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Mandatory requirements

Every applicant for the practising certificate must satisfy a panel of assessors that they meet the eligibility criteria as outlined in CIMA’s Member in Practice Rules.

CIMA charter crestEach application must be accompanied by confirmation that the relevant prescribed documents are in place. The mandatory documents are also outlined in CIMA’s member in practice rules. Evidence of these documents are to be submitted to CIMA upon request.

Members in Practice Rule 6 states that members in practice are required to:

(i) hold professional indemnity insurance (or an equivalent provision if practising outside the UK with an appropriate disclaimer incorporated in their terms of engagement) at a level consistent with guidelines provided by the institute
(ii) provide written terms of engagement for all clients
(iii) ensure in the event of their illness, disability or death that services to clients are maintained, either through internal arrangements within the practice or through a written agreement with another accountant or firm (unless the client has indicated that he/she does not want to be subject to such an agreement)
(iv) make provision for complaints handling procedures
(v) comply with current HMRC money laundering regulations (or equivalent if practising outside the UK)
(vi) undertake continuing professional development in accordance with the requirements of the Institute
(vii) provide confirmation of compliance with (i) to (vi) above on registration and renewal of registration, and evidence of the above when applying for the practising certificate.

Guidance on how to comply with CIMA's regulations around mandatory requirements can be found in the links to the right or in the Business structures and mandatory requirements document.


Professional Indemnity Insurance

As a CIMA Member in Practice (MiP) you must have Professional Indemnity Insurance (PII). Not only is it a mandatory requirement, it is also in your interests and that of your business to have appropriate levels of Professional Indemnity Insurance.  

Not every business is the same and requirements for cover will vary from business to business, therefore CIMA suggests you always talk to a broker about finding cover that is specific to your business and suitable for your needs. 

What is Professional Indemnity Insurance?

If you are alleged to have provided inadequate advice or services to a client, Professional Indemnity Insurance can help protect your business.  It can offer cover if you need to pay compensation to your client to correct a mistake and can also provide cover for the legal costs and expenses in defending the claim.

Regardless of your level of experience, there is always the possibility you (or one of your team) could make a mistake. Professional indemnity insurance can give you cover in a wide range of scenarios, including:

  • Professional negligence (i.e. making a mistake in a piece of work for a client)
  • Loss of documents or data
  • Unintentional breach of copyright and/or confidentiality
  • Defamation and libel
  • Loss of goods or money (your own or for which you are responsible)

What limit of professional indemnity do I need?

CIMA does not advise on the level of cover you are likely to need as this must be assessed according to your own circumstances. In considering what level of cover is suitable for you, you may wish to: 

  • Speak to a broker: a qualified broker can advise you, based on the information you provide about your business and risks associated with the business and your clients.
  • Be specific about your needs: assess your business risks, client profile and even the location of your business e.g. do you rent an office or work from home?
  • Check other sources of information: for example, the FCA provides a useful factsheet on PII for anyone working in a regulated industry: 

https://www.fca.org.uk/publication/other/fs027-buying-professional-indemnity-insurance.pdf

  • Seek guidance from others, including other members in practice
  • Think carefully about any particular risks associated with your client base or practice
  • Be aware of legislative and/or regulatory requirement on you: e.g. do you advise on a particular area such as tax or company formation?
  • Revisit your requirements in the light of client profile, risk, size of business and so on during the course of the year to ensure your cover continues to be sufficient.   

Some insurers may offer cover for disciplinary proceedings by a professional body and this is something you should consider when reviewing your business risks and potential costs. As with all risk, you and your broker must discuss the probability of an event and the cost of cover. Bear in mind, however, that although the risks of disciplinary proceedings are low, the impact may be high in terms of costs and time.

Key points:

  • Take expert advice from a PII provider as to how much cover is available and at what costs
  • Seek to quantify personal exposure/the practice’s exposure to risk
  • Consider whether in the unlikely event of a client making a complaint to CIMA legal costs arising from your defence of the complaint would be included in the cover
  • Assess whether the anticipated protection is sufficient to meet potential claims and is consistent with that of similar firms (your insurance broker will be able to assist with this)
  • Consider to what extent if any claims can be met from the practice’s resources
  • Consider carefully the need for run off cover – cover which operates for a defined period after the practitioner has ceased to practice (e.g. on retirement).  

CIMA have produced a useful guide PDF (52 KB) showing how requirements differ for different business types.

The more information you can provide a broker, the more suitable your cover will be. Please note, members in practice are free to choose an insurance provider of their choice.

If you have difficulty obtaining cover or need further advice please contact CIMA Professional Standards team.

 
MiPs in the Republic of Ireland who are acting as liquidators

IAASA have recently made Regulations setting Professional Indemnity cover requirements for liquidators.

The Statutory Instrument, which comes into effect on 1 June 2016, can be accessed here:

Statutory Instrument 127 of 2016 Companies Act 2014 (Professional Indemnity Insurance)(Liquidators) Regulations 2016

Please also note that sections 633 and 634 of the 2014 Act now provide a statutory regime governing qualifications for appointment as a liquidator or provisional liquidator.

In order to qualify for appointment as a liquidator of a company, CIMA members must: 

  • hold a current practising certificate;
  • and comply with the PII requirements set out in the Companies Act 2014 (Professional Indemnity Insurance) (Liquidators) Regulations 2016 which sets a minimum PII threshold cover of E1,500,000. 

