Safeguarding against a failure to adequately supervise your staff

On a daily basis, principals entrust their employees to carry out work on their behalf. Therefore, ensuring that adequate supervision is in place is vital to ensuring that clients’ needs are being met and to safeguarding the ongoing success of client relationships. The reputational benefits associated with good supervision are evident. However, did you know there’s an ethical requirement to do so and that a failure to demonstrate compliance could lead to a complaint against you?

Who is a supervised person?

If a person is undertaking work and providing advice on behalf of the firm or principal, they will likely be deemed to be a supervised person. Most of a firm’s personnel, with the exception of the principals, will therefore likely fall into the category of supervised staff.  

What are the Code of Ethics requirements in relation to supervision?

The fundamental principle of professional competence and due care, contained within Section 113 of the ICAS Code of Ethics, provides that “ A professional accountant shall comply with the principle of professional competence and due care, which requires an accountant to: (a) Attain and maintain professional knowledge and skills at the level required to ensure that a client or employing organisation receives competent professional service, based on current technical and professional standards and relevant legislation; and (b) Act diligently and in accordance with applicable technical and professional standards”.

Paragraph 113.2 goes on to state that principals must “take reasonable steps to ensure that those working in a professional capacity under the accountant’s authority have appropriate training and supervision”.

How do you demonstrate adequate supervision of staff?

A firm should have established procedures for the delegation, control and supervision of work, with the objective of such procedures being to mitigate and detects errors or abuses of process by its staff. The firm should also have a robust system for applying these procedures. It would be best practice for the firm to document these procedures. 

Principals and firms are expected to apply their professional judgement in determining how much supervision will be required on a client engagement. The level of supervision required will vary from individual to individual, with it expected that supervision will be proportionate to the staff member’s training and expertise. For example, a more junior member of staff will likely require a higher level of supervision then a qualified CA with significant post-qualifying experience.  

Further, the level of supervision will vary from engagement to engagement. It’s likely that a complex or higher risk engagement may require a higher level of oversight from the principal than a simple or low risk engagement. However, it’s important to note that all engagements, even those that are considered to be simple or low risk, will require a degree of supervision. 

Adequate staff training 

Training is of the utmost importance for ensuring that your staff are competent enough to carry out the work. Therefore, a firm should also have processes in place to evaluate staff performance, identify any gaps that exists in knowledge or identify areas for improvement and follow up with appropriate training opportunities. 

In demonstrating the adequate supervision of staff, principals and firms should ensure that work is only delegated to staff who have the appropriate skills and expertise to carry out the role. 

Can a principal or firm be found liable for disciplinary action due to the actions of failings of a staff member?

If something goes wrong, the responsibility for the issue will likely lie with the principal. Therefore, you could find yourself personally liable for disciplinary action as a result of the actions or failings of your staff. Further, if you’re not able to demonstrate that your staff were appropriately supervised, you could also leave yourself open to disciplinary action for failing to adequately supervise. 

Where the client engagement is an audit engagement, ICAS will usually consider the complaint against the firm. In such circumstances, the firm could find itself liable for disciplinary action as a result of failings of the engagement staff. 

In addition, the ICAS Rules provide the power for us to consider a complaint against an ICAS regulated firm where the principal who is the subject of the complaint is not regulated by ICAS or another professional body. For example, a complaint concerning an error on the part of a member of staff working for a non-CA principal could result in a disciplinary finding against the firm.

For further information on how best to establish procedures for the delegation and supervision of work, please contact the ICAS Practice Support team. 

If you have any questions or concerns in relation to a failure to supervise, please contact the Investigations Department on +44 (0)131 347 0271.