ACCOUNTING - You've earned your qualification, now what's the

Last month, this magazine amply demonstrated that – at least for now – being a qualified accountant matters if you want to be a leading financial director. It showed that around 80% of the present group FDs scraping a living from FTSE-100 companies had an accountancy qualification to their name. At the same time that Financial Director was unveiling the seemingly unassailable power of the professions within Britain’s blue-chip companies, one of the UK’s most eminent accountants was questioning the very links between members in business and the professional body to which they belong. Ian Hay Davison is credited with the eminent rise of UK accountancy. He laid the foundations for Arthur Andersen’s UK success before taking on a variety of regulatory and commercial roles. He now sees himself as an “industrial member” of the ICAEW. Having the integrity to speak his mind has kept him out of the highest office but he was recently awarded one of the accountancy profession’s highest honours. Accepting the Founding Societies Award – presented by four of the Institute District Societies – Davison drew attention to what he perceived as the decline of the involvement of members with the Institute. The membership now stands at 115,000 but barely 10% of that figure bother to even use their postal vote at the June AGM. Davison argues that moving administration and financial control away from the local societies has led directly to the grassroots withering. If these roots are to be regenerated then he argues that those in practice must pave the way. “One criticism,” he says, “is that the district societies are dominated by practitioners. But they are interested and have a reason to be involved. Artificial attempts to get the industrial members of the institute involved – by steps that looks like positive discrimination on the part of the Institute – are rarely successful. Our industrial members don’t really want to participate. I would like to see District Societies flourish. If that means more power to the activist practitioner as compared with the passive industrial accountants, so be it.” The problem as defined by Davison is not unique to the numerically dominant ICAEW. CIMA should be the natural spiritual home of all accountants in business and commerce. And although its members and qualifications are better regarded than ever before it never fails to punch below its weight as a representational organisation, while the Scots, ACCA and CIPFA are – in UK terms at least – presently also-rans. The dichotomy is this: the accountancy qualification is still important in industry, as is shown by the FD survey, yet to most commercial and industrial accountants their professional institute is an irrelevance. Any professional body only has two meaningful purposes. First, to ensure that those who wish to join are educated and trained in the ways of the craft to a sufficiently robust standard that ensures at least the maintenance, if not the enhancement, of the qualification. Second, to ensure that, once qualified, the members remain fit and proper to appear on the register of members. Every other activity is merely marketing. For qualified, commercially based accountants, the professional tie is broken once the exams are passed. The only continuing interest in the education process is a delegated one of ensuring the reputation of the qualification is maintained against the competition including, in the case of accountancy, not only other professional bodies but interlopers such as Masters of Business Administration. But even MBAs – once seen as the big threat – are now seen as a further business qualification designed to widen knowledge, not directly competing with the institutes’ highly regarded but entry-level business qualifications. Why should FDs, fighting their way in a selfish world, show any gratitude or allegiance to an examining body? If qualified accountants who trained in practice show any glimmer of loyalty or recognition it will be to the firm which not only provided them with the wherewithal to pass the exams but also inculcated the work ethic and professional approach which still informs their working lives. The firms know this well. Why else are the large ones spending such considerable sums on carefully cultivating their alumni networks? Yesterday’s audit junior is tomorrow’s client. But yesterday’s student is not tomorrow’s active member. The institute has little or no role to play in the working life of the FD. Admittedly the institute may step in to apply the fit and proper test, if the business member is embroiled wittingly or otherwise in transactions that start to interest bodies such as the Serious Fraud Office. But the overwhelming majority of the regulatory angst is reserved for the auditor and, to a lesser extent, the insolvency practitioner. There is only one representative role within the workings of the market economy in which FDs should participate. When quasi-statutory bodies such as the Accounting Standards Board are promulgating financial reporting rules, FDs should ensure that the commercial voice is heard. The accountancy bodies should recognise that they are victims of their own success. Practice-based institutes have turned out thousands of members more than the practice market can bear. These members have used the qualification, not as it was originally intended, but as a passport to a career in financial management. And as for CIMA, the industrial-based qualification, its success has been to transform members from decidedly second-rate factory-bound costs and works accountants into more rounded professionals. It is vainglorious for the accountancy institutes to think that they can serve those members scattered throughout industry and commerce. And they should stop pretending to try. Equally, the institutes – aside from maintaining educational standards – have no role to play in ensuring that when Financial Director publishes the FD qualification survey in 2008, the vice-like grip on Britain’s blue-chips remains. The market will make that decision. Peter Williams is a freelance journalist.