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Alice Rae explains why firms are finding ACCA Quality Checked visits a real benefit and gives guidance on how firms can implement procedures to avoid some of the most common weaknesses identified on visits to member firms by ACCA staff.

What are the benefits of a visit?
Most firms are surprised about the consultative nature of the visit and that the approach is very much about trying to find ways to enhance a firm’s existing systems rather than suggesting wholesale changes to a firm’s procedures. It is very much about creating a bespoke approach for each firm rather than suggesting a 'one size fits all’ set of recommendations.

Many times firms have commented that the visit is an opportunity for the firm’s working practices to be reviewed by an independent third party who can challenge established ways of doing things. This process may often lead to improved customer service, efficient use of resources and reduce risk to the firm, including minimising complaints from clients.

How many firms have received a visit?
Since July 2001 ACCA staff have carried out over 2000 ACCA Quality Checked visits to firms and more than 500 ACCA Quality Checked awards have been issued.

What is the purpose of an ACCA Quality Checked visit?
Firms can achieve the award if they can demonstrate that they have implemented best practice quality control procedures in the running of their firm. However, the primary purpose of an ACCA Quality Checked visit is to promote best practice policies and procedures and to encourage firms to adopt such working practices.

The visits are advisory and tailored to a firm’s specific size and client needs. During a visit ACCA’s staff will review the firm’s quality control procedures, identify any perceived weaknesses and give the firm practical advice and guidance on making improvements to its procedures so that they meet what is considered to be current best practice in the accountancy profession.

What are the underlying principles of the scheme?
ACCA’s quality assurance scheme, ACCA Quality Checked, is based on five principles designed to enhance the delivery of a firm’s services to its clients. To be awarded ACCA Quality Checked a firm needs to show it has developed procedures to:

• clearly identify its clients’ needs;
• maintain efficient paper-based or electronic systems;
• provide training and development to keep both partners and staff technically up to date;
• communicate effectively with statutory bodies, the ACCA and other regulators and to keep clients informed of opportunities or obligations of which they may have been unaware;
• adhere to statutory and regulatory compliance and ACCA’s Code of Ethics and Conduct.

How can your firm avoid the common weaknesses?
The ACCA Quality Checked review covers a variety of practice management issues and quality control procedures in all client service areas. Set out below are some of most common systems weaknesses identified at ACCA Quality Checked visits and brief guidance on how to strengthen your firm’s procedures.

Practice management

Forward planning
Firms do not always carry out effective forward planning or scheduling of their workload, causing staff to work under unnecessary time pressure which may lead to ‘fire fighting’ in order to meet deadlines. This may also result in an increased risk of errors and have an adverse effect on client service levels. To avoid this situation firms need to plan their workflow in advance by using a client list, spreadsheet or practice management software to help them plan and review the spread of their work to match the availability of resources within their firm.

Engagement procedures:
Obtaining identity information and professional clearance
It is very important that firms have procedures in place to obtain all the necessary information required from a prospective new client before accepting the appointment. This includes: confirming the identity of the new client, obtaining professional clearance and issuing the new client with an engagement letter. Often all that is required is to devise a simple new client checklist to provide effective control of the sequence of the engagement process so that all necessary steps are followed. In particular, firms should not accept appointment or issue the engagement letter to the client before obtaining the professional clearance response from the client’s previous advisers and carrying out its new client due diligence procedures.

Engagement letters
Engagement letters reviewed on visits are often out of date and do not cover all relevant services provided by the firm. It is important that firms implement a procedure to regularly review engagement letters to update them to include all current services provided, otherwise disputes may arise with clients over the scope of the appointment. In addition, firms need to monitor and control the return of signed engagement letters to ensure that the client has agreed to the firm’s terms and conditions before work commences.

Accounts preparation:
Obtaining client approval of accounts
Firms sometimes rely on their clients’ signing their tax returns as approval for the figures included in their unincorporated business accounts and do not obtain separate approval of the accounts. As the accounts are prepared on the basis of information and explanations provided by clients it is important that clients acknowledge their responsibility for the information they have provided the firm and confirm that it is complete by formally approving their year end accounts. Therefore, approval of all client accounts should be sought from the client and a copy of the signed accounts retained on the client’s file.

Checking disclosures and audit exemption criteria
It is best practice to use a disclosure checklist on limited company accounts and to assess whether audit exemption can be claimed by the client. Without strong procedures in this area accounts may include disclosure errors or inappropriate accounts may be filed at Companies House. Although firms often rely on the use of accounting software to ensure the accuracy of the disclosures in limited company accounts, the software will not automatically pick up disclosures that are not generated by the figures in the trial balance. Also, if data is not coded to the account code specified by the software providers it will not generate the relevant note.

For audit clients, a checklist should be used every year. However, for small incorporated clients that have taken advantage of the audit exemptions available, a less rigorous procedure can be used alongside good, up to date accounting software. For example, control procedures could be put in place to ensure a disclosure checklist is used in the first year a firm prepares accounts for a newly incorporated company or a new client and then used routinely every three to four years thereafter unless there are any major changes in legislation or the size, structure or operation of the company. In addition, firms could use a short checklist to confirm that the limited company client meets the eligibility criteria to claim audit exemption and ensure the correct accounts are filed.

Taxation procedures:
Advising clients of their tax liabilities
In many cases firms may explain tax liabilities to clients face to face at a meeting or over the phone without later confirming this in writing with the client. It is best practice to confirm the amounts of tax due and the date of payment in writing to provide the client with a point of reference of their tax liability and the due date of payment. This is particularly relevant if clients incur penalties due to late payment and complain that they were not adequately advised.

Client approval of tax returns and online filing
With the advent of electronic filing of tax returns some firms do not obtain their client’s signed approval of tax returns submitted online or advise their clients of online filing. It is best practice to always obtain signed approval of all tax returns before submission to HMRC and to advise the client that their return will be filed online. In particular, for VAT and construction industry returns where HMRC’s online filing system does not facilitate an approval copy of the return, firms may need to devise a template with a declaration which the client can sign and approve prior to the electronic filing of the return.

Management accounts, projections and income references:
Including disclaimers and restrictions of use
There are various documents prepared by firms, such as projections, management accounts and income references, which may be relied upon by third parties for decision making purposes. In many cases firms do not include disclaimers or a restriction of use in such documents. It is best practice to always include a suitable disclaimer to minimise the firm’s exposure to the risk of third parties relying too heavily on this information without knowing the basis of preparation or doing their own financial assessment, and to restrict the use of such documents for management use only or for the use of a specific third party.

How do you find out more about the scheme?
If you would like your firm to benefit from participating in an ACCA Quality Checked review you can find out more about the scheme. Here you can complete a self-diagnostic review of your quality control procedures.

If you have any questions or you would like to request a visit please contact Liz Kirkham or Alice Rae by email.

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