Keeping PII details up to date with CIMA

It is essential that PII records are kept up to date with CIMA. Upon renewal of the policy please update the details online through your MY CIMA account.

As part of CIMA's ongoing quality assurance processes, CIMA conducts checks to ensure that members' PII details are current.

Terms of Engagement

Members in practice are required to provide written terms of engagement for all clients they have a direct business relationship with, and therefore are paid directly by that client. This is a formal agreement between them and their client, detailing the responsibilities of each party and the nature of the work required.

It is mandatory to have terms of engagement in place prior to applying to become a CIMA member in practice. Confirmation of compliance is required as part of the member in practice application. A copy of the terms of engagement must be submitted to CIMA upon request as part of its quality checking procedures.  

Discussing terms with clients

Before drawing up terms of engagement, there should be a discussion covering the service(s) the client wants the practitioner to provide and their responsibilities as the client. In doing so members in practice should:

  • Establish a thorough understanding of the client's requirements and clarify any doubtful points.
  • Ask the client's opinion where appropriate and recognise that terms of engagement will often encompass matters raised by the client as well the practitioner.
  • Ensure the client is aware of any work that they must do, or any information they must provide, to enable the practitioner to act.
  • Never under any circumstances promise anything that is not capable of being delivered.
  • Always consider any conflicts of interest that may arise with clients when entering into an engagement.
  • Include information around compliance with anti-money laundering regulations in the terms of engagement. 

Example format and contents

CIMA has an example on terms of engagement below which outlines key areas to address and a useful guide showing how requirements differ for different business types.

  • The client may require some additional work to be undertaken that is not reflected in the terms of engagement.
  • It may be recognised that the practitioner cannot meet an agreed deadline for the completion of work, for reasons that the client needs to know and understand.

You can also read an example of more detailed terms of engagement. This document was created through a collaborative working party that included the AAT, CIOT, CIMA, ICAEW, ACCA, ICAS and IIT.

Revisiting the agreement

At any point once work has commenced for the client, the terms of engagement may lose their currency because: 

  • The client may require some additional work to be undertaken that is not reflected in the terms of engagement.
  • It may be recognised that the practitioner cannot meet an agreed deadline for the completion of work for reasons that the client needs to know and understand.

Complaints Handling

It is mandatory that all members in practice have complaints handling procedures in place.

Any member wishing to gain member in practice status must confirm they have a complaints handling procedure in place as part of their application. A copy of this must be submitted to CIMA upon request as part of its quality checking procedures.

A recognised policy on complaints (and the procedures to support the policy) is the most effective method of ensuring that differences of opinion do not become complaints.

Clients must be informed that an internal complaints procedure is in place and it may be wise to include reference to it in the letter of engagement. When an issue arises that may prompt a complaint, or there may be reason to believe the client is dissatisfied, keep the client advised that matter is being dealt with and give them an opportunity to contribute their views.   

Please also refer to CIMA's example complaint handling procedure within our terms of engagement section.  

Suggested procedures

A complaints procedure may consist of:

  • A policy statement (for public display and/or inclusion in practice literature, especially within the terms of engagement).
  • A complaint record form.
  • Appropriate training for all staff and partners.

Should the complaint escalate, CIMA's independent alternative dispute resolution scheme guidance may be useful.

Continuity Arrangements

All members in practice must ensure in the event of their illness, disability or death that services to clients are maintained, either through internal arrangements within the practice or through a written agreement with another accountant or firm.

Arrangement for the continuity of practice between the practitioner and the alternate must be formally recorded in line with the requirement above. It is mandatory that a continuity agreement is in place prior to applying to become a CIMA member in practice. 

As part of the member in practice application it is necessary to supply the full name of the partner, their practice name and full address. It is not possible to complete the application without this information.   

CIMA conducts quality assurance checks on continuity arrangements. It is mandatory for the member in practice to submit a copy to CIMA upon request. See CIMA's sample continuity agreement.

To enable the alternate to complete their responsibilities, they will need access to the names, addresses and the nature of work of all relevant clients.

Consideration should be given to making it clear in the continuity agreement that the alternate does not have, and does not accept, any responsibility for the quality of the work prior to the agreement.

Notifying interested parties

Once the continuity agreement has been signed, the practitioner is advised to notify all interested parties. These interested parties (other than the person or firm with whom the agreement has been made) are: 

  • His or her dependants.
  • Providers of other professional services to the practitioner (eg banks, solicitors, the professional indemnity insurance/general insurance providers)
  • The client(s) the agreement may concern; in particular, these clients must be advised of their right to choose whether or not the alternate is to act on their behalf in the event of the continuity arrangement becoming operational.

Find a continuity partner

Sample continuity agreement

See CIMA's sample continuity agreement and a useful guide showing how requirements differ for different business types.

Disclaimer: members should always take appropriate legal or other advice before using CIMA's sample continuity agreement as a basis for their own document and should ensure that they are fully adapted to the particular circumstances.

Where a member uses these illustrative forms for any purpose, he or she acknowledges that CIMA accepts no responsibility or liability whatsoever in connection with any matter, dispute, or action arising out of such use or as a result of any consequential contractual relationship between members in practice and their clients.

CIMA Professional Development

It is mandatory that all members in practice undertake CPD and that they submit their records to CIMA upon request for monitoring.

Any member selected for CPD monitoring during the annual renewal process will be notified by CIMA by email. 

Further information

Anti-Money Laundering

It is a mandatory requirement that all CIMA members in practice comply with money laundering regulations.

See the anti-money laundering section of the handbook for further information.