Which ACCA regulations are most commonly misunderstood by members?

Most of the complaints received by the Professional Conduct Department are the result of an inadvertent breach of ACCA regulations. However, if the breach is not rectified, or it is persistent, a referral to the Disciplinary Committee is the likely outcome. Nicole Ziman and Zoë Clapp guide members through the rules which are most commonly misunderstood

Your relationship with ACCA

Failure to respond
It is important that you keep your contact details up-to-date with ACCA. ACCA members have the privilege of being self-regulated, but that privilege relies on ACCA being able to contact its members and receive a reply within a reasonable time. Each year, more than 100 members are referred to the Professional Conduct Department because they have failed to respond to correspondence sent to their old address. The ultimate penalty for failing to respond is removal from membership.

Continuing professional development (CPD)
CPD is important because competence in one’s work is achieved not just by experience, but by being up-to-date with the relevant regulations and legislation. All members, whether they hold a practising certificate or not, are required to undertake 40 CPD units per year and maintain records of the units obtained and the relevance of the units to their role. In addition, members are required to submit an annual CPD return and provide their CPD records to ACCA if requested to do so, for example at a monitoring visit or by written request. It is easy to obtain CPD credits and the Professional Development Support Unit can help you understand how. Unfortunately, over 800 members had to be referred to the Professional Conduct Department in 2006 for failure to submit their annual CPD return or provide their CPD records when requested to do so. From 1 January 2008, affiliates who have held affiliate status for three years or more will also have to undertake CPD.

Practising certificate compliance

What is public practice?
A large percentage of complaints received by the Professional Conduct Department relate to members who have been carrying on public practice without a practising certificate (PC). These are serious matters, as the members have been offering services to the public which they are not authorised to provide, for example preparing tax returns for clients to sign. Yet, in many cases, the breach occurred because members had not ensured that they understood the meaning of public practice. If you are a sole practitioner offering accountancy services to the public, or a partner or director of a firm offering such services, you are likely to need a PC. If you are in any doubt, you should read the factsheet Do I need a practising certificate?.
It is worth mentioning here for new members that if you wish to carry on public practice in due course you must ensure that your employer with whom you are gaining your practical experience is an ACCA approved training provider. Otherwise, your experience gained there will not count towards the practical experience requirements for obtaining a PC.
Once you have obtained a PC, there are certain requirements with which you must comply in order to maintain your eligibility to hold it. These include holding Professional Indemnity Insurance and having a continuity agreement in place.

Professional Indemnity Insurance (PII)
Do not assume that your insurance broker knows ACCA’s rules regarding PII. It is your responsibility to check that your policy complies with the rules.
If you sell a block of fees or retire from practice, you are required to hold run-off PII cover for six years. Lockton (previously Alexander Forbes) offers such cover which can be purchased in one block by paying a one-off premium (see further the article on page 21 in the December 2006 edition of In Practice).
ACCA recommends that where a member in practice has died, his estate should take out run-off PII cover to protect itself against any claims. If someone else has bought the practice, it is possible he or she may have taken over liability for past work, but that would need to be clearly stated in the sale agreement and, if not, appropriate cover taken out.

Continuity agreement
If you hold a PC, you need to enter into and maintain a continuity agreement with another practitioner who holds equivalent qualifications, so he or she can take over the work of your practice with confidence should the need arise. It is your responsibility to check that your continuity provider has not retired, moved away or ceased practising. The continuity agreement must be in writing and an example is available from ACCA.

Your relationship with your employer

Advertising and intellectual property
If you choose to leave employment in an accountancy practice to set up on your own, do not make the mistake of thinking you can take your clients with you. Your clients are free to seek you out of their own volition, but you cannot make use of your employer’s telephone lists or database records to contact their clients and invite them to move with you. This would be a breach of both ACCA rules and, usually, your employment contract.
Once you have set up on your own, you are permitted to carry out marketing activity to specialist groups of potential clients, but you may not target former clients individually. For example, if you send a marketing mailshot to all pubs in your area and you know that two of them are clients of your former employer, you must not personalise the letter which you send to those clients even though you know their names. You must keep the letter generic.

Whistleblowing
If you work in business (as opposed to in practice), you may one day find yourself in a position where you feel forced into taking certain actions which are contrary to ACCA’s code of ethics. There was recently a case involving a member who did not blow the whistle because he had been threatened with the loss of his job if he did so. ACCA understands how difficult it is for members in this position and we encourage you to seek advice from ACCA’s confidential Technical Advisory helpline about the best way of dealing with such situations if they arise. It is essential that you seek advice and follow the ethical guidelines in order to prevent yourself being in breach of regulations. Further factsheet guidance can be found in the Ethics section of ACCA’s website.

