Practice monitoring

Practice Monitoring is essentially a quality assurance programme for practising CAs and their Affiliates.

The Public Practice Regulations of ICAS set out what ICAS Practice Monitoring is and the areas of work that it covers.  Essentially, any ICAS Members holding a Practising Certificate are subject to a Practice Monitoring review. It also covers the work of other persons who have agreed to be subject to Practice Monitoring (typically Affiliate Members of ICAS).  Practice Monitoring will cover the regulatory and compliance processes of a Firm which includes one or more such individuals.

There are some exemptions from Practice Monitoring, typically when the Member or Firm are subject to a comparable quality assurance programme conducted by another accountancy body where ICAS has reciprocal arrangements.

Practice Monitoring is not a statutory function and, therefore, the reviews are designed to be consultative and helpful as opposed to prescriptive, the aim being to help Firms to ensure that they are complying with relevant legislation, ICAS Rules and best practice.

However, there are certain aspects where compliance is expected, and breaches of the regulations can occasionally lead to regulatory actions or referrals to other committees within ICAS.

With the exception of audit and insolvency, which are monitored separately, Practice Monitoring covers all areas of accountancy practice.

To begin with the reviewer will gain an understanding of the practice being reviewed, to gain an overview of how the business is organised, the types of work being undertaken and the sort of clients that the firm engages with.

The specific areas of regulation covered on a Practice Monitoring Review are:

• Anti-Money Laundering Regulations
• Bribery Act 2010
• Client Money Regulations
• Continuing Professional Development (CPD)
• Investment Business
• Code of Ethics
• Professional Indemnity Insurance
• Consumer Credit activity
• Firm name, use of ICAS logos and branding and descriptions
• Data protection

Additionally, client work is also reviewed as part of a review.

During a review the reviewer will also confirm that any weaknesses identified at previous reviews have been satisfactorily addressed.

ICAS has been conducting Practice Monitoring reviews for 20 years now and feedback from our Firms indicates that Members welcome the opportunity to discuss an array of relevant matters with the monitoring team.  Whilst the reviewer may not have the answer to all questions each practitioner may have, they can often signpost the Member to the relevant contact in ICAS or some supportive material that is available on icas.com or other sources of information and guidance.

The ability of the reviewer to act as a sounding board to practitioners has proved to be an important element of the review process over the years and both the monitoring team and Firms continue to value these interactions.

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The reviews tend to be referred to as visits simply because the majority of the reviews are performed on site on Firm’s premises.  There are two types of review:

• Desktop (remote) reviews; and
• Onsite visits.

Desktop Reviews

Desktop reviews are conducted remotely, and the reviewer therefore does not normally attend the Firm’s premises to carry out such a review.  When a desktop review is conducted, the practitioner is required to submit various documents to the reviewer about two weeks before the scheduled review date.  A list of required information is sent along with the review notification.

Desktop reviews are aimed at small sole practitioners, typically with no staff or one or two part-time members of staff.  The thinking behind these reviews is that it aims to minimise disruption to the Firm by carrying out the review remotely.

However, as noted, the desktop review is only really appropriate for smaller practices. Some practitioners are selected for a desktop review, but prefer a face to face visit instead, so we are more than happy to accommodate the onsite visit request as and when these arise.

On a desktop review, the reviewer will take the time to review all of the information provided in advance by the Firm, looking for evidence that the Firm is complying with the various regulatory requirements.

Normally a desktop review will include the review of at least one client file.

To conclude the desktop review, the reviewer will telephone the practitioner to discuss any questions arising and to summarise the observations made during the review.  Normally the reviewer will be in touch in advance to agree a mutually agreeable time to undertake the closing discussions.

Following the closing discussions, a draft report will be prepared and normally emailed to the practitioner for responses. The practitioner’s responses are normally required within two weeks of receiving the draft report.

Onsite Visits

The majority of Firms will receive an onsite visit. As noted above practitioners selected for a desktop review who prefer a face to face visit can request an onsite visit.

An onsite visit comprises:

• An initial opening meeting; and
• Fieldwork, including a review of:
  • The Firm’s policies and procedures
  • A sample of client engagement files
  • A closing meeting

The opening meeting allows the reviewer to discuss a variety of areas to establish the approach the Firm follows in terms of regulatory compliance and client work.  It also allows the reviewer to gain an understanding into the type of work the Firm is undertaking and how the work is carried out.

The areas reviewed during the fieldwork stage include:

• Client file structure, standard documentation, consistency of approach, for example compliance with the appropriate financial reporting standards and disclosure requirements
• Review of staff documentation such as CPD records
• Adherence to Standards, Rules, Regulations and best practice guidance
• Practice management and compliance with the prevailing regulated areas such as client money, professional conduct such as ethics, investment business, etc.
• A detailed review of the Firm’s compliance with the Anti-Money Laundering Regulations

Practice Monitoring is a risk-based approach to monitoring and as a result the reviewer will determine the number of client engagement files and the type of files to be reviewed based on the perceived risks.

To conclude the visit, the reviewer will carry out a closing meeting with the practitioner to discuss issues that have arisen and to provide guidance and pointers that may help improve the Firm.

If time permits on the day of the visit a draft report will be prepared and discussed at the closing meeting.  However, if not, the reviewer will prepare the report offsite and email a copy of it to the Firm as soon as possible following the visit. Normally, the practitioner’s comments are required within two weeks of receiving the draft report.

All reviews are independently quality reviewed to ensure that the review methodology has been met, and that the conclusions are fair and balanced.

The Authorisation Committee has oversight over the activities of Practice Monitoring, and includes Members who are practising Chartered Accountants, and makes the decisions on whether any follow-up action is required by the Firm following the review. The Committee is also responsible for referring any disciplinary issues to the ICAS complaints and disciplinary process. The Committee is also bound by confidentiality rules.

