Accountancy & Management: New action on old complaints: Michael Chamberlain of the ICAEW argues that some criticisms of the profession that appeared here last week are already out of date

ACCOUNTANTS, in particular auditors, are frequently damned as backward-looking, interested only in what has happened rather than what might happen. How ironic that Roger Trapp, in 'In the last-chance saloon' on 19 January, spends so much time looking backwards. He makes no acknowledgement of the changes and interdependent reforms introduced by the accountancy profession over the past two years which are producing results.

Mr Trapp's article repeats several criticisms expressed by Prem Sikka, accounting academic at the University of East London. He accuses the old auditing standard-setting body, the Auditing Practices Committee, of being dominated by audit practitioners. According to Mr Sikka: 'Industrial/commercial accountants had little direct say in audit policy making.' Mr Sikka is, regrettably, tilting at toppled windmills.

An early initiative by the profession to boost confidence in the audit was to set up the Auditing Practices Board as successor to the APC. If the APC's membership could be criticised for being dominated by the big firms, the APB's composition should be above reproach. Only half its members are auditors and, of the non-practising members, several are not accountants.

Indeed, the APB working party responsible for the widely welcomed discussion paper The Future Development of Auditing was chaired by a non-accountant member of the board, John McFarlane.

Mr Sikka criticises auditors for past passivity on going concern issues. Yet going concern is high on the profession's agenda, not least because of the work of the Cadbury Committee on the Financial Aspects of Corporate Governance, which the profession played a leading role in setting up.

Cadbury recommended that directors explicitly state in the report and accounts whether or not the business is a going concern, and that the auditors report on this going concern statement. Cadbury also recommended that the accountancy profession, in conjunction with representatives of preparers of accounts, take the lead in developing further guidance for companies and auditors. The Institute of Chartered Accountants in England and Wales has nearly completed a consultative document on guidance in assessing and reporting on the going concern status of a company.

Corporate reporting was an even earlier target for reform. The profession helped to found - and now to fund - the Financial Reporting Council, which with its interlocking bodies is working hard to improve corporate financial reporting.

Under the FRC, the Accounting Standards Board is working to end 'creative accounting'. New standards cover cash flow, off-balance sheet finance, acquisition accounting, goodwill and intangibles.

Another recent development has been the introduction of audit regulation. For the first time, the supervisory bodies are able to monitor the quality of audit work and check compliance with auditing standards and guidelines.

In their reports to the Department of Trade and Industry on the new audit regime's first year, all the supervisory bodies provided a frank account (warts and all) of their findings. But monitoring of audit firms is still relatively new. The three Institutes of Chartered Accountants explained it was too early for a definitive statement about the quality of audit work in the generality of firms. To accuse the institutes and other supervisory bodies of complacency on the basis of those reports, all of which acknowledge that not all the firms visited met legitimate expectations, is misguided.

The reform agenda has also included strengthened disciplinary processes. Extra resources have been devoted to speeding up complaints handling, particularly for public interest cases. Ceilings on financial penalties have been removed and an ombudsman has been appointed to help complainants.

Tough new ethical guidance for auditors on issues such as specialist valuations, partner rotation and predatory pricing has been introduced or is in the pipeline.

The ICAEW is committed to maximum openness. Decisions of the disciplinary committee are being more widely publicised. In future, the institute will be able to reveal more about cases under investigation. The Institute Council has opened its meetings to the press and others when public interest decisions are being taken. There is lay representation on disciplinary and regulatory committees.

This is a considered programme of mutually supportive reforms. Unlike Mr Sikka, they look forward, not back. The programme will inevitably take time to be fully effective, but its adoption reflects the profession's realisation that accountants and the broader business community have a common interest in the maintenance of financial reporting, auditing and professional regulation in which all can have confidence.

Michael Chamberlain is Deputy President of the Institute of Chartered Accountants in England and Wales.

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