It appears the Institute of Chartered Accountants in England and Wales (ICAEW) has finally pushed Sheffield University’s Richard Murphy over the edge. The Professor of Accounting Practice at Sheffield’s Management School issued a new report chastising the group for hoarding funds.
Murphy’s report [PDF] says the ICAEW is just flat out keeping fines and other sums of money levied against chartered accountants who did shitty work.
In his report, Murphy says:
“It is wholly unreasonable that the Institute of Chartered Accountants in England and Wales should be enriched every time one of its members is fined for harming the public by delivering substandard work. It is just as unacceptable that to date none of those fines have been put to use to compensate society for the harm that chartered accountants have caused and that the ICAEW has not published plans as to how it will do this. This proposal addresses both these issues. It suggests passing this money to an independent charitable body and tasks that body with improving the financial education of young people – a goal wholly consistent with that of the ICAEW.”
In parts, the press release that Murphy inexplicably distributed as a PDF hence why we’re only writing about it now said:
New research on the accounts of the Institute of Chartered Accountants in England (ICAEW) and Wales by researchers at the Corporate Accountability Network and academics at the Sheffield University Management School has shown that the ICAEW has benefitted from £148 million [that’s $184,375,292 USD for us blokes] of fines and related cost recoveries in excess of expenditure incurred since 2015.
The penalties in question have all been paid by chartered accountants who are members of the ICAEW in respect of substandard work that they have done at cost to members of society at large.
Under an arrangement between the ICAEW and the UK Financial Reporting Council (FRC) reached in 2004 that institute guaranteed to underwrite the cost of its members being disciplined by the FRC. The ICAEW imposes a levy on its members to cover the costs the FRC bills to it for doing this.
And here’s the kick:
In exchange, the FRC returns fines on ICAEW members to that institute.
It goes on to say:
It is suggested that an online certificate on these issues should be made available by the charity funded by the ICAEW for at least ten years using these funds. The benefit of students taking it should be promoted to schools, universities and employers, who should encourage job applicants to take it. The certificate should be open to anyone, free of charge.
The ICAEW has been accused of acting as a cheerleader for big auditors despite scandals such as the high-profile failure of Carillion. The collapse of the outsourcing giant two years ago was cataclysmic, when more than 3,000 jobs were lost at the company, and 450 public sector projects—including hospitals, schools and prisons—were plunged into crisis. It failed with debts of £7bn, more than its annual sales of £5.2bn.
In 2019, the FRC fined PwC £4.55 million for failing to challenge management at IT services company Redcentric where a 20 million pound hole (giggity) was later found in the books. The accounting watchdog said breaches were numerous and in certain cases basic or fundamental in nature.
There are allies to Murphy’s sentiments by folks like John Christensen, a director of Corporate Accountability Network and formerly of the Tax Justice Network; and Adam Leaver, Professor of Accounting and Society at Sheffield University Management School.
Christensen, for example, said:
“As a parent, I know that my sons did not get the guidance that they needed to manage money from their formal education. That’s a massive issue when most adults spend most of their life worrying about money and how to manage it. The Institute of Chartered Accountants in England and Wales now needs to be open, transparent and accountable about the funds it has received as a result of disciplinary actions against its members. It could make good their failure by funding education for all young people on money related issues as they approach adulthood. That is an essential preparation for life.”
In the end, campaigners at the Corporate Accountability Network and academics at Sheffield like Miller suggest that the funds be transferred to a new accounting education and research charity for new curricula and training methods for accounting undergraduates (yes, like the basics of tax and how it impacts them).
You can see their recommendations here.
And you thought the crowning of a new king in Britain was the biggest tabloid-ish story.
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