Keeping up to standard

Regulation - as is clear from recent events at Morgan Grenfell - is always an issue in the financial world. So, many outsiders would perhaps find it surprising that the accountancy profession has taken until now to decide that it really must do something to convince the public that it is doing the job effectively.

Though management accountants are not generally in the firing line when scandals break - internal and external auditors are more likely to be under pressure - their professional body, the Chartered Institute of Management Accountants (Cima), has not ignored the matter.

Indeed, last month it set out its view that - while there had been a general move towards making regulation more independent - insufficient thought had been given to the idea of placing the Auditing Practices Board under the Financial Reporting Council. This widely-representative body is currently responsible for the Accounting Standards Board and, accordingly, it would make a certain amount of sense for the two organisations to stand side by side.

Cima is anxious to stress that it is not seeking to distance itself from the recommendations for an independent review board, developed over recent months in a rare spirit of co-operation by the six main accountancy bodies and expected to be made formally in the coming weeks. But it sees three main benefits from having the APB under the "ownership" of the FRC.

Such a move would "explicitly recognise the wider public interest in the auditing standard-setting process as an integral part of corporate reporting"; enable the APB to receive guidance on priorities and work programmes and to enjoy improved communication, debate, understanding, co-ordination and integration with the ASB; and enable consideration of policy issues on such matters as the future development of corporate reporting and auditing separate from technical work on the development of standards.

Incidentally, the APB has just stiffened the regulations regarding auditors' duty to report to the Bank of England and other regulators in the financial sector on matters that arise in the course of their work. The changes resulting from the implementation in the UK of the European Directive developed in the wake of the Bingham report on the collapse of BCCI alter the duty on auditors in two ways. First, there are more detailed definitions of the matters to be reported and, second, the duty is extended to auditors of entities that are closely linked to regulated financial institutions, as well as the institutions themselves.

Anthea Rose, chief executive of the Chartered Association of Certified Accountants, suggests that the proposed independent review board would be "incomplete" without the APB, while others in the profession point out that the priority is to get the board established and in operation - though probably not until early 1998, by the time the necessary approvals have been obtained.

However, Rod Hill, Cima's president, bases his view on a belief that audit is "the impartial final step in the process of ensuring the integrity of corporate reporting", increasingly prescribed by the ASB. Accordingly, it is in "the interests of the business community, the public and the profession itself" that the arguments for and against putting the APB - which is already having its role reviewed - alongside the ASB under the FRC be publicly debated.

Certainly, if the claim of the Institute of Chartered Accountants - that the reforms being planned will produce something "of an enduring nature" - is to hold up, it would make sense to look at the whole issue. After all, the role and organisation of the Joint Disciplinary Scheme - the body that investigates the most serious allegations of misconduct against accountants - are at last being examined, after the certified accountants complained about the funding arrangements.