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Practice Assurance Principles

By Claire Searle

The ICAEW have issued a report detailing their key findings from Practice Assurance Reviews carried out in 2017. The focused reviews carried out in 2017 included:

 

  • Client take-on;
  • Marketing; and
  • Trusts.

Client take-on

As part of the review, the ICAEW identified a number of common practices indicating that the majority of firms reviewed assess risk when they take on a new client, have procedures in place to check sanctions, undertake conflict checks on take-on, and even a fair proportion use electronic checks to supplement or replace paper checks. Some areas of good practice were also noted as part of the review including considering whether services to be provided will involve holding client money and setting liability caps. Some areas for improvement were however noted with 40% of firms reviewed not having an engagement acceptance form to assess changes to risks when providing new services to existing clients and 19% not having formal written procedures for take-on.

The report identifies some useful top client take-on tips for sole practitioners and small firms including use of a good client take-on checklist, for example form A1.3, the new client checklist, in our Practise Assurance Manual, to make sure that all areas are covered. Another tip is implementing procedures to ensure that all new clients have a letter of engagement and appropriate AML documentation in place.

Marketing

The report highlights several areas of good practice and areas for improvement. The review found that although 45% of practices reviewed have a marketing department, there are still 32% who don’t have an overall marketing strategy. Other areas of good practice found were the use of email marketing, the use of the ICAEW logo on marketing materials, and having a social media policy in place. The review however did find that the proportion of firms with a gifts and entertainment policy was less than half those reviewed.

The report identifies useful top marketing tips for small firms including checking technical content of marketing material, and the use of social media to reach a large but targeted audience.

Trusts

Although it is early days for registering Trusts with HMRC, most firms have been communicating the requirements to their clients and have procedures in place to identify trusts that need to register their beneficial ownership with HMRC. Worryingly though 6% of practices reviewed were found to have PII cover that did not include acting as a Trustee for a Trust. Also more than a quarter reviewed did not include trust work in their internal quality review procedures.

Recommendations for small practices in the report include putting safeguards in place when appointed as a Trustee, for example a second review of work, consult with a solicitor as needed and for the drafting of Trust Deeds, and ensure that Trust work is included in quality review procedures.

Visit Outcomes and Committee Referrals

The Institute found that the number of firms requiring follow-up increased in 2017 and in many cases these follow-ups were due to firms not properly addressing issues raised on previous visits. Firms who had watched the new firm webinar and had a follow-up discussion were less likely to require any follow up action than firms that had not gone through this process.

A total of 73 firms were referred to the Practice Assurance Committee in 2017, with 31 being referred on to the Professional Conduct Department. There are concerns that firms underestimate the importance of complying with Practice Assurance Standards, with the highest number of referrals being due to firms not complying with assurances given after previous reviews.

The top 3 areas where firms were found to need to take action were AML, Client Money Regulations and Data Protection. Improvements were however seen with AML, and the actions needed were more likely to be to improve compliance as opposed to firms not complying at all. Some firms were found not to be complying with the Client Money Regulations, in particular obtaining a bank trust letter. All Data Protection Act findings were in relation to entities not being registered with the Information Commissioners Office.

Future Areas of Focus

The ICAEW plan to carry out a similar exercise in 2018. Unsurprisingly the areas of focus will be:

  1. AML procedures and how firms are complying with the new Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.
  2. A look at how firms have prepared for, and are complying with the General Data Protection Regulation which came into force 25 May 2018.
 

June 2018 

 

Disclaimer
This article is published with the understanding that SWAT UK Limited is not engaged in rendering legal or professional services. The material contained in this article neither purports, nor is intended to be, advice on any particular matter. This article is an aid and cannot be expected to replace professional judgment. SWAT UK accepts no responsibility or liability to any person in respect of anything done or omitted to be done by any such person in reliance, whether sole or partial, upon the whole or any part of the contents of this article.