The New UK GAAP New UK GAAP

Functions and structures of UK Professional accounting bodies in the regulation of the Practice of their members in support of company law, and in pursuit of better accounting standards of financial reporting have been dynamic. The United Kingdom needed to comply with international standards and the European Union (Gray 2007). In essence, the assessment of reporting and auditing standards becomes inherent to the future of company law and growth.
In the United Kingdom, the Company law and pronouncements regulate professional bodies (Budde & Wright 2004). It is vital to discuss the function and structure of such pronouncements. This is because the company law is general and the pronouncements are based on the legal provisions of the United Kingdom Company law (Puttick VanEsch & Kana 2007). Professional pronouncements are indispensable in systemizing financial reporting to solve outstanding conflicts and disagreements (Millichamp 2002).
In the context of this discussion, it would be necessary to provide a brief overview of the companies (Audit, Investigations, and community enterprise) Act of 2004. It was the amended version of the Companies Act of 1989 (Budde & Wright 2004). The act paved way for more self-regulation of professional accounting firms in the United Kingdom. The Act replaced Recognized Supervisory Bodies (RSB) with Recognized Qualifying bodies (RQB). The RQB had the following roles according to the amendment.
“Maintain and enforce rules as to: a) the eligibility of persons to seek the appointment as the company auditors, and b) the appointment or acting as company auditors either because they are members of that body or because they are subject to its control.” (Section 30(1), CAP 89 of the Companies Act 2004) (Mondaq Business Briefing 2008 April 1). The amendment allowed the main accounting bodies to seek obtains the status of both RSB and RQB (Day & Woodward 2009).
In the United Kingdom, auditors act on behalf of accounting firms in providing reports about the published accounts of companies as the law requires (Management Accounting 1994 December 1). The practice is self-regulated in nature. This implies that professional bodies such as the Auditing and practices board (APB) play a truly vital role in the practice of accounting as a whole (Lynn 2005). The government delegates some of the powers of delegation to such bodies since it cannot do the entire oversight job of the accountancy profession (Basu 2006).
The following are examples of accounting bodies in the United Kingdom including their structures, in addition, to their regulatory framework of their members.
1. The institute of chartered Accountants in England and Wales (ICAEW)
2. The chartered institutes of management of Accountants (CIMA)
3. The chartered institute of public finance and Accountants (CIPAF)
4. The institute of chartered Accountants in Ireland (ICAIR)
5. The institute of chartered accountants in Scotland (ICS) (Mena Report 2012 September 7).
The harmonization process and bodies introduced to regulate professional accounting
The bodies investigate complaints against their members and issue disciplinary action where necessary. Disciplinary measures are in the form of fines, suspension or absolute withdrawal of practicing the license. The Financial Reporting Council regulates all the professional accounting bodies that are expected to carry out their business in respect of the standards established by it (Mangena & Tauringana 2004 p. 56). The FRC has subsidiary bodies that aid in the fulfilment of its mandate as the regulator of the accounting profession in the United Kingdom. One of the bodies, which are subsidiaries to the FRC, is the Accounting Standards Board (A.S.B). The FRC oversees the arrangement of the standard setting process and has the duty to support the ASB and seek the necessary support for it whenever FRC has the influence (Mena Report 2012 September 7 p.88). The ASB has the following objectives to achieve:
a) Ensure consistency in financial reporting from one financial reporting standard to another and between the financial reporting and the United Kingdom Company law.
b) To be objective and ensure that the information resulting from the application of accounting standards represents the underlying commercial activity and is free from bias
c) To ensure that accounting standards are clearly expressed and supported by a reasoned analysis of issues (Wood & Sangster 2008).
Financial Reporting and review Panel
Another subsidiary of the FRC is the Financial reporting Review Panel (FRRP), which receives and investigates complaints about the published accounts of Companies in breach of the companies Act (Mondaq Business Briefing 2012 December 20. P. 32). This is the requirement to show fair and true view of published accounts. It has the powers to compel the directors of the said company to prepare revised accounts through a court order. Considering that the Court process may be expensive, the FRRP relies on the funds allocated to the ASB for that purpose.
The professional Oversight Board (POB)
The body was established as a subsidiary of the Financial Reporting Council to oversee the activities of the Accountancy professional bodies in the United Kingdom. The Audit Inspection Unit facilitates this role by carrying out independent inspections of public audits and firms (Dunne & Morris 2008). It issues public reports about the findings of their independent inspections. For instance, 2010, the POB issued reports about the audits of leading audit firms and called for more scepticism form members of the public who rely on the findings of such audits. The POB has 11 members none of whom is employed in the auditing profession (Mondaq Business Briefing 2013 September 27 p.34). The role of the POB is to provide which is also part of the advantages of the harmonization process.
1. Independent oversight of the regulation of the auditing profession by the recognized supervising and qualifying bodies
2. Independent oversight of the regulation of the accountancy profession by the professional accountancy bodies (Olibe 2006).
The Audit inspection Unit (AIU) operating under the POB is responsible for monitoring the audits of all listed firms and other crucial public interest in the United Kingdom (Mcphail 2013). The AIU does its work based on the following guidelines:
1. Focus on the quality of auditing with a recommendation in this regard
2. Thorough, robust and challenging approach to inspection visits
3. A review of the entire procedural perspective of firms including an assessment of the impact of their accounting culture to the process of auditing
4. Selection of prime audits for review based on the identified risk factors
5. Review of the quality of reporting t the audit committee (Cahn & Donald 2010 p.122).
The Auditing Practice Board
Another body established by the 2004 amendment of the Companies Act as a subsidiary of the FRC is the Auditing Practice Board (APB) (Financial Management 2011 July 1). The body is required to ensure that the requirements set by the RSB are sufficiently complied within the auditing profession. The objective was to revise the objectivity of the pronouncements of auditors in the Auditor`s report (Gee 2006). The objectivity of pronouncements was revised to meet the following objectives:
The objectives are the advantages that came with harmonization process that ensured that the profession is regulated
1. Establish auditing standards, which spell out the basic principles and the essential procedures with which external auditors are required to meet
2. Guiding the application of auditing standards in specific circumstances and industries and emerging issues
3. Contribute the collective effort of ensuring public understanding of the roles and responsibilities of external auditors including the sponsorship of research on the same
4. Taking the essential role of developing legislation, regulation and accounting standards and the integrity of external auditors (Villiers 2006: Gee 2006).
It is paramount to understand the statutory and practical relationships in the Accounting profession as spelt out by the Companies Act, 2004 (Cerioni 2007).
The Companies Act, 2004 sets out the rules governing the appointment, resignation, and the removal of auditors (Wood & Sangster 2008). The Companies Act informs the following rules:
1. The individuals and firms who are permitted to act as auditors
2. The period for which the auditor is appointed
3. The statutory relationship between auditors and shareholders
4. The statutory relationship between shareholders and directors
5. The practical relationship between auditors and shareholders (Cosserat & Rodda 2009).
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