Hello, my name is Gillian Bowen.

This is Small Firm, Big Impact.

So if you're a CA ANZ member with a certificate of public practice, an affiