The Institute of Chartered Accountants in Ireland (ICAI) has issued a fresh plea for the continuation of self-regulation for the profession together with recommending a range of measures designed to restore public confidence in auditors. The proposals are contained in its submission to the Review Group on Auditing established by the Tanaiste, Ms Harney, on foot of a recommendation by the Dail Public Accounts Committee (PAC) which investigated DIRT tax evasion in the banking sector. The Review Group is due to report back to the Government in June.
The ICAI's primary recommendation is that the Government consider the establishment of a new independent body to oversee the existing regulatory regimes operated by the various accountancy bodies. The ICAI wants to be regulated by an independent oversight board, similar or affiliated to that which operates in the UK.
The ICAI deputy president, Mr David Simpson, said yesterday that such a body would ensure open, regular and rigorous scrutiny of its regulation procedures and help to reassure the public.
In the UK, the oversight board is funded by the accountancy profession, but does not contain any accountants. Its members include representatives of the Stock Exchange, the Bank of England and the Central Bank of Ireland. The ICAI believes the most effective way to proceed with its proposal would be to set up an Irish panel of the UK oversight board. "This would be the most cost-effective way to do it. There is a model in existence there already, and the Central Bank already has a nominee on the board," Mr Simpson said.
The ICAI also wants the Government to introduce new legislation to provide statutory backing for its investigation and disciplinary process, including powers to obtain documents and compel witnesses to attend public hearings. The ICAI believes the adoption of these measures will strengthen its regulatory role. "We believe self-regulation works, but the difficulty is that it hasn't been seen to have worked. We want to work with the Government to improve public confidence through a strong, effective and transparent regulatory system," Mr Simpson said yesterday.
The Institute, which has more than 11,500 members, has also put forward proposals on how to improve the independence of external auditors and has flatly rejected a number of the PAC's recommendations on this issue.
It has called for the adoption of legislation which would protect auditors when making disclosures of tax evasion to the relevant authorities. The Institute has proposed the appointment of a taxing master to deal with disputes on auditor's fees. All other professional fees paid to auditors should be disclosed in company annual reports to shareholders. The Institute also wants statutory backing for accounting standards and the establishment of a financial reporting review panel.
The ICAI has dismissed the PAC's recommendation that auditors should be banned from providing other services to a client, insisting this would have a negative impact on the competitiveness of the business and increase the costs of accountancy services to clients.
It also believes there is no merit in the suggestion that financial institutions should have joint auditors or that auditors should be rotated every five years. Mr Simpson said this would act to the detriment of clients undermining the trust and experience built up through such relationships.