The full impact on a Firm that will potentially be subject to follow-up action will be discussed by the reviewer during the review.

The timing of when a Firm hears about the outcome of a review will depend on whether there is anything to follow up on post review, or if registration will continue without any additional information being provided to the Committee. As the Committee only meets every two months, it may be some time before a Firm receives notification of the decision.

If you are concerned about the delay in hearing back after the review, please contact auditandpracticemonitoring@icas.com.

All ICAS Members holding a Practising Certificate (PC) will receive a Practice Monitoring review on a regular basis.  Rather than visiting PC holders individually it is more effective to visit a Firm and all PC holders at the Firm.  All offices of the same Firm will, where practical, be covered within the same visit.

For CA Members in practice with Members of other accountancy bodies, there are reciprocity arrangements in place and, in most cases, only one body will visit the Firm.

The Practice Monitoring team consists of qualified Chartered Accountants who are employed by ICAS and have extensive experience gained in all areas of general practice, including taxation, accounting for owner-managed businesses, charity accounting, audit and corporate finance.

Additionally, as a number of PC holders are often engaged as peripatetic directors, we have reviewers who also have experience of work outside traditional general practice.

A risk-based approach to review selection is applied, although all Firms can expect to be subject to a Practice Monitoring Review from time to time.

The selection is based upon:

• Risks identified from a review of information provided in the Firm’s annual return
• Risks and knowledge obtained from historic reviews
• Referrals made from other ICAS committees, departments or other regulators
• Random selection from the Practising community

The Public Practice Regulations set out that Firms shall be notified at least six weeks in advance of the review, and this notification sets out details of the proposed date, the proposed type of review (desktop or onsite visit) and the name of the reviewer.

When you receive your review selection email which as noted above will advise whether your review is a desktop (i.e. offsite) review or an onsite visit.

Desktop review

The documents and records list provided prior to the review sets out the required information.  The requested documentation should be provided around two weeks before the review.  Typically, this includes an example client file – normally an accounts preparation and tax compliance case often for a limited company client.  In addition, you will be asked to submit copies of your CPD records, client money accounts statements and associated documentation, a variety of Anti-Money Laundering documentation and such like.

Hard copies can be submitted to your reviewer at CA House.  We normally recommend using Royal Mail Special Delivery or some other tracked delivery service when submitting the documentation in hard copy. The costs of submitting such documentation will be reimbursed by ICAS.

Alternatively scanned documentation can be provided via email to auditandpracticemonitoring@icas.com.

Onsite visit

A documents and records list is also provided prior to an onsite visit being carried out.  This includes a list of clients from which the reviewer will select the sample of client work to review.  As with the desktop review the documentation required includes CPD records, Client money records, AML documentation and such like.

There is no requirement to submit this information to the reviewer prior to the visit.  However, it is really helpful to have these things to hand prior to the commencement of the visit as it will speed things along on the day of the visit.

Desktop review

As explained above a desktop review is performed remotely, but before it is finalised the reviewer will need to speak to the practitioner to cover a variety of standard questions and also to feedback the conclusions of the review of documentation submitted.

This closing discussion tends to be carried out over the telephone.  It is difficult to be categoric as to the length of time such a conversation takes, but experience suggests that it would normally be between 30 minutes to an hour in duration.

Onsite visit

The length of time to complete an onsite visit is also variable.  The majority of ICAS regulated Firms are sole practitioners and these visits are normally concluded within one day.  Occasionally it may take longer if there are unusual circumstances or multiple locations and areas of work to cover.

A Firm with two partners will also normally be concluded within one day.  For larger Firms with multiple partners and offices the visits will take more than one day. Your visit selection letter will normally set out an indication of how long to expect the visit to take.

Your reviewer will of course keep you updated in respect of the visit as it progresses.

If the date proposed in the selection email is unsuitable, then the Firm should contact the team either using the telephone number included in the correspondence or by direct email to auditandpracticemonitoring@icas.com within five working days of receipt of the notification.

When reviews are selected, we ensure that the reviewer has no recent connections with the Firm being reviewed, so that there is no conflict of interest.  However, if the reviewer is considered unsuitable for any reason by the Firm then again an email should be sent to auditandpracticemonitoring@icas.com within five working days of receipt of the review notification.

No member of the Practice Monitoring team may make use of or disclose, the contents of any Practice Monitoring report, file, any working paper file, document, other material reviewed, any confidential information concerning the affairs of any Firm or of their clients obtained during the course of a review, except where appropriate to the Authorisation Committee. A copy of the final report will be retained on the Firm’s file in ICAS.

ICAS is a Recognised Supervisory Body (RSB) under the Anti-Money Laundering (AML) Regulations. ICAS reviews AML compliance as part of the Practice Monitoring review regime, although could on occasion carry out separate AML visits as necessary.

The level of scrutiny of AML compliance has increased substantially in recent years following the establishment of OPBAS (Office for Professional Body Anti-Money Laundering Supervision) part of the FCA to oversee how RSB’s supervise their own Members.

We are committed to improving the level of AML compliance achieved by our Firms and have a two-stage approach to ensuring compliance.  If AML issues are identified on a review typically Firms will be given a further three months following the review to make the necessary improvements.  The Practice Monitoring team will advise our colleagues in Practice Support of the AML matters for improvement and the Practice Support team will be in contact with the Firm to provide advice to assist in addressing the issues highlighted as a result of the review.

If it transpires that insufficient progress has been made to address shortcomings in AML compliance, the Authorisation Committee may take regulatory action against the firm.

Details of the Regulatory Actions open to the Committee can be found here.