Practice Assurance Monitoring 2020

  • Cathy French
  • 26 May 2020 13:46

Each year the ICAEW publishes a summary of the key findings from Practice Assurance (PA) reviews carried out by their Quality Assurance Department.  Every PA review covers a wide range of areas and considers compliance with relevant laws and regulations, and areas of best practice.

Key findings

Overall, the ICAEW’s work in 2019 has shown that nearly half of member firms were not fully compliant with the Money Laundering Regulations (MLR 2017).  The main issues were either no firm-wide risk assessment or significant issues with the firm-wide risk assessment. Other findings related to firms not recording AML client risk assessments and having no procedures in place to keep client due diligence (CDD) up to date.

Another area of concern is Data Protection, with the report highlighting the importance of registering with the Information Commissioner’s Office and ensuring registration is at the correct “tier” for the size of firm. 

Compliance with Client Money Regulations also remains one of the top areas, with 13% of firms reviewed having at least one finding under this heading. Findings in this area related to firms without a bank trust letter to acknowledge the status of client money, firms who hadn’t carried out or documented an annual clients’ money compliance review, and firms not using designated accounts when holding more than £10,000 for more than 30 days.

Other findings relate to errors in the Annual Return and ethical matters, predominantly around conflicts of interest and whistleblowing, as discussed below:

Conflicts of interest

“You need to draft firm-wide policies and procedures to cover conflicts – don’t rely on the staff handbook, annual declarations and client take-on forms to cover this area. Think about it holistically.”

ICAEW – A Framework of Principles; Practice Assurance Monitoring 2020

Most firms had procedures in place to identify and monitor personal or close relationships between staff and clients, typically by the completion of annual declarations.  However, it might come as little surprise that less than half of firms had formal written procedures in relation to identifying and managing conflicts and less than a third were keeping a log of identified conflicts.

In addition to having written policies and procedures, the report highlights a few other areas to consider including: providing staff with examples of potential conflicts of interest to watch out for; providing regular ethics training to staff; and updating take-on and engagement procedures to cover conflict checks across the firm.

Area of focus for 2020

In 2020, ICAEW’s onsite PA visits will focus on Professional Conduct in Relation to Taxation (PCRT). PCRT sets out the fundamental principles and standards of behaviour that all members, affiliates and students must follow, and the visits will focus on how firms incorporate the requirements of PCRT into their policies and procedures.

Copies of the ICAEW 2020 Practice Assurance Monitoring report and PCRT are available online.

How we can help

We carry out hundreds of reviews for accountancy firms throughout the UK and Ireland each year and our experienced team can help ensure your firm remains up to date and compliant in a wide range of areas, from Practice Assurance compliance reviews to compliance reviews across a range of areas (e.g. Clients Money, AML, DPB, audit).

We use the ICAEW’s findings, as well as those of other regulators, alongside our own experience of performing reviews for our clients to help develop the content of our training courses.  That way we ensure that we cover issues that are of real concern to regulators and will help to ensure that you don’t fall foul of the same issues that have tripped up other firms.  

For further information on how we could support your firm with a peer review, please visit here.

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