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[Excerpt] Ireland has been at the forefront of developments in the regulatory area and the Institute has been more than proactive in driving forward the process of change. That there is a perception that the profession is just reacting to external pressures is disappointing, because the facts simply don't bear it out, argues Brian Walsh. [Accountancy Ireland] You say that you are proactive but commentators say that you only take action when change is forced on you. For example, newspaper reports said that you were negative on the recommendations of the Review Group on Auditing. "We made very detailed submissions to the Review Group on Auditing and to the Tanaiste on the report of the RGA. We were represented on the Review Group and we are currently represented on the Interim Supervisory Authority Board. Our nominees have played a full and active role on those. "If anyone took the time to examine the recommendations of the RGA and compare them to the submission we made, they will see just how proactive we have been. Many of the major policy recommendations contained in the RGA were part of our submission. "In fact, in the autumn of 1999, before the idea of a Review Group was even raised, we had brought a suggestion for a new supervisory authority to senior levels of government." [Accountancy Ireland] But when the Review Group published its report, you said that its recommendations would give Ireland "the toughest regulatory regime in the world". "What we said on the day the report was published was that it would require detailed scrutiny and consultation. That was a holding statement. We needed time to consider the recommendations. It was interpreted in some quarters as some kind of policy statement, but that was never what it was. We actually said that in the press release we issued at the time. And we were right to flag that the recommendations would bring about a very tough regime for auditors. We talked about the need to achieve a balance between effective regulation and compliance on the one hand and the need for business to be able to operate effectively. We carried out the detailed analysis which we promised and two months later we published a very comprehensive response to the Report that made clear our support for the main policy recommendations of the RGA. You have to remember that the Review Group on Auditing predated Enron and WorldCom. But its analyses and recommendations have more than stood the test of time and we strongly support its early implementation." [Accountancy Ireland] The Tanaiste has published draft heads of the new Audit and Accountancy Bill. Are you happy with it? "Broadly speaking, yes. When this legislation is enacted we will have a new model of supervised self-regulation. This new model has attracted attention from a number of countries abroad where the debate about self-regulation vs state regulation is ongoing. Of course, in any piece of legislation there will be issues that will give cause for concern. I am increasingly concerned about the burden of regulation that is being imposed on small businesses in Ireland, and by extension small and medium sized practices, not just in relation to this Bill but across a range of areas, and I hope that this Bill won�¢??t add unduly to that. I also think that the issue of giving some recognition to the term 'accountant' must be addressed in this Bill if IAASA is to fully meet the remit which it is setting for itself as the supervisory body for the accountancy profession in Ireland". [Accountancy Ireland] Talking about the burden that regulation puts on smaller business you have gone on record calling for 'joined up Government'. Are you looking for less regulation of smaller businesses? "Recently we have seen a lot of energy going in to drafting laws to stop things from happening. Given all that's come out in recent times, perhaps that is not surprising. But what is really needed is co-ordination, simplification, and a determination to make things happen, to support entrepreneurialism and small business. "At the moment, some practitioners say they are advising new entrepreneurs against doing business as a limited liability company because of the regulatory burden. "And, look at what is happening with the CRO. Everyone wants better compliance with filing requirements but the method of implementation by the CRO is causing huge problems for SMEs and their advisers. Auditors now have to inform the Office of the Director of Corporate Enforcement if they detect any one of 128 possible offences in the course of carrying out the audit. Even if the company has corrected the matter, a report still has to be made. What�¢??s missing here is a question of degree. Of course action should be taken where there�¢??s a potential public impact, but where a minor breach has been committed and has been corrected,you have to ask is it reasonable or fair to put that additional cost burden on the company. "We've also argued for an increase in the audit exemption limit. Did you know we have the lowest exemption limit in Europe? "So the answer to your question is not so much that we are calling for less regulation but that we would like to see better co-ordination and simplification and that�¢??s why I am saying that we would not like to see IAASA adding to the existing burdens on smaller companies ". [Accountancy Ireland] The Institute is also on record saying that it doesn't want IAASA to have the power to intervene in operational processes, that you don't want it to intervene in the disciplinary process? "The Institute strongly supports a new model of supervised self-regulation. This can work if the professional accountancy bodies are given the powers to regulate members and if the supervisory authority is effective in ensuring that the bodies' processes and procedures are consistent and effective. Our concern about the intervention role for IAASA was that the power could be framed in such a way that it would make IAASA a second-guessing board which would undermine the work of the accountancy bodies�¢?? disciplinary processes. All of our disciplinary committees now have a majority of non-members on them and they operate to the highest standards of fair and due process. The draft IAASA legislation has gone a long way to meeting the concerns we had in this area but we will suspend judgement until we see the final Bill." [Accountancy Ireland] You are still arguing for self-regulation, but how effective can self-regulation be if it doesn't have statutory backing? "In our submission to the Review Group on Auditing we sought statutory powers to discover documents, compel witnesses, and to take evidence under oath. It was our experience that without these powers there were times when we couldn't conduct a full and thorough inquiry. We were delighted that the RGA recommended these powers and we look forward to the provisions being included in the IAASA Bill. Just recently the Institute of Chartered Accountants in Scotland said that they would not proceed with public disciplinary hearings until they got statutory backing. We did not hold back in that way but there is no doubt that statutory backing would help us progress cases".

Accountancy Ireland Vol 34 No 6 December 2002