I recently came across a question on an online accountancy forum asking about other peoples’ experience in obtaining a practising certificate from ICAEW.
The accountant asking the question explained that he had qualified as an ICAEW member about a year ago and had worked in practice for approximately five years. He had officially become an ICAEW member about six months ago.
He explained that he wanted to become self-employed and offer various accountancy related services including statutory accounts preparation bookkeeping tax returns and payroll.
He had done the right thing at the outset and contacted ICAEW who told him that he must wait a further 18 months to be able to obtain a practising certificate. So he cannot become self-employed (at least under ICAEW’s rules) for another year and a half.
The time and effort involved in obtaining a practicing certificate has been a problem for many years. It is also one that students newly qualified members and existing members need to be fully aware of because there are strict rules in place about practising accountancy when you become a member of a chartered professional body.
Pretty much all the professional bodies require a certain amount of post qualification experience before they will grant a practising certificate to enable their members to hold themselves out to be in public practice.
ICAEW’s practising certificate (PC) regulations state that:
A member shall be eligible to hold an ICAEW PC only if they:
- Have been a member for two years.
- Are compliant with the requirements of Principal Bye-law 56 – Continuing Professional Development (CPD).
- Understand the Fundamental Principles set out in the Code of Ethics.
- Have undertaken to comply with the ICAEW’s Professional Indemnity Insurance Regulations.
- Are a fit and proper person to hold a PC.
- Have submitted an application including payment of set application fees.
- Have passed an aptitude test if relevant."
To apply for an ACCA practising certificate you must be able to show that you have achieved:
- Three years of supervised experience with an ACCA approved employer - practising certificate development (general) stream - or an employer that would be eligible to register.
- A minimum of two years of continuous membership.
- Two years of post-membership experience. Only experience gained after admission to membership can count towards a practising certificate.
- Experience must be supervised by an appropriately qualified individual as defined in Appendix 1 of the Practising Certificate Experience Form (PCEF).
- The competences contained in the Approved Employer Practising Certificate Experience Requirement confirmation or PCEF. A member training towards the certificate must complete the PCEF part 1 and part 2.
ACCA has confirmed that the provision of basic bookkeeping services directly to the public cannot count towards the practical training requirements for its practising certificates. However basic bookkeeping and other accountancy work undertaken on a sub-contract basis for employers who are approved by ACCA may count provided that it is supervised by a principal and documented in the PCEF.
Ignoring the rules
The post qualification experience rules are there for a reason.
The provision of accountancy and tax related services to members of the public are protected by the professional bodies. The member must be able to demonstrate their competency in providing such services. It would be reckless for professional bodies to enable newly qualified accountants the option of simply setting up a general practice without proper post qualification experience that has been adequately documented supervised and agreed as this would clearly be to the detriment of the profession.
Unfortunately it is not uncommon for students to fall foul of these rules. Professional bodies have been known to expel student members for carrying out public practice work without a practising certificate because it brings the profession (and the body) into disrepute. Some members of chartered professional bodies have found themselves on the receiving end of a large fine and membership expulsion for carrying out public practice work without a certificate.
The definition of accountancy services is taken from the Consultative Committee of Accountancy Bodies (CCAB) Anti-money Laundering Guidance for the Accountancy Sector. It is very wide:
"Accountancy services includes any services which involves recording review analysis calculation or reporting of financial information and which is provided under arrangements other than a contract of employment."
Public practice work will include:
- Production of financial statements (accounts) that a third party relies on.
- Preparing personal or corporate tax returns (even where the client submits them directly to the tax authority).
- Preparing a report or certificate concerning a person’s financial affairs that will be seen by a third party (including for example confirmation to a potential lender of a person’s income).
Different professional bodies have different rules on what constitutes public practice work. Certain activities such as basic bookkeeping may not require a practising certificate.
However professional bodies such as ACCA have very strict rules on this type of work. In the context of maintaining a client’s books of prime entry and ledgers the member could end up producing a trial balance (whether computerised or manual). ACCA members without authorisation to practise cannot provide advice or interpretation based on that trial balance.
As you can see there is a very very fine line between the boundaries.
Sanctions
The sanctions for carrying out public practice work without a practising certificate are severe and invariably involve expulsion from membership of the professional body together with a hefty fine. It is simply not worth it to even think about taking the risk.
The rules on obtaining practising certificates may seem onerous. It can appear as though professional bodies are putting hurdles in front of members who wish to become self-employed but they are there to protect members of the public.
It is the responsibility of the professional bodies to ensure that they protect the public interest by ensuring member firms members students and affiliates maintain the highest standards of professional competency and conduct.
To that end it is imperative that you completely understand the rules of your professional body on practising before embarking on becoming self-employed or providing services to the public.
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