A guide to disciplinary proceedings within the accountancy profession

A guide to disciplinary proceedings within the accountancy profession

There are six professional bodies within the accountancy profession in the UK which are Recognised Qualifying Bodies (RQBs) for the purposes of the Companies Act 2006. These organisations are empowered to award the professional qualifications required in order to legally carry out audit work. These six professional bodies are:

  • Association of Chartered Certified Accountants (ACCA);
  • Association of International Accountants (AIA);
  • Chartered Accountants Ireland (CAI);
  • Institute of Chartered Accountants in England and Wales (ICEAW);
  • Institute of Chartered Accountants of Scotland (ICAS);
  • Chartered Institute of Public Finance and Accountancy (CIPFA).

ACCA, ICEAW, CAI and ICAS are also able to authorise their members to carry out insolvency and investment business work.

In addition to their responsibilities in relation to education, training and registration, these professional bodies operate disciplinary procedures to deal with professional conduct matters in relation to their members. The purpose of these disciplinary procedures is to seek to uphold the good name of the accountancy profession, maintain high standards of professional practice and to protect the public interest.

Under these disciplinary procedures, complaints and allegations against members will be investigated and evidence will be obtained. Normally the member in question will be invited to respond to the allegations made and all of the evidence available will be referred to an investigating committee or assessor. If there is a case to answer, the matter will normally be referred to a professional conduct hearing where those allegations will be considered. Where allegations are admitted or found to be proven, it will be necessary to consider what action should be taken against a member which is proportionate in all the circumstances of the case.

What matters could lead to disciplinary proceedings?

These will often depend on the organisation itself and each professional body has its own code of ethics, bye laws and professional conduct rules which govern their members’ activities. In general terms however, relevant matters can include issues in relation to a member’s professional competence and due care; issues in relation to professional ethics; academic issues; qualification/scope of practice matters; and criminal convictions. The following are examples of conduct which may be considered relevant and which accountancy professionals should be careful to avoid at all times:

Professional competence: A professional body will demand high standards of its members in relation to the quality of their work. Matters which may cause concern include missed filing deadlines; non-compliant audit reports; breaches of requirements relating to insolvency; financial mismanagement; negligent advice; poor supervision; unreasonable delays in completion of work. Where allegations relate solely to competence matters, normally one would expect to see a pattern of behaviour with allegations of repeated errors and breaches. That said, there is nothing to preclude a professional body investigating and pursuing an isolated incident, particularly if it is a serious error or breach resulting in a loss to a client.

Professional ethics: Professional ethics underpin all aspects of accountancy practice and are central to the profession’s good reputation. As such a key function of a professional body is to ensure that high ethical standards are maintained by its membership and that breaches of relevant bye-laws and conduct rules are dealt with. Ethical matters which may be considered include failing to avoid conflicts of interest; breach of trust and/or fiduciary duty; failing to ensure client confidentiality; misconduct as a company director; unprofessional behaviour towards clients, professional bodies, members of the public and/or peers; failing to cooperate with a disciplinary investigation; failing to disclose relevant matters to professional body (for example failure to disclose a criminal conviction); misleading a professional body; and misleading clients.

In relation to misleading conduct it is important to note that all professional bodies consider dishonesty by its members to be among the most serious categories of misconduct. Where dishonesty is found to be proven the most serious of sanctions will normally be considered.

Academic Issues: As part of a professional body’s responsibilities in relation to education, training and qualification, it will often be necessary to deal with allegations of misconduct relating to students. Examples may include plagiarism, impersonation of another when sitting exams; use of unauthorised materials during exams; convictions for criminal offences.

Scope of practice matters: A professional body will pursue allegations which relate to members failing to comply with their requirements of practice and/or acting beyond the scope of their membership. Examples of relevant conduct may include failure to renew a practicing certificate; engaging in insolvency or audit practice when ineligible to do so; failure to hold indemnity insurance or acting beyond the scope of that insurance; carrying on investment business without authorisation; failing to comply with undertakings agreed with a professional body. Given the nature of these matters, allegations of acting beyond the scope of one’s practice will often be accompanied by allegations of dishonesty. They may also lead to, or be the result of enforcement action by other bodies such as the Financial Conduct Authority (FCA).