Your relationship with clients

Client monies
Any monies belonging to a client that may spend even a very short time in an account, for example tax refunds, are ‘client monies’ held by your firm. They must therefore be held in a separate client account. You must not put them through the firm’s office account, even if they are one-off payments. This is a common breach which can be easily remedied.

Commission
Any commission or other financial gain received as a result of the client relationship must be disclosed in writing to the client.

Objectivity and independence
The fundamental principle of objectivity, which encompasses independence, applies to all members, not just those with audit clients. It is important to recognise that while you may know you are independent, you must also be seen to be independent. There are detailed guidelines in ACCA’s code of ethics which can help you maintain independence.

Fee Protection Insurance (FPI)
FPI is an attractive value-added service for clients. It is often marketed by insurance companies to members in such a way as to indicate that you do not have to be registered for investment activity in order to provide it. However, this is not the always the case. Registration is not required if you take out insurance which applies to the whole client base, but as soon as you approach individual clients to ask if they would like to join the scheme for a fee, you are acting as an agent and need to be registered.
You can easily regulate your position by applying for Exempt Regulated Activities (ERA) registration through ACCA. While there is no cost for this, you should bear in mind that the PII cover required is 1m euros (approximately £750,000), which may be more than your current cover.
Carrying out such work without the appropriate ERA registration is not only a breach of ACCA’s rules but a criminal offence.
It is important to remember that while FPI protects the clients if they are subject to a routine enquiry from the tax office, and therefore the time spent by you to satisfy the Inspector of Taxes that the information provided is accurate, it does not cover clients who are found not to have fully disclosed their income.
If you would like more information, please see the article in the July 2006 edition of In Practice.

Your letterhead
ACCA’s Rulebook contains regulations concerning how members and firms may describe themselves on their letterhead.
You should ensure that your letterhead is up-to-date and does not bear any out-of-date wording, for example a declaration that you are authorised to carry out investment business. Your letterhead should not be misleading.
For example, you may not use a name such as ‘Joe Bloggs & Partners’ if there are not in fact any partners, and if any persons are named on the letterhead who are not principals, that should be made clear and their role described.
It is important to ensure that if your firm incorporates, you make it clear on your letterhead that you are trading as a limited company and you inform both your clients and ACCA of the change. You must keep ACCA informed of your practising status and any change to it, whether it is a sole practice, a company, a partnership or an LLP.

Your relationship with other accountants

Transfer information
Clients are entitled to change accountants as they wish. While this is disruptive and inconvenient to your practice, you are required to carry out certain obligations to ensure the continuity of treatment of the client’s affairs. You must provide reasonable transfer information to the new accountant, even where there are outstanding fees, and you must return certain categories of client documents over which it is not possible to exercise a lien.
For further information about your obligations, please see the article entitled ‘What are my obligations when my client moves to another accountant?’ in the March 2007 edition of In Practice and the November/December 2006 edition of accounting & business.

Your relationship with the law

Money Laundering Regulations

The Money Laundering Regulations apply to all members in practice. You should ensure you are familiar with the regulations and that you have adequate procedures in place, for example with regard to checking a client’s identity and reporting any suspicions. It is important to document how you know a particular client, regardless of the length of time you have known them. Further guidance is available on ACCA’s website.
It has become common for new accountants to ask in the professional clearance letter whether there are any money laundering issues relating to the client. This puts the former accountant in a very difficult position, because he or she must be careful not to breach the regulations on ‘tipping off’. Guidance on the wording to use when responding to such enquiries is available on ACCA’s website.

Complaints made to ACCA
If you or your firm do find yourself facing a complaint from a client, you should have procedures in place for dealing with such complaints internally. Bear in mind that you may obtain guidance on your obligations at any time from the Technical Advisory helpline.
If you are unable to resolve the matter and your client complains to ACCA, it will first be assessed by our Conciliation Service. Many complaints relate to quality of service and in such cases the conciliation officer will contact you by telephone to try to achieve a quick resolution to the problem.
If the complaint indicates possible liability to disciplinary action, an investigation will follow and it may ultimately be referred to the Disciplinary Committee. If that does happen, you may wish to obtain legal representation to help you, and ACCA can provide a list of lawyers who have previously represented members before the Committee. ACCA has developed guideline disciplinary sanctions which are soon to be published in order to assist members and their representatives to understand how the Committee makes its decisions and to assist the Committee to achieve consistency.

Nicole Ziman is head of professional conduct, and Zoë Clapp is investigations officer, both at ACCA.