The Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, has established, on an interim basis, the Irish Auditing and Accounting Supervisory Authority, (IAASA). This body will oversee the legislation to amend company law and put into effect the recommendations of the Audit Review Group, which reported in July 2000. That report contains more than 80 recommendations with the principal ones focusing on the governance and operational arrangements of the auditing and accounting professions. The Government instigated the review following the Dail Public Accounts Committee's inquiries into DIRT. The Association of Chartered Certified Accountants in Ireland (ACCA) supports the main thrust of the report and has welcomed the proposals that should enhance the profession's status. However, it is important that the Tanaiste strikes the right balance when establishing the IAASA. Documentation from the Department of Enterprise, Trade and Employment has indicated that the IAASA will have an advisory role prior to legislation being enacted that will allow for greater (unspecified) executive powers in the future. Herein lies the potential for difficulty. ACCA and other professional bodies have consistently argued that a light touch is needed rather than an overly restrictive bureaucratic model of control.
In its original submission to the review group last year, ACCA states: "The failures identified by the DIRT inquiry reflect a lack of enforcement in a climate where malpractice was tolerated, not an absence of appropriate structure or inadequate professional standards. Merely to round up existing regulators and put them under one roof elevates structural issues above the objectives of regulation. "We believe that the primary objective must be to make regulation work by ensuring that laws, directives, standards and regulations are effectively enforced. We believe that this will rebuild public confidence in the role of audit in the regulatory framework."
ACCA still firmly believes enforcement, rather than detailed regulation, is the key issue. This issue of enforcement rather than detailed regulation is critical, particularly for small and medium-sized enterprises (SMEs) and smaller accountancy practices.
The IAASA's responsibilities should include issues such as the recognition, authorisation and performance of the accountancy bodies, the development of auditing and accounting standards, and the provision of specialist advice to Government and other parties on audit and accounting policy matters. To deviate now and introduce executive powers will not only result in duplication but also greatly increase the costs associated with the IAASA. The review group stated that it did not want to start imposing additional regulatory burdens on small and medium-sized companies at a time when national and EU policy appears to be moving in an opposite direction and reducing regulatory requirements on such companies. The fact that the review group has acknowledged the possible impact of its recommendations on SMEs is most encouraging and must be heeded by the Department.
This is a challenging time for the accountancy profession in the Republic. A new structure has been proposed that will, if appropriately governed, ensure that the Republic is to the forefront of effective professional governance. The proposal to establish the IAASA will continue the momentum towards a progressive and relevant attitude in the business and professional sectors. A properly constituted IAASA should be a key partner with the profession going forward. Too much emphasis on control and not enough on enforcement will render the IAASA a bureaucratic muddle.
Roger Acton is head of the Association of Chartered Certified Accountants in Ireland.