Criminal Convictions: Good character is the bedrock of any professional’s practice and as such, a professional body will be concerned by members being convicted of criminal offences. These may be directly related to accountancy practice, for example offences under the Insolvency Act, the Companies Act or the Proceeds of Crime Act and offences involving breach of trust and/or fraudulent conduct.

A professional body will also be concerned by offences outside of professional practice, for example driving with excess alcohol, offences of assault, drug offences. Criminal convictions for offences of serious violence, offences of a sexual nature and dishonesty offences will be treated very seriously by professional bodies and will give rise to the most serious of sanctions.

What powers to professional bodies have?

In the event that allegations are ultimately referred to a full professional conduct hearing and are either admitted or found proven, it will be necessary to consider what action, if any, should be taken against a member. In the event that you face disciplinary proceedings it will be necessary for you to take specialist legal advice in order to confirm the specific powers available to your own professional body. In general terms, in the event that action is required against a member, the following sanctions will normally be available:

Admonishment/entry on record: These are the least severe of sanctions available to professional bodies and may be appropriate where the matters proven are not so serious to warrant a more severe penalty. These sanctions may be deemed appropriate where there have been early admissions and the member demonstrates genuine remorse and insight; the matters proven are isolated incidents; there is no evidence of any loss to clients/members of the public; and/or there is evidence of remedial action taken by the member.

Reprimand/severe reprimand: These sanctions will normally be imposed where it is necessary for a professional body to formally and publicly express its disapproval of the member in question and their conduct. A reprimand will normally be appropriate where the conduct proven is of a minor nature; the conduct was not in deliberate disregard for professional obligations; any harm/loss caused is relatively minor and/or has been rectified and the member demonstrates genuine insight and remorse.

A severe reprimand may be appropriate where the conduct is of a serious nature but in all the circumstances of the case it is not necessary to take more serious action against a member. This may due to evidence of mitigation presented on behalf of a member, including positive references and testimonials; corrective steps taken to mitigate the risk of repetition; cooperation with the investigation and/or early admissions; previous good record; and insight into wrongdoing.

Exclusion from membership: This sanction will be considered in the most serious of cases where a lesser sanction is insufficient to deal with the conduct in question and it is necessary to remove an individual from membership of the organisation, thus removing their eligibility to carry out protected work. This is likely to be appropriate where there has been a serious departure from professional standards; significant loss caused to clients and/or members of the public; dishonesty; repeated misconduct; attempts to cover up wrong-doing; and serious criminal convictions.

Each professional body has its own rules in relation to exclusion from membership. Some have power to impose a temporary suspension of membership as a lesser sanction. There are also differing rules in relation to minimum periods of exclusion before which an application for readmission can be made.

Fines, compensation & costs orders: In addition to the sanctions outlined above, professional bodies also have powers to make financial orders. Fines can normally be imposed either in isolation or in conjunction with other sanctions. These fines can be significant, for example ACCA has the power to impose fines of up to £50,000. Orders requiring a member to compensate or reimburse a complainant can also be made.  Professional bodies normally also have the power to make orders for costs against a member against whom allegations have been proven. These costs will be in relation to the professional body’s costs of investigating and pursuing the matter.

As outlined above, if you are the subject of disciplinary proceedings, this can have very serious implications both professionally and financially. It is vital that you seek specialist legal advice in order to confirm the risk specific to your case and to protect your interests. The rules governing the regulation and discipline of accountancy professionals are complex and vary between professional bodies, with each having its own specific procedures and powers.

By Carl Johnson, professional discipline lawyer

This article should not be relied upon as legal advice and in the event that you face disciplinary proceedings as an accountant you should seek specialist advice on the particular circumstances of your case.