GAA leadership profile

14 October 2014

Where traditionmeets innovationPhotography by Marcus Oleniuk

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GAA leadership profile

16 October 2014

W hen the Dubai Financial Services Authority, a regulator in a free-trade zone in the United Arab Emirates, sought help

monitoring the quality of registered audit firms, it turned to the Institute of Chartered Accountants in England and Wales.

That was in 2009, and just five years later ICAEW has a regional office in Dubai, supports more than 1,000 of its members in the Middle East and Africa, and is working towards establishing an audit-quality monitoring programme for the six Gulf Cooperation Council nations.

Fresh from a visit to Dubai and Abu Dhabi, ICAEW Chief Executive Officer Michael Izza says the institute’s Middle East role is the progression of a strategy he initiated when he took over the top job

eight years ago. “Shortly after I became chief execu-tive, we agreed to transform ICAEW into an inter-national accountancy body headquartered in the United Kingdom.”

That strategy has seen ICAEW establish interna-tional regional offices in Southeast Asia, the Middle East, Europe, and perhaps most significant of all, Greater China, with offices in Hong Kong, Beijing and Shanghai. The institute’s China presence was further cemented in May when a Hong Kong chapter – the largest local ICAEW society outside London – was launched.

There are an estimated 3,000 ICAEW members in Hong Kong and Izza says the chapter is designed to reflect Hong Kong’s significance. Edward Chow, the Hong Kong Institute of CPAs president in 2005, is the chapter’s Chairman and an ICAEW council member.

The chapter also underscores the close rela-

Michael Izza, Chief Executive Officer of the Institute of Chartered Accountants in England and Wales since 2006, tells George W. Russell about its global ambitions and why Hong Kong is an increasingly important strategic location

tionship between ICAEW and the Institute, Izza adds. “The mutual reciprocal member-ship recognition is perhaps the best reflec-tion of the strong relationship between the two institutes.”

ICAEW has had a formal agreement with the Institute since 2004. Institute mem-bers who have passed the Qualification Programme can become ICAEW members without sitting further examinations. “This is one of only a handful of such reciprocal agreements that ICAEW has,” Izza notes. “This gives them access to ICAEW’s member services, including thought leadership and li-brary services. We have many members who hold dual memberships.”

ICAEW and the Institute also collaborate through the Global Accounting Alliance. Re-cent projects have covered succession plan-ning for firms and cooperation on a G20 tax event. “The GAA is also a forum that allows the chief executives of member bodies to meet and cooperate,” he says. “We are proud to be a GAA member alongside the Hong Kong institute.”

Continuing the missionAlthough Izza has made international expan-sion a priority, the heart and soul of ICAEW is in England and Wales. Back in the 1870s, sev-eral accountants who had become presidents of local societies in London, Liverpool, Man-chester and Sheffield sought to incorporate under a united body.

At that time, Britain, like much of the rest of Europe and North America, had fallen into a severe recession and accountants found themselves as much involved in liquidations as auditing and tax matters. The ICAEW pio-neers thought that, as the trusted advisers of Victorian England, they could help bring or-der to a chaotic business world.

Their motivation, they said, was aimed “… at the elevation of the profession of public accountants as a whole and the promotion of their efficiency and usefulness by compelling the observance of strict rules of conduct as a condition of membership and by setting up a high standard of professional and general ed-ucation and knowledge …”

This is the wording that appears in ICAEW’s

royal charter, issued in the name of Queen Victoria in 1880 – the year ICAEW was founded – and which was amended and up-dated in 1948, and stresses the role of its mem-bers to work for the common good. “We have a clear focus on supporting our members, wher-ever they are, but should there be a conflict between members’ interests and the public interest, our charter states that the public in-terest comes first,” Izza says.

ICAEW’s key responsibilities, Izza adds, include provision of education and training, maintenance of professional standards and delivering technical excellence in the pub-

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“ The mutual recipro-cal membership

recognition is perhaps the best reflection of the strong relationship between the two institutes.”

GAA leadership profile

18 October 2014

lic interest. That mission, he explains, has become even more important as financial reporting assumes centre stage in the public conscience.

“We are seeing more attention paid around the world to corporate governance, maintain-ing high standards of auditing, and enforce-ment of financial reporting standards,” says Izza. “All these developments are helping to raise the quality of financial reporting.”

Although financial reporting has gone through a lot of change in recent years, espe-cially in the wake of the global financial crisis with more emphasis on disclosures, clutter, integrated reporting and global reporting standards, Izza expects there is more to come.

