Commonhold and Leasehold Reform Act 2002
Comments from ACCA
The Association of Chartered Certified Accountants (ACCA) is pleased to respond to the Consultation paper on accounting for leaseholders monies and summaries of tenants rights and obligations. ACCA is the largest and fastest-growing international accountancy body. ACCA's mission is to work in the public interest to provide quality professional opportunities to people of ability and application, to promote the highest ethical and governance standards and to be a leader in the development of the accountancy profession. Further information is available on ACCA's website, www.accaglobal.com
In drawing up this response we have consulted extensively with the Royal Institution of Chartered Surveyors (RICS) and with the Institute of Chartered Accountants in England and Wales (ICAEW). Firms registered with either ACCA or ICAEW will be responsible for almost all the accountants' certificates required for section 21.
Rather than provide two detailed responses to the many questions set out in the Consultation paper, ACCA adds its support to the response of ICAEW which sets out answers with which we agree. In this letter we would like to emphasise some of the more important matters. These relate to the cost-benefit balance, the form of reporting and the work of the reporting accountant.
The provision of information to tenants is a vital safeguard and we understand the reasons set out in the Consultation paper for the lack of specific exemption from section 42A. There remains, however, the issue of cost-benefit which, in the case of the current proposals has two facets: the absolute cost of certain proposals and the disproportionate burden on tenants in smaller properties.
The proposal to have a registered auditor report on each individual certificate rather than just overall is not appropriate. Individual reporting requires extensive work, considerable documentation and rigorous quality control to comply with professional standards. It is not simply an administrative matter and would involve costs disproportionate to any benefit to individuals.
Even if the absolute cost of involvement of a registered auditor is kept to a realistic level, the cost is likely to be such that spreading it across a small number of individuals imposes a considerable burden. While we do not feel it appropriate for us to comment in detail on such matters, there are many possibilities of opt-in or opt-out that should be considered in addition to a simple exemption for smaller properties.
Although the body of the text of the Consultation document indicates that it is only intended to prescribe the minimum information that must be provided in the regular statement of account, the form of reporting illustrated in Annex A is detailed. To promote concise yet informative reporting we would prefer to see headings and subheadings set out in a similar way to that in Schedule 4 to the Companies Act 1985 (dealt with in further detail in the ICAEW response to question 7).
The accountant's report is referred to in primary legislation as a �certificate'. This is an error in the legislation as certification is only appropriate to a matter capable of determination with certainty. We strongly agree with the approach suggested by the Consultation paper which recognises the reality that a report can only be an expression of opinion in accordance with applicable professional standards. This matter is dealt with at length in the ICAEW response.