ACA vs ACCA: Which Accounting Qualification Should You Choose?

There can be a lot to think about when you are deciding to close down a firm, including securing appropriate run-off insurance.

Why should accountants buy cover?

Your insurers will likely look to apply a retroactive date to the policy for the new firm, which will confirm that no work completed prior to the date in question will be covered. What processes will you need to put in place to review and pick up on any potential problems from past work completed by the purchased firm? If there is an error in past work that is not picked up, and is then replicated in the future, you may find that any claims are split between your insurers and the run-off insurers. Regardless of whether you are the purchaser or the seller, what is important for both parties is for responsibilities to be appropriately understood and agreed upon. Both parties should agree on the date from which responsibility transfers to the purchaser, particularly if completion of work straddles the completion date.

Communications and data protection

It is sensible to build this into the sale agreement – we are often notified of new claims during the first year of run off, brought to light when a fresh pair of eyes reviews past work. In one case, a client picked up on a template error for payroll calculations which spanned several years, including incorrect holiday pay and pension calculations. This resulted in six claim notifications being made under the run-off policy. In the case of another client, the sole trader had passed away suddenly, resulting in a claimant actively trying to pursue a claim against the insured’s family. As you can imagine, this added immensely to the family’s distress.

9.2 Distinctive features

In this case, run-off insurers managed all communications with the claimant to relieve the family of further upset and conclude the claim. Each party should also ensure that the other relevant parties have access to historic files. This ensures that, should a claim arise, they will be able to validate the advice given or provide copy documents or communications. For further information, please visit Lockton’s Accountants page, or contact Catherine Davis, ACCA relationship manager: catherine.davis@lockton.com Chloe Sweet, vice president, on chloe.sweet@lockton.com Lockton is ACCA’s recommended broker for professional indemnity insurance. The regulations relating to audit, insolvency, probate, investment business and the eligibility requirements for a practising certificate (PC) all require members and firms to comply with ICAEW's PII Regulations. Run-off insurance responds to claims for work done while in practice but arising after the practice has ceased.

Insurers take a cautious view of insuring firms that advise on or introduce clients to tax mitigation schemes. Section 8 of the guidance, Professional conduct in relation to taxation, gives advice to firms on how

• New practices must secure insurance before commencing work
• ACCA provides a list of approved insurance brokers for guidance
• The requirement applies to all ACCA members offering professional services
• Certain non-practicing roles may be exempt from mandatory PI
• Scope of services offered dictates the necessary level of cover

they should deal with tax schemes, including if the only involvement is to make introductions to other firms.

• Review policy exclusions for cyber liability and data breaches
• Consider standalone cyber insurance as a supplement to PI
• Fidelity cover (for employee theft) is often a separate policy
• Legal expenses insurance can be a valuable addition
• Policy excess (deductible) should be set at an affordable level
• Ensure the policy territory is worldwide for international clients
• Negotiate a waiver of subrogation for key client contracts

ICAEW’s engagement letters helpsheet includes material provided by the Tax Faculty for tax practitioners about specialist and ad hoc tax advisory services.

What is accountants’ insurance?

In the event of a dispute between a policy holder and their insurer, the difference in conditions clause should ensure that ICAEW's minimum wording overrides any provision in the insurer's wording that is less favourable to the insured. All ICAEW compliant policies should include a DIC clause and there is provision in ICAEW’s contract with each insurer for firms to enforce this requirement. If you require further information about this, please call +44 (0)1908 248 250 or use our Live Chat service. ICAEW recommends you take necessary steps to ensure there is no gap in insurance cover which would be a breach of the PII Regulations. Firms have a legal obligation to make a fair presentation of the risk on taking out or renewing cover.

Understanding professional indemnity insurance (PII)

Therefore, in order to safeguard the indemnity available for a claim should it arise, it is essential that firms are open and transparent with their insurer/prospective insurer when taking out or renewing cover as to: their claims history and any potential claims (or grounds to suspect a claim - ‘circumstances’); In-depth and complete information should be provided at the outset of the renewal process in an effort to make proposals more attractive to insurers, and to assist in obtaining a timely response from insurers as to whether cover terms will be offered. The duty of fair presentation was introduced by the Insurance Act 2015. The PII Committee recommends that firms prepare early for their renewal and that they take advice from a trusted and reputable broker or other adviser when taking out their insurance. The committee recommends firms discuss their placement strategy with their broker to ensure access to a number of different insurers; specifically, firms may wish to clarify whether their brokers are ‘whole of market’ brokers. If firms are unable to obtain a new policy before their current policy expires, they should note that their last insurer is required, under the minimum approved wording, to extend cover for an additional 30 days (see clause D3). T: +44 (0)1908 248 250 E: pii@icaew.com Live Chat Insurance required by the PII regulations must be obtained from a participating insurer.

