Obtaining a practising certificate as a professional accountant: FAQs

If you are a member of the ACCA, ICAEW, ICAS, or IFA, you may be subject to requirements to obtain a practising certificate for carrying out certain activities. These requirements vary depending on your professional body. Understanding the relevant regulatory rules and procedures which govern when you need to obtain a practising certificate, and how to go about obtaining one, can be difficult to navigate. Yet the consequences of failing to have one when required to do so can be devastating.

We advise professional accountants as to their requirement to obtain a practising certificate from the various regulatory bodies for accountants, including:

  • The Association of Chartered, Certified Accountants (ACCA);
  • The Institute of Chartered Accountants of England and Wales (ICAEW);
  • The Institute of Chartered Accountants of Scotland (ICAS); and
  • The Institute of Financial Accountants (IFA)

Individuals can be disciplined if they fail to obtain a practising certificate, which will likely result in regulatory sanctions, such as a reprimand, a fine and possibly even expulsion. Any disciplinary action that culminates in a sanction will clearly impact individuals reputationally, so if you are approached by a regulator and you are concerned about whether you are operating in compliance with the rules of your regulatory body, you should take advice. 

Our advice regarding practising certificates is always to proactively ensure you are operating in compliance with the rules of your regulatory body, before regulatory investigation or disciplinary action becomes an issue.

These frequently asked questions aim to help you to identify whether you need a practising certificate. If you find that you may be in breach of the regulations in force, we can help you to communicate with your regulator, take immediate steps to ‘regularise’ your practice, and support you if disciplinary action is taken against you. Early remedial action and communication with your regulator is often critical in these situations to mitigate your position and reduce the severity of any sanctions imposed.

When do I need a practising certificate?

You need a practising certificate to engage in ‘Practice’ (ICAS) or ‘public practice’ (ACCA, ICAEW and IFA).  The relevant provisions that apply to each of the respective professional bodies are:

  1. ACCA: Regulation 3(1)(a) of the Chartered Certified Accountants’ Global Practising Regulations 2003 (the “GPR”);
  2. ICAEW: Paragraph 4 of the ICAEW Statement on engaging in public practice (the “ICAEW’s Statement”);
  3. ICAS: Paragraph 3.1 of the Public Practice Regulations, which refers to the need to obtain a practice certificate when engaged in “Practice”; and
  4. IFA: Paragraph 3.1 of the Public Practice Regulations.

 

What is practice, or public practice?

The ACCA, ICAEW, ICAS, and IFA each respectively adopt their own definition of practice, or public practice, which overlap considerably and can be summarised as follows:

ACCA:

Regulation 4(1) of the GPR includes within its definition of public practice:

  1. accepting an appointment as an auditor; and/or
  2. signing or producing any accounts, report, certificate or tax return for third party use;
  3. holding oneself/itself out, or allowing oneself to be held out, as available to undertake the above activities (as well as allowing or using such titles as Chartered Certified Accountant(s)”, “Certified Accountant(s)”, “Chartered Accountant(s)”, “Accountant(s)” or “Auditor(s)” or similar); and/or
  4. holding oneself out, or allowing oneself to be held out, as a sole proprietor, partner or director of a firm, or designated member or member of a limited liability partnership, where public practice is carried on.

ICAEW:

The ICAEW Statement confirms at paragraph 8 that an individual is engaged in public practice if they are a principal or are held out as a principal in a “public practitioner” that carries out accountancy or reserved services in anticipation of a fee (for which there is a de-minimis level).

Accountancy or reserved services are:

  1. any one of the services listed in annex 1 of the ICAEW’s Statement, which includes the provision of external audit and assurance services and the preparation of financial accounts.
  2. any service that requires a specific licence that the ICAEW can provide, even if the licence is obtained elsewhere.
  3. any reserved legal services (other than those where you are a member of another qualifying membership body).

ICAS:

Regulation 3.4 of ICAS’s Public Practice Regulations provides that its members shall be engaging in ‘Practice’ if they are providing accountancy or related services, to persons other than their employer, for a fee; or are a Principal in a Firm providing accountancy or related services. 

A Principal is defined as: “an individual in sole practice (where the firm is a sole practice), a person who is a partner (including both salaried and equity partners) (where the firm is a partnership), a member of a limited liability partnership (where the firm is an LLP), a director (where the firm is a company) or any individual who is held out as being a company director, partner or member.”

A Firm is defined as: “a body corporate, a partnership, a limited liability partnership or an unincorporated practice which contains one or more Members in Practice.”

The accompanying guidance: “When is a practising certificate required?” sets out a long non-definitive list of activities that fall within the definition of accountancy or related services.

