Protect Audit to Protect Prosperity

Last week, the European Summit in Brussels ended without reaching agreement on the terms of the UK’s exit from the European Union.

Negotiations are continuing, and there are some encouraging signs, but the clock continues to tick for businesses, who need to plan for a future that is currently uncertain. The same is true for the many professionals who may be affected – including many of our members.

In the meantime, both sides are now more conscious of the possibility of a “no deal” scenario. This was recently highlighted by the UK Government’s publication of the Technical Notices on Accounting and audit and Providing services including those of a qualified professional. These make clear the importance of achieving a ‘deal’ to avoid activating costly and disruptive contingency measures. Most importantly, they also underline the vital need to comprehensively address accountancy and audit issues in an eventual future UK-EU27 agreement.

The UK and EU are – and will continue to be – mutually dependent markets, which, like all markets, depend on timely and reliable financial information for stability. Companies of all sizes, and anyone who works for them, need to avoid a breakdown in corporate information, which would negatively impact liquidity and investment.

The UK Government’s plan to pursue third country agreements with the EU27 for accountancy and audit is a workable starting point. However, it is not enough.

We need to go significantly further to pursue a similar type of UK-EU regulatory interaction to that proposed for the financial services sector. We want to avoid the possibility of companies needing to have two distinct audit reports, uncertainty around the legal validity of audit reports and other overlapping regulations. Clearly, these potential consequences are not in the interests of the UK or the EU27 economies, or indeed of anyone involved.

We also need to ensure certainty around the recognition of professional qualifications between the UK and the EU27. ICAEW already has an excellent basis for this through individual bilateral agreements and through the Common Content Project, but we need to see a clear overall framework put in place after the UK's withdrawal.

With the time remaining to reach agreement in time for ratification rapidly running out, ICAEW, ACCA, Chartered Accountants Ireland and ICAS have jointly written to the Government. We have emphasised the absolute importance of avoiding a disorderly UK exit and set out six priorities relating to accountancy, including on recognition of professional qualifications. We have also published a statement, which mirrors the content of our letter. The UK profession is proud of how cooperation with our European counterparts has developed and we want to ensure that we are fully enabled to play our part in delivering prosperity for the future.

In the meantime, ICAEW will continue to provide guidance and information to members, which can be found on our Brexit hub.