How to Calculate What Level of Professional Indemnity Insurance You Need

If so, ensure you discuss this with your insurers, and do not carry out any work after the run-off date agreed upon. ACCA requirements are for run-off to be maintained for six years. If you’re not responsible for maintaining run-off, is the purchasing firm going to be responsible for covering your run-off under their policy moving forwards? If so, you will likely need to provide them with your last completed proposal form and claims history. But consider the potential pitfalls of this approach.

What are the regulatory requirements?

For instance, how will you ensure that the purchasing firm continues to maintain cover for the appropriate period – either to avoid you becoming exposed in the event of a claim, or falling in breach of the ACCA regulations? How will you pay for the run-off cover? Historically, some providers have offered block run-off policies; however, this is no longer available. As a result, budgeting for the premiums can become more complicated. Premium finance options are also often unavailable to firms who have ceased to trade, so you should ensure you have means to pay for the cover for the six-year period.

Office Break In and Equipment Loss

If you are the purchasing firm, factor in the following as part of your considerations: Will you be responsible for covering the past liabilities of the firm you are buying once the purchase goes through? If so, this is likely to impact on your premium and the rating approach that your underwriters take. For example, if the firm you are purchasing has a poor claims history, this will impact upon your policy as a whole. Similarly, if you take on the past exposures under your policy and a large claim subsequently arises from work completed by the firm you purchased, this claim will impact your risk profile moving forwards. If you are not responsible for the past exposures but are planning to use the existing trading name of the firm you are purchasing for any period of time, you should ensure this is included within your own policy moving forwards. ACA (ICAEW) and ACCA are the two most widely held chartered accountancy qualifications in the UK and Ireland — and the two that candidates most frequently..

PII minimum approved policy wording

The PII Regulations give details of the amount of insurance required, insurers and the policy wording insurers must use. Qualifying insurance is underwritten in terms of the minimum wording, which is approved by ICAEW. Policies must use this wording or bet best betting sites uk for football contain a difference in conditions endorsement. ICAEW PII minimum approved policy wording – effective from 1 September 2021 Schedule of amendments to the PII minimum approved policy wording (1 September 2021) Non-members can download an order form to obtain historic copies of ICAEW's minimum approved policy wording. You must obtain the insurance required by the PII regulations from a participating insurer.

Can I switch from ACCA to ACA (or vice versa)?

These insurers have agreed to meet the requirements of ICAEW's minimum approved policy wording. The fact that an insurer is on the list does not imply that ICAEW has performed independent checks on the insurer's suitability. ICAEW recommends that you investigate the current ratings and discuss with your brokers the suitability of these insurers when you take out or renew your insurance. When obtaining PII or renewing existing cover, you should ensure you arrange qualifying insurance and check the following: The insurer is on the list of the current list of participating insurers (and if the insurance is provided by more than one insurer, that all insurers are participating). The cover meets the minimum limits of indemnity set out in ICAEW’s PII Regulations.

5.1 The ICAS minimum

The policy provides cover which meets ICAEW’s approved minimum wording and includes at least six years’ retroactive cover (ie, cover for claims arising in relation to advice, services and business activities carried out during the last six years). Please also remember to check that the policy complies with ICAEW's updated requirements that took effect in September 2024. All participating insurers have agreed to provide cover under terms that match those of ICAEW's approved minimum wording. Many insurers use their own policy wording and, in some instances, this will include extensions of cover beyond the cover that is required under the minimum wording. Participating insurers which use a different policy wording must also include a difference in conditions (DIC) clause in the policy and, as an extra safeguard, in the absence of an express DIC clause, it will be deemed to apply. ACA (ICAEW) and ACCA are the two most widely held chartered accountancy qualifications in the UK and Ireland — and the two that candidates most frequently compare when deciding which path to take.

Both are rigorous, both are respected, and both lead to excellent careers in accounting and finance.

• Minimum indemnity limit typically £50,000 for members in practice
• Cover must be provided by an insurer authorized in the UK
• Policy must cover civil liability from professional business activities
• Run-off cover required upon retirement or cessation of practice

But they are not the same qualification.

• Proof of insurance must be submitted annually to ACCA
• Failure to maintain insurance can lead to disciplinary action
• ACCA may request a certificate of insurance at any time
• The policy must be in the name of the firm or sole practitioner
• Cover must be continuous with no gaps