IFA:

Regulation 4 of the IFA’s Public Practice Regulations defines public practice activities as individuals who provide, or are held out to be able to provide accountancy services to the public, whether in the capacity of sole practitioner, a partner in a partnership, a member in a limited liability partnership, or a director of a body corporate.  Appendices 1A and 1B to the Public Practice Regulations provides guidance on the types of services that the IFA regards as accountancy services.

 

Why is my regulator concerned with public practice?

Offering services to the public carries with it a significant level of responsibility. There is a clear risk that if you are negligent or otherwise incompetent in the delivery of your services, your client may suffer significant losses. Examples of negligence may include:

  • Carrying out flawed or inaccurate valuations of companies;
  • Other inaccuracies within the company accounts or failing to prepare accounts at all;
  • Missing an important deadline to file information with Companies House (including but not limited to company accounts or confirmation statements); and
  • Carrying out audits incorrectly.

Public practice activities are therefore justifiably reserved so that only individuals who have fulfilled the criteria required to obtain a practising certificate may be considered suitably qualified for this work. Further, by regulating public practice activity, consumers will have a right of redress via their accountants’ regulatory body complaints procedures. They may also be entitled to compensation which can be funded via an accountant’s compulsory professional indemnity insurance policy or, if available, a compensation scheme that is operated by one or more of the above regulatory bodies, such as the Investment Business Compensation Scheme, which is operated by the ICAEW, ICAS and the Institute of Chartered Accountants in Ireland (ICAI). 

 

How do I obtain a practising certificate?

Eligibility criteria and the process of obtaining a practising certificate varies by professional body.

ACCA:

Eligibility for a practising certificate is set out at regulations 6 to 9 and 11 of the GPR and consists of the following requirements:

  1. Qualifications (Regulations 7(1)):
  1. To be qualified to hold a practising certificate, with the exception of accepting appointments as an auditor, an individual must have been a member of the ACCA continuously for a period of not less than two years and have either:
    aa) completed three years’ practical training in an ACCA approved employer, working either as an employee or sub-contractor, under the supervision of a suitably experienced member or another person with adequate qualifications;
    bb) at least two years of practical training must be completed after the individual’s admission to membership and must comply with the training requirements at (b) below. The remaining training period may be completed before or after, or partly before and partly after, the individual’s admission to membership and must include experience in the matters set out in the Practising Certificate Experience Requirement in an ACCA approved employer. Members must also complete a practising certificate training record; and
    cc) training must be recorded in accordance with the ACCA’s Practising Certificate Experience Requirement; or
  2. As an alternative to (i) above, a member of the ACCA may also hold an equivalent practising certificate issued by the ACCA.
  1. Satisfy the requirements to be a fit and proper person within the meaning of regulation 8. 
  2. Hold the necessary professional indemnity insurance (PII) in accordance with regulation 9; and
  3. Have made arrangements for continuity of practice in accordance with regulation 11, which will ensure that the practice is able to continue in the event of the member’s death or incapacity.

ICAEW:

The ICAEW’s Practising Certificate Guidance Notes require members to:

  1. have been a member of ICAEW for at least two years;
  2. complete an application form and accompanying ‘Are You Ready to go Into Practice?’ checklist;
  3. comply with ICAEW’s requirements on CPD for the two years preceding their application;
  4. understand the Fundamental Principles in the ICAEW’s Code of Ethics;
  5. comply with ICAEW’s Professional Indemnity Insurance Regulations;
  6.  be a fit and proper person to hold a practising certificate (by reference to ICAEW’s disciplinary records); and
  7. pay the annual practising fee (this includes a practising certificate fee and the annual Practice Assurance fee).

ICAS:

ICAS Regulation Board has a dedicated Committee which has the power to grant practising certificates. Regulation 3.8 of the ICAS Public Practice Regulations requires an applicant to satisfy this Committee that they:

  1. have the required level of competence and experience for all areas of work to be undertaken whilst engaged in Practice;
  2. comply with any additional training requirements deemed appropriate by the Committee;
  3. is a fit and proper person to hold a Practising Certificate;
  4. holds sufficient Professional Indemnity Insurance (to comply with the Professional Indemnity Insurance Regulations);
  5. has provided the Committee with all information requested in connection with the application for a practising certificate;
  6. has obtained not less than two years’ appropriate experience, in accordance with Regulation 3.9, which will include consideration of:
    1. experience gained in a role in accountancy or a related role in public practice, business, public service, or teaching;
    2. experience gained as a Principal in countries where a Practising Certificate is not, or was not previously, required; or
    3. in the case of a Member admitted under reciprocal arrangements with other professional bodies, appropriate experience gained as an employee or as a Principal after the date of admission to the professional body; and
  7. Can demonstrate compliance with the ICAS’s Rules and Regulations, as appropriate.

