Mrs. Anthea Rose
The Association of Chartered Certified Accountants
29 Lincoln’s Inn Fields
London WC2A 3EE                                                     25 February 1999

Dear Mrs. Rose,

I am writing to lodge a complaint against the ACCA Chief Executive and Council for publishing inaccurate and misleading accounts. I note that the present bye-laws do not offer any guidance on the procedures for complaints against the Council and the Chief Executive. Unlike other professional bodies, the ACCA does not appear to have an ombudsman to adjudicate disputes between the Association and its members. Regrettably, I have to lodge my complaint with you. I am sure that in the interests of fairness, the ACCA Council would wish to ensure that an independent party ought to investigate the matter. Anything less would simply be seen as a cover-up.

The details of the complaint are as follows:

The Association’s 1997 financial statements are described as “true and fair”. The policy clearly stated is that “ACCA prepares accounts which comply with accounting standards applicable in the UK”. However, the accounts for the year to 31st December 1997 (possibly approved on 26 February 1998) failed to comply with the relevant and appropriate accounting standards.

1. In 1997, it was alleged that the examiner for the Association’s Malaysian Tax paper had plagiarised the exam papers. A letter (dated 21 July 1997) from the ACCA Chief Executive (see enclosed) to the Executive Director of The Malaysia Association of Certified Public Accountants (MACPA), confirms that the exam paper was plagiarised. This incidence subsequently resulted in a lawsuit of RM200 million (approximately £32 million) against the Association. The lawsuit could give rise to actual liability of more than £500 per member. Compared to the Association’s net assets of £8.98 million the amounts are material. Even if the eventual settlement and related legal fees amount to one-tenth of the amounts mentioned in the lawsuit, the amounts would still be material. By any measure the amounts are material. However, contrary to the requirements of the Statement of Standard Accounting Practice (SSAP) 18 ‘Accounting for Contingencies’, the ACCA’s 1997 accounts contain no mention of it. There are no disclosures of any kind in the accounts. It is also important to note whilst the Malaysian and the UK press have reported the incidence, the ACCA management have taken no steps whatsoever to inform members, e.g. through the in-house magazine.

2. Financial Reporting Standard (FRS) 8 ‘Related Party Disclosures’ was issued to facilitate transparency in organisational affairs. It was good to see the disclosures on page 16 of the accounts and the fact that ACCA members paid the costs of £5,673 to enable the Chief Executive’s spouse to accompany her on official business. However, there is no mention of the costs charged by the officeholders for taking their spouses (and friends) on overseas travel. I have been unable to find any bye-law which authorised the officeholders to charge an estimated £40,000 - £50,000 to the Association.

FRS8 requires that “Financial statements should disclose material transactions undertaken by the reporting entity with a related party”. I submit that the ACCA officeholders are a ‘related party’ since they in a position to exercise significant influence over the finances and affairs of the Association. The amounts involved are material (see the above example). The costs incurred on taking their (spouses and friends) to overseas travel should have been disclosed.

As a result of the omissions and the violations of accounting standards, the 1997 accounts are misleading and cannot be considered to be ‘true and fair’. Accordingly, I am lodging a complaint against the ACCA Chief Executive and Council for publishing inaccurate and misleading accounts.

I understand the Financial Reporting Review Panel’s remit does not cover the Association. Therefore, it would be helpful to know which independent organisation has the authority to examine the Association’s accounts.

I look forward to hearing from you.

Yours sincerely

Prem Sikka