Transforming Challenges into Opportunities: Regulations & Standards
The recent IFAC Global SMP Survey identified key challenges many small- and medium-sized practices (SMPs) face. This article is one in a series that breaks down the data from the survey and provides information, ideas, and tips to help SMPs address these challenges as well as best practice examples from IFAC SMP Committee members, together with the range of other tools and resources available.
Keeping Up with New Regulations and Standards
The IFAC publication, From Crisis to Confidence: Good Regulation, Governance, and Culture, identified the principles of good regulation, which include that new regulations should be subject to impact evaluations as well as systematic reviews of how new regulations are performing, including sunset clauses and mechanisms. It is clear that regulations should be proportionate and structured to scale for different sizes of organizations.
Despite such well-established principles, there continues to be an increase in the amount of regulation under which the accountancy profession operates. These regulations come from both government and non-government regulators and show no sign of slowing down.
On one hand, this means there will be a continued strong demand for accountants and business advisers. On the other hand, many practitioners wonder how they can stay abreast of all the changes. Keeping up with new regulations and standards was the second most significant challenge facing SMPs globally, and the top challenge in Central and South America/ Caribbean, Europe, Australasia/ Oceania, and North America regions.
The key internal strategy is regular training for your team. This training can be done in-house or with a third-party training organization. For example, annual seminars could be organized to update on the news and changes since the year before. This could involve different partners presenting on accounting, audit, tax, legal issues, and other relevant topics.
Increasing numbers of firms are also joining together for training sessions, thus sharing the costs. This also allows the training to focus more tightly on the needs of the group, rather than the broad-based style used in lecture-type situations.
Many professional accountancy organizations provide training, and some provide the option of training on-site or lecture style at another venue. Staff attendance should be encouraged, as should information sharing with other team members after the event.
Online learning, where the information is streamed or downloaded and staff can learn at their own pace and at a time that suits them, is another in-house training strategy.
Staff should be encouraged to set aside time (e.g., two hours a week) to read up on new legislation. Practices could start reading groups for relevant standards and organize discussions, which can be over an informal lunch. This is a great way of learning from each other.
One advantage of providing many different training opportunities is highlighting the range available from your practice when recruiting new staff. With talent recruitment and retention also a key issue, outlining the benefits provided by your firm to employees can really help.
Firms should utilize their professional accountancy organization, as many issue technical briefing papers on most regulations. Staff should maximize their membership and take advantage of the resources available.
Your practice can also form alliances with specialists and build close relationships with other professionals who have technical knowledge in certain areas. These professionals can be called on to assist with specific client matters as they arise. Typically, specialists invoice your firm, which can choose to pass the fee on to clients or absorb it.
Your firm can also consider joining a professional network. The 2015 Global SMP Survey found that training, conferences, and workshops was one of the top four benefits of joining a network, as the information networks provide is usually of a very high standard.
Small firms can build “buddy networks” and check with each other on issues before escalating client matters to the higher level, and costs, of specialist advisers. These types of informal network tend to be based on relationships established through professional associations. They may meet regularly or not at all, depending on the needs of the group.
Your practice could join a local business association, which can provide information and support in other business-related areas, such as human resources or occupational health and safety. Examples include chambers of commerce and industry organizations. They also provide an opportunity to network and become known in another circle of business people.
The international standard-setting boards provide helpful information covering changes to standards, which includes Basis for Conclusions, At a Glance, and Question and Answer publications. Practitioners can also keep up-to-date with future developments by following their respective work plans.
The International Auditing and Assurance Standards Board (IAASB) and International Ethics Standards Board for Accountants (IESBA) launched dedicated websites as a source for understanding and effective implementation of the new and revised Auditor Reporting standards and Responding to Non-compliance with Laws and Regulations (NOCLAR), respectively.
Additional information is available in the Guide to Practice Management for Small- and Medium-Sized Practices, which includes a section on internal and external strategies for coping with increased regulation.
The Global Knowledge Gateway also includes a number of articles, videos, and resources on these topics.
Regulations & Standards
- Doing the Right Thing Even When No One Is Looking Part II: Compliance with Rules and Regulations
- Factsheets on the EU Audit Directive and Regulation
- Member States’ Implementation of New EU Audit Rules
- The New Auditor’s Report: Questions and Answers
- Determining and Communicating Key Audit Matters
- Auditor Reporting—Illustrative Key Audit Matters
- Responding to Non-Compliance with Laws and Regulations Fact Sheet
- IESBA Staff Questions and Answers—Responding to Non-Compliance with Laws & Regulations