the certifieds. But they would add that it is largely because they are better.
Q: Why's that?
A: Oh, all the usual stuff about Scottish educational standards, natural affinity with money etc, etc.
Q: So, what's their solution to the regulation problem?
A: Well, being cleverer, they begin with the assertion that "not all is perfect in the regulation of audit firms by the professional bodies". In the words of James Gemmell, convenor of the working party that produced the paper, "the purpose of regulation must be the clear and plausible demonstration and enforcement of high standards".
Q: Difficult to argue with that. So what do the English lot say?
A: They say pretty much the same, of course. But they don't think their members would accept too much outside interference. So they want something that looks sort of independent but which is sort of connected to the institute.
Q: Looks like sort of a fudge to me. But I still don't get why they are all going to this trouble. Didn't this JDS thing hit those Touche Ross guys with some pretty hefty fines over Barlow Clowes last week?
A: Well, yes. What a coincidence, eh? But don't forget that inquiry took more than five years and cost more than pounds 4m. And it's not as if Touche is saying "fair cop, we're sorry". By crying foul it's calling the whole system into question.
Q: But that can't be the only reason.
A: No, it's not. For some reason, lots of accountants are becoming increasingly convinced that the first thing Tony Blair is going to do when he gets into power is to end this self-regulation business by imposing an SEC- type thing on them.
Q: Sounds like they should all band together and fight it.
A: Well, that's what Michael Heseltine (a former accountant himself) thought when he was at the DTI. And to be fair, they've tried it. But - with the exception of the institute and the management accountants - they haven't been able to stomach it.
Q: Yes, I can see why. But one last question? Would any of these ideas stop another BCCI, Barlow Clowes, Polly Peck or Maxwell happening?
A: Well, not on their own. That's because they are really looking at ways of dealing with allegedly naughty accountants after they have transgressed - albeit in the hope that tough penalties will encourage them to do better. What's really supposed to prevent all these scandals is the Cadbury Code and whatever the successor to the Cadbury Committee (currently being formed) comes up with. But you don't want me to go into all that here.Reuse content