Your most common audit queries answered

What you can and can't do. By Louise Ross, accounting specialist, CIMA technical services.

The letters ACMA or FCMA after a name enable CIMA members to perform several functions denied to lesser mortals. Following several queries to our Technical Information Service about entitlement to provide additional accountancy services, we thought we should cover a few frequently asked questions.

The most common queries relate to audit. Although it is understood that CIMA is not a recognised qualifying or supervisory body and therefore its members in practice (MiPs) cannot undertake audits, there are several grey areas.

Can a CIMA member carry out an audit for a UK company if it is under the audit threshold limit?

If there is no mandatory requirement for a company to have an audit, a member in practice (MiP) can provide a report on the accounts. This is as long as it is a minuted decision of the company’s board. However this report must not be referred to as an audit. As with any service undertaken by a CIMA member, the member must be competent to carry out the activity. So additional training is recommended. The current audit threshold limits are defined on the DTI website.

Can a CIMA member carry out an audit on a voluntary basis, for a charity, club or similar?

You can provide examining or reporting services but again you cannot refer to this as an audit, nor describe the report as an audit report. You should check specific rules from the relevant regulator. The Charities Commission in England and Wales, for example, specifies size limits above which an organisation needs a registered auditor. You need to ensure you are competent to carry out a service because you can still be held liable for any incorrect work, even if you are not paid for that work. You don’t have to register as a MiP if you do not charge a fee.

Can a CIMA member be a reporting accountant?

Yes. A reporting accountant provides the report on the accounts of a company under the audit threshold but you must be a registered MiP. However, CIMA members are not reporting accountants as defined by the Law Society (for the purpose of solicitors’ accounts).

I’m a member of another body that entitles me to carry out an audit. Can CIMA give me technical guidance?

Unfortunately, no. CIMA has very little technical material on the conduct of audits. Since the provision of audit services lies outside CIMA’s technical remit, our staff does not have this specialist knowledge. You should seek help from the professional body that entitles you to audit.

In the country in which I practice, company law allows CIMA members to conduct audits. Can CIMA give me technical guidance?

Again, no, for the same reason as above. If your query is about local recognition of the CIMA qualification, your local contact – either a CIMA office or an individual member – can advise. You may need to register additionally with your country’s Public Accountants Registration Board or equivalent. See the Our Locations page on the CIMA website for details.

Can I sign a mortgage application for a client?

Most banks and building societies in the UK will accept the signature of CIMA members on mortgage applications. Some, however, will only accept accountants’ reports supported by registered auditors. This is because of the requirement imposed on them by their mortgage indemnity insurance. CIMA’s Professional Standards department has been in discussion with these banks and building societies, and with the Building Societies Association. Any progress will be reported in the MiP newsletter.

Can a CIMA member act as a company secretary?

In the UK, yes. Section 286 of the Companies Act 1985 requires that one of the qualifying criteria for a company secretary is to be a member of a UK professional accountancy body.

Can I sign grant applications for clients applying for DTI development grants?

The DTI’s guidance specifies that it must be an independent accountant ‘as specified under s25 of the Companies Act 1989’ who certifies as to the applicant’s financial position and past set of accounts. Unfortunately this means a registered auditor. CIMA has told the DTI that this is out of line with the audit threshold limits. Many applicants for such grants will have a reporting accountant rather than a registered auditor. The DTI has subsequently allowed members to sign applications for regional development grants up to £25,000.

Can I contact a barrister directly, or do I have to go through a solicitor?

In the UK and Northern Ireland you can instruct a barrister directly. This is known as direct access. CIMA is one of the professional bodies licensed by the two Bar Councils for direct access to barristers, to seek advice or instruct counsel to act in non-court litigation. There are some restrictions. The matter under consideration should be within your normal professional experience. You should also be acting in a professional rather than a personal capacity. Finally, it is up to the barrister to decide that it is in your client’s best interests that a solicitor be involved. You can select a barrister from the relevant Bar Council directory, or seek recommendations from colleagues or solicitors. The barrister’s Chambers will advise on fees, availability and what information should be submitted. For further information, consult the relevant Bar Council sites for UK or Northern Ireland.

A revised handbook for members giving comprehensive advice on audits will by published by CIMA’s Professional Standards department in January 2006. In the meantime if you are unsure about offering a service, whether for a fee or on a voluntary basis, you should consult the Professional Standards pages on our website, or contact the department.

December 2005