IFA:

In accordance with Regulation 5 of the IFA’s Public Practice Regulations, an Associate member or Fellow member of the IFA shall be eligible for an IFA practising certificate if the member:

  1. has achieved the educational requirements for an IFA practicing certificate;
  2. has not less than three years of relevant practical experience, gained in the UK within ten years of applying for the practising certificate;
  3. is compliant with the Continuing Professional Development Regulations;
  4. understands the fundamental ethical principles set out within the IFA’s Code of Ethics;
  5. is considered fit and proper to be associated with the IFA and the accountancy profession; and
  6. has submitted an application to the IFA, together with the prescribed fee.

 

What are the implications for carrying out public practice without a practising certificate?

Failure to hold a practising certificate will likely result in disciplinary action. 

ACCA:

An inadvertent failure to obtain a practising certificate can be remedied if the member regularises their position by:

  • applying for a practising certificate; or
  • ceasing to be a principal/partner/director of a public practice firm; or
  • resigning from the ACCA.

In addition to the above, the ACCA will make sure that anyone who carries out one of the following roles is properly supervised for anti-money laundering (AML):

  • a trust or company service provider;
  • an auditor;
  • an external accountant;
  • an insolvency practitioner; or
  • a tax adviser.

Members of the ACCA with a practising certificate are automatically subject to AML supervision by the ACCA, however if they are engaging in public practice work as a principal/partner or director of a firm, and are doing so without a practising certificate, they must, if they wish to continue their work apply for a practising certificate and register for AML supervision with HMRC pending issue of the practising certificate.

Alternatively, if they are not eligible for a practising certificate, they must resign from the ACCA and register for supervision with HMRC, or step down from being a partner/director or principal in a firm.

All cases will be disposed of with a disciplinary outcome, as the failure to register with an AML supervisor when providing any of the above services is a criminal offence.

Members of the ACCA who carry out public practice without a practising certificate must also expect to incur possible financial penalties from the HMRC (for late registration) and from the ACCA. These penalties would be in addition to the usual fees required to obtain a practising certificate and register with HMRC for AML compliance.

For further information concerning the ACCA’s enforcement approach, see the ACCA’s website: “Practising without a certificate and failing to register for supervision”.

ICAEW:

Failing to obtain a practising certificate constitutes a breach of the ICAEW’s Principal bye-law 51a.  The ICAEW confirms at paragraph 2 of its Statement on Engaging in Public Practice that: “Failure to hold a practising certificate when you would be considered to be engaging in public practice could result in disciplinary action against you.”

According to paragraph 7a. of the ICAEW’s Guidance on Sanctions (July 2019), the penalties that may be imposed for failing to obtain a practising certificate start at (and may rise depending on aggravating and mitigating circumstances):

  • Less serious cases: a reprimand and a category F financial penalty (£1,000); or
  • Serious cases: a severe reprimand and a category E financial penalty (£3,000)
  • Very serious cases: exclusion and a category D fine (£5,000)

ICAS:

ICAS’ Sanctions Guidance at part 5(D), sets out indicative penalties for practising without a current practising certificate, which range from a reprimand and a £2,000 financial penalty (for less serious cases), to an exclusion and a much larger fine (for which an indicative penalty is not set) for very serious cases. The precise sanctions imposed will depend on several relevant factors, which are also cited in part 5(D) of the Sanctions Guidance:

  • Extent and level of work undertaken;
  • Period of time involved;
  • Number of clients engaged;
  • Level of threat to the public interest;
  • Intent or reckless conduct;
  • Genuine belief that a PC was not required or that a PC was in place;
  • Misrepresentation and/or prejudice to clients or third parties;
  • Level of benefit accrued (eg the level of fees); and
  • Genuine attempt to act in the client’s interest.

IFA:

Under regulation 5.3 of the Public Practice Regulations, failure to hold a current IFA practising certificate while engaging in public practice shall render a member liable to disciplinary action in accordance with the Bye-laws.  The Annex of the IFA’s Sanctions guide: Investigations, Disciplinary and Appeal Committees, further sets out that, depending on the application of aggravating and mitigating factors, a suggested starting sanction is a severe reprimand and a fine of £1,500.

 

If I make a mistake, what should I do?

Whether your regulatory body has contacted you or not, you will need to stop carrying out work that falls within the definition of Practice (for ICAS) or ‘public practice’ (for the ACCA, ICAEW and the IFA) until you are certain you are compliant with your regulatory body’s rules.

You should then seek legal advice in order to understand whether you require a practising certificate and take all steps needed to regularise your position.  If your regulator has not contacted you, you may still need to adhere to obligations to report any instances of non-compliance. In any event, an open line of communication with your regulator will be essential to maintain trust and will form one of the first steps towards seeking to mitigate any risk of significant enforcement action being taken against you.   

 

FURTHER INFORMATION

If you have any questions, either in addition to or arising from these FAQs, or would like to discuss any concerns you have about your practice, please contact Julie Matheson, Partner and Head of the Audit and Accounting Regulatory team at Kingsley Napley.

 

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