Broadly defined, regulation refers to the making and implementing of rules which direct or constrain the behaviour of a person or group of people being regulated. It is important to acknowledge the role of the profession in the evolution of its regulation. In most developed nations, the licensing and regulation of the accountancy profession was founded through the initiative of practicing professional accountants who often sponsored legislation to set minimum requirements to be designated as a professional public accountant. Historically, leading practitioners then established a code of professional conduct and, eventually, accounting, auditing and other practice standards.
Through much of the 20th century, the requisite knowledge of professional practice standards that protected the public resided nearly exclusively with professional practitioners who founded professional associations to promote their profession and its standards. This led many government regulators who had the legal authority to mandate compliance to choose to adopt the standards of the professional associations by reference or as acceptable interpretations. Over time and in many countries, such as the United States, this approach evolved into a sophisticated system of government-sanctioned self regulation that for many years was considered adequate, efficient and protected the public.
Regulation of the audit profession has typically been included as part of the overall regulation of the accountancy profession and has covered the following areas: •Education and admission standards;
•Ethical standards; and
Where the regulation has been carried out primarily by the profession, it is often referred to as “self-regulation” and when it is carried out by the government, is often just “direct regulation”. There is no pure model of either self-regulation or direct regulation. The profession rarely regulates without some form of government mandate to do so, and similarly, the government rarely regulates without some form of interaction with the profession.
In general, the International Federation of...