Education CommitteeWritten evidence submitted by ICAEW

Purpose of Royal Charters

Royal Charters, granted by the sovereign on the advice of the Privy Council, have a history dating back to the 13th century. Their original purpose was to create public or private corporations (including towns and cities), and to define their privileges and purpose.

Though Charters are still occasionally granted to cities, new Charters are now normally reserved for bodies that work in the public interest (such as professional institutions and charities) and which can demonstrate pre-eminence, stability and permanence in their particular field.

Many older universities in England, Wales and Northern Ireland are also Chartered bodies.

ICAEW’s Royal Charter

ICAEW’s Royal Charter was granted in 1880. It mandates the ICAEW to pursue:

“the elevation of the profession of public accountants as a whole and the promotion of their efficiency and usefulness by compelling the observance of strict rules of conduct as a condition of membership and by setting up a high standard of professional and general education and knowledge and otherwise.”

This means that everything we do and are responsible for is defined by our Royal Charter.

What “Chartered Status” Means in Practice

Fundamentally, it means putting the public interest first, even if this means before members’ interests. For ICAEW, for example, this means campaigning for simplification of the tax system in the public’s interest, even though a complex tax system creates more work for accountants.

1. Providing high quality education and training

It normally takes three—five years to become an ICAEW Chartered Accountant. Students must train with one of our 2,500 authorised employers. ICAEW Chartered Accountants must:

Study and pass 15 challenging examinations, with the final level being set and marked at Masters level.

Complete Initial Professional Development—a work place skills development programme.

Record 450 days of “on the job” technical work experience within a normal minimum three—year training agreement.

Train rigorously in professional ethics.

2. Maintaining high standards of practice and professional conduct

Under the Charter, the ICAEW protects the public by:

Requiring members to comply with regulations and standards, including a Code of Ethics and mandating professional indemnity insurance.

Requiring mandatory continuing professional development (CPD), ensuring professionals are up to date, continually trained and developed and competent for any work they undertake.

Regulating work in audit, investment business and insolvency—we are the largest audit regulator in the UK, and license more insolvency practitioners than any other body.

Ensuring that only members who qualify for and hold a practising certificate may engage in public practice (ie offer accountancy services direct to the public) within the European Economic Area.

Monitoring and reviewing members’ work on a regular basis.

Facilitating and investigating complaints of misconduct, and disciplining members who fall below expected standards.

ICAEW is overseen by the Financial Reporting Council, the Financial Services Authority and the Insolvency Service.

3. Delivering technical excellence in the public interest

Our technical experts and members work with governments, regulators and industry to ensure that the highest technical and ethical standards are maintained in the accountancy profession, business and finance. This includes advising Whitehall and Westminster on the content of each year’s Finance Bill. Every year we prepare hundreds of technical submissions for regulators and government bodies in the UK, EU and internationally, to help inform and strengthen public policy. Fundamentally, our Chartered status means that we must put the public interest above members’ interests.

Attracting High-Quality People

It can be difficult to analyse the complex motivations driving graduates into different career paths. We believe graduates seeking to become chartered accountants are driven by several factors—none of which involve the acquisition of chartered status in itself.

1. A wide array of career paths and choices

Chartered accountancy opens up a broad array of career options rather than closing a graduate into a limited array of choices. This is because trainees acquire a broad array of transferable skills which enable them to work and progress in any organisation, in the public, private or voluntary sectors.

2. Clear prospects for progression

The variety of possible career opportunities means that trainee chartered accountants can take several paths to higher levels of seniority and reward, by becoming a senior partner in a firm, an FD of a FTSE 100 company leading to a Chief Operations Officer or Chief Executive position—or starting their own business from scratch.

3. Legacy and reputation

Its 130 year history means that chartered accountancy has over 130 years of high standards, recognition and prestige as a profession.

4. Higher salaries

ICAEW’s latest salary data shows that those starting out in the chartered accountancy profession can expect to earn an average annual salary of £48,600 during their first four years post-qualification. That rises to an annual average salary of £84,300 for those qualified for 20 or more years.

5. Attractive and well-known employers

Chartered accountants must train with an ICAEW approved employer which is monitored by ICAEW on an on-going basis. Most of these are well known, prestigious employers with strong reputations as good graduate recruiters. Half of the Times’ top ten graduate recruitment schemes in 2011 were accountancy firms.

The Value of Chartered Status

The real value of the Royal Charter to the accountancy profession has been to keep our institute focused on our core Charter responsibilities, maintaining high standards in training, professional standards and technical expertise. These three characteristics have built and consolidated the profession’s status in society, and its contribution to the UK’s strength as a major business, financial and trading power.

We do not claim a monopoly of expertise on attracting the brightest graduates. However, we hope that our assessment of factors attracting graduates to the accountancy profession can inform the committee in generating ideas on how to attract and retain more high-quality graduates to the teaching profession.

Conclusion

We believe that acquiring the title “chartered” cannot in itself build the social status and economic importance of a profession. The core demands of a Royal Charter—high standards in training, professionalism and expertise—can build status, but you do not need a Royal Charter to meet them.

To add to our assessment, ICAEW is currently undertaking a research project with Oxford Brookes University on the factors affecting undergraduates’ choice of career, with particular reference to accountancy. Depending on the availability of preliminary results by the time of the oral evidence sessions for the committee’s inquiry, we would be happy to talk through the findings of this research or, alternatively, provide the results in writing to the Select Committee after 25 January.

About ICAEW

We are a professional membership organisation, supporting over 136,000 chartered accountants around the world. Through our technical knowledge, skills and expertise, we provide insight and leadership to the global accountancy and finance profession.

We believe in educating people to the highest standard. Our comprehensive suite of qualifications and personal development programmes cover a range of specialist areas across accountancy, finance and business. From the ACA qualification to our leadership programmes, we develop and support individuals at all stages of their career. In emerging and developing markets such as Bangladesh and Botswana, we work with governments and stakeholders to strengthen professional qualifications and professional bodies.

January 2012

Prepared 30th April 2012