“These debates are likely to continue also in the future, with more emphasis being put on non-financial information in annual reports than in the past,” he says. “This all goes hand in hand with the transparency that international governments, driven through the G20, want to see from multinational corporations.”

Time of transformationIzza has been in the box seat to watch the changes in the profession. He qualified as a chartered accountant in 1986 with Coopers & Lybrand (now PricewaterhouseCoopers) after graduating with a law degree from Durham University. He spent time as a professional accountant in business, working for the Eu-ropean operations of Canadian brewer Labatt (since absorbed into Anheuser-Busch InBev) and at Spring Group, a vocational training group.

He joined ICAEW in 2002 as director of fi-nance and operations, was promoted to chief operating officer in 2004, when he also joined the ICAEW board, and was named CEO in 2006.

“My role is to determine and implement ICAEW’s strategy,” he says. “I work with our council, board and office holders to make sure we deliver what our members need, ensure that we continue to encourage young talent-ed people to join the profession, and fulfil our

statutory obligations – which includes audit oversight of smaller audit firms,” Izza adds.

Auditing, he notes, has already been rad-ically changed by amendments to the regu-latory framework implemented or proposed by the European Union, the International Au-diting and Assurance Standards Board, the U.K. Competition and Markets Authority, the Financial Reporting Council and the Public Company Accounting Oversight Board in the United States.

Izza believes that audit regulatory re-form might be nearing its end, but the focus will now turn to implementation. “At the same time, the audit profession itself has in-troduced a series of initiatives to look at the future and vision of audit, seeking greater in-sights from auditors on risks and challenges,” he says. “It is important that the profession continues to innovate and look for areas of improvement. It will never be a job done.”

At the same time, he adds, there is a lot of work going on to reduce overall regulatory complexity, which ICAEW supports. “We are also strong believers of having a princi-ples-based approach to regulation so that or-ganizations are encouraged to comply with the meaning of the law rather than the letter of the law,” he says. “The latter often results in box-ticking and can be unhelpful.”

He believes that one of the greatest chang-es is the enhanced scrutiny of the profession. “People’s expectations of what the profession can and should deliver have heightened,” he says. “This obviously puts more pressure on everybody in the profession, but it is also a recognition of the important role the profes-sion plays in today’s society.”

Scanning the horizons Izza says he is heartened by business around the world increasingly speaking a common language: IFRS. “I believe we will continue to see countries adopt IFRS, which should help investors compare across country borders,” he says.

“A lot of changes have been brought in to improve the information provided to in-vestors and the impact of these changes will become increasingly apparent in the years to come,” he adds.

Communicating with the wider society will require improvements in corporate gov-ernance, Izza notes. “The quality of corporate governance is very important for businesses aspiring to be successful over the longer term. At the macro level, it affects the relationship between businesses and society. Where there is good corporate governance, people have high-er trust in business and this facilitates market efficiency.”

ICAEW is committed to communication at a wide range of levels, says Izza. “We work closely with the U.K. government to strengthen policy on tax, education and business. At the EU level, ICAEW engages regularly with the European Parliament, the Council of Europe and the European Commission on legislation impacting the profession.”

He notes with pride that ICAEW’s first office outside the U.K., in Brussels, was opened back in 1994. “We have been in Brussels for 20 years and will be marking the occasion in October with the launch of a publication, which looks at the development of the EU single market.”

The profession, Izza stresses, relies on building public trust and ICAEW was rewarded recently by being named the U.K.’s regulator of probate services, as well as the licensing authority for alternative business structures, which allow for both lawyers and non-lawyers to share the management and control of a legal services business.

Moving forward, Izza expects other coming challenges to include the struggle for sustained economic growth, keeping up with regulatory changes, continued debates over audit reform,

and issues connected with taxation, such as evasion, inversion, base erosion and profit shifting.

Nonetheless, Izza is unfazed by the fu-ture. “I am optimistic,” he declares. “Quali-fied accountants play a critical role in making financial markets function, helping govern-ments spend money wisely and helping busi-nesses grow – whether from the inside or as external advisers. This has been the case ever since the profession was established and is likely to also be the case in the future.”

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“ People’s expec-tations of what the profession can and should deliver have heightened.”

ICAEW's first president, William Turquand, was a partner in Turquand, Youngs & Company, now EY

The Global Accounting Alliance facilitates coopera-tion among 11 of the world's leading professional ac-counting organizations, including ICAEW and HKICPA.