Supplementary memorandum submitted by
the Professional Oversight Board
Further to Sir John Bourn's letter of 6 March
2008 I am pleased to set out suggestions for steps that could
contribute to increased transparency over the quality of accounting
information filed at Companies House and, indirectly, improvements
in that quality. These are based on our review of how accountants
support the needs of small and medium-sized companies and their
stakeholders which we published in March 2006.
In 2006, we found that around 75% of accounts
filed at Companies House showed the name of a professional accountant
who had been involved in their preparation. Small and medium companies
are themselves a significant user group for other companies' accounts
and we were told that directors of small companies looked for
the involvement of an independent professional accountant when
reviewing a set of accounts of another business.
Accountants who are members of bodies affiliated
with the International Federation of Accountants are expected
to comply with certain ethical requirements. These include not
being associated with reports where they believe the information
to contain materially false or misleading statements or statements
or information furnished recklessly. They must also act diligently
in accordance with applicable technical and professional standards
when providing professional services. We believe that these commitments
are of public interest and have been encouraging the professional
bodies to promote these more positively through a cross-profession
report that could be attached to sets of unaudited accounts prepared
with the involvement of their members.
Since 2006 electronic filing of accounts has
been introduced and it is not currently possible to show the name
of a professional accountant in a set of accounts filed using
the Companies House web-filing arrangements. We understand that
the intention was to keep the web-filing as simple as possible
by limiting the information to that required by law. Whilst recognising
the legitimacy of this intention, we note that most unaudited
companies choose entirely voluntarily to show the name of their
accountants when filing on paper, and doing so is seen to be helpful
to users of the accounts.
Suggestion 1: Consideration should be given
to allowing companies using Companies House web-filing arrangements
to show the name of their professional accountant, should they
wish to do so in order to help give users more confidence in the
quality of the accounts.
As we noted in our 2006 report, users also need
to be confident that where a set of accounts appears to show the
involvement of a professional accountant, that this is the reality
of the situation. Accountants periodically express the concern
that it is possible for the name of a professional accountant
to be used in a fraudulent manner.
As a supporting measure, therefore, there is
a need for improved clarity and security over reporting the involvement
of professional accountants when accounts are filed at Companies
House. Users should have confidence that where the involvement
of a professional accountant is shown this is genuine. With the
introduction of electronic filing of accounts, the accountant's
identity might be recorded using a list of accountants registered
with professional bodies. Firms of accountants could then electronically
check for filings made in their name. The accounts might also
be able to show the nature of the professional accountant's involvement
in non-audited accounts using the cross-profession report referred
to above.
The professional accountancy bodies have been
working with Companies House to develop these arrangements, but
progress to date has been rather limited in part because of the
inherent difficulty of planning such changes alongside the staged
introduction of electronic filing.
Suggestion 2: Liaison between Companies
House and the professional accountancy bodies should continue
to help achieve improved clarity and security over reporting the
involvement of professional accountants when accounts are filed
electronically.
April 2008
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