Professional Standards Scheme offers benefits to CPAs and clients

Content Summary

Nicole North-Vanner, regulatory risk and compliance specialist professional at CPA Australia. | February 2020
This article was current at the time of publication.

CPA Australia’s new Professional Standards Scheme (Scheme), which began on 23 December, may limit eligible public practitioners’ professional liability. This is well known, but what is less obvious is the integrity system working in the background and the public interest aspects of the accounting profession, which enables the Scheme to operate in the first place.

The accounting profession is characterised by two features: professional expertise (skills and knowledge); and professional ethics (codes of conduct and standards). Professions require an integrity system to maintain status and focus on the public interest.

The accounting profession is regulated through an integrity system monitored by many forces including government and statutory regulators, the Professional Standards Councils (PSC), CPA Australia and educational organisations as well as the media, cultural norms, and market forces.

What are the obligations?

The obligations imposed by this integrity system require members to:

  • be fit and proper
  • hold a qualification in accounting
  • undertake a public program examination
  • participate in CPD
  • abide by all laws and regulations
  • hold a minimum amount of professional indemnity insurance
  • participate in an audit or review to monitor compliance with codes of conduct and standards
  • participate in professional conduct enquiries and investigations.

All these forces combine to form a regulatory bargain, enabling accountants to benefit from the prestige and economic rewards of the profession in exchange for the obligation to act in the public interest.

A CPA Australia public practice accountant’s participation in the accounting profession indicates consent to the regulatory bargain, which, with the integrity system, is crucial to the operation of the Scheme. It may limit the amount of damages that can be awarded against a member by an Australian court in a civil claim, and thus reduce the amount of damages available to consumers.
In exchange for the limited liability benefit, the Scheme requires public practice accountants to meet high professional standards and continually improve by managing risk.

Alert your clients

As a Scheme participant, you are required to notify your clients that you participate in the Scheme by using this statement: “Liability limited by a scheme approved under Professional Standards Legislation” on your advice and promotion material.

This ensures your clients are given the information they need before engaging you. If you fail to alert clients, a court is unlikely to limit your liability and can award damages above your professional indemnity insurance amount, which could be crippling for your business.

The Scheme also requires you to provide a copy to your clients (where requested), which can be accessed on the PSC’s website.

Apart from being a mechanism to limit eligible public practice accountants’ liability, the Scheme is primarily a public interest driver. This means that the public can expect the Scheme to continually improve public accountants’ professional standards, keeping civil claims low and insurance costs down, which preserves the viability of the accounting profession for the future and protects today’s consumers.

Accordingly, consumers can expect their CPA public practice accountant to be qualified, competent, insured and committed to maintaining professional standards.

The Scheme really is a win/win for public practitioner accountants, consumers and the public interest.

More information about the Scheme

This page includes a two-minute video explaining what the Scheme is and why consumers should use a CPA public practitioner. Contact [email protected] to obtain a copy for your website.