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Did you know that anyone can call themselves an accountant? Unlike doctors and solicitors that are protected titles in the UK, anyone can call themselves and practice as an accountant.
Having said that, there are some professional titles that only qualified accountants may use. In the UK there are six professional bodies of accountants. They are:
Institute of Chartered Accountants in England and Wales (ICAEW)
Institute of Chartered Accountants in Scotland (ICAS)
Institute of Chartered Accountants in Ireland (CAI)
Association of Chartered Certified Accountants (ACCA)
Chartered Institute of Management Accountants (CIMA)
Chartered Institute of Public Finance Accountants (CIPFA)
All six of the above professional bodies were members of the Consultative Committee of Accountancy Bodies (CCAB). However, when the Financial Reporting Council was set up as a regulator for accounting and reporting in the UK, the focus of the CCAB changed and in 2011 CIMA left the CCAB. Nevertheless, CIMA are still one of the six professional accounting bodies in the UK.
The six bodies regulate their own members to ensure standards are upheld. They have disciplinary procedures and rules in place to protect the general public and a complaints procedure that members of the general public can follow if they feel their accountant has not looked after their interests correctly. Moreover, members in practice are required to hold a practising certificate and to have professional indemnity insurance. Their members are also required to complete a set number of hours of continuing professional development (CPD) each year to retain their membership. This is not the case with accountants who do not belong to a professional body.
Does this mean that accountants who belong to one of the above professional bodies are better than the rest?
Personally, I don’t think so. I’ve come across many qualified accountants and wondered how they find their way to work in the mornings, let alone how they managed to pass years of demanding examinations to qualify as an accountant. I’ve also come across accountants who have no professional qualifications, but who really know their stuff.
In general however, these tend to be the exceptions to the rule. Most qualified accountants with a few years experience behind them tend to be quite competent. As for the rest, it varies – some are good, some less so.
This is the problem. Of the unqualified accountants, how can you tell if they are any good? Unfortunately, unless you happen to be an accountant yourself, there’s no easy way to tell. These days there are software packages that will churn out a pretty decent looking set of accounts and software that will calculate the tax you owe – it doesn’t mean it’s right.
However, if you want to be tax efficient you’re going to need someone who can do more than just plug numbers into a piece of software to calculate your tax liability and this means they have to know the rules and how to apply them.
If I were looking for an accountant, I would have no qualms about using an unqualified accountant so long as I knew them and knew what they were capable of, otherwise I wouldn’t go anywhere near them.
Then again, there are accountants out there who once belonged to one of the six professional accounting bodies, but have for whatever reason decided to give up their membership. They are no longer allowed to call themselves a Chartered Accountant or Chartered Certified Accountant or whatever, they can only call themselves accountants. I would probably have confidence in their abilities as I knew they had qualified as accountants in the past. I’d still want to see that they had professional indemnity insurance.
There are also other accounting qualifications that people can obtain.
For example, there is the Association of Accounting Technicians (AAT) and the Institute of Financial Accountants (IFA). These bodies have less rigorous examinations and entry requirements than the professional accounting bodies, yet are able to issue their members with practising certificates.
Again, I don’t have a problem with that. A suitably experience AAT qualified accountant would likely make a very competent accountant, but traditionally they have been employed at more junior levels in accountancy practices.
Note the difference between the ‘A’s and the ‘F’s in the designatory letters is for Associate membership and Fellowship. Fellows are better than associates, yes? Maybe.
All it really denotes is that the person has been a member of their professional body for a given number of years, after which fellowship is automatically bestowed upon them. Not looking so great now!
So after all that, you might be thinking that you can trust a qualified accountant if they belong to one of the six professional bodies. Well, like all professions accountancy has its fair share of rotten apples.
I once asked a friend who works for HMRC if he thought there were a lot of dodgy accountants out there. He instantly replied, “yes, millions of them”. A slight exaggeration I feel as the combined membership of all the six professional bodies is only a few hundred thousand, the majority of which probably don’t work in practice. However, the point was made. It may also give some insight to how HMRC view the profession.
So how do you tell if your accountant has your interests at heart?
You may think that your accountant is a good accountant because s/he lets you get away with things, such as turning a blind eye when you stick some blatantly person expenses through your business. Actually, in this situation your accountant has anything but your best interests at heart – s/he is just after your fee.
The reason is that eventually HMRC will make a spot check on your business. They’ll ask a few questions and if all checks out, they’ll wander away again. Bliss.
However, if they stumble upon those personal expenses you’ve been slipping through, they’ll look more closely. They’ll look to see if it was a one off. If they find you did the same thing the previous year, they’ll likely conclude you have a habit of under reporting your profits and will open an investigation into your business. Ouch!
They’ll look back at past years and assess what they believe you have underpaid in tax over the years. They will demand payment of the back tax, plus interest, plus penalties.
At the end of it all, you will be worse off, HMRC will have you under a magnifying glass and it will have been very costly. Your accountant won’t mind, s/he’s got your fee for the last several years and now has a nice big fat fee from you for supporting you during the HMRC investigation.
In summary, choose wisely. Don’t be afraid to use an “unqualified” accountant if you know they are competent, but by the same token be wary of any accountant that is too eager to please by turning a blind eye to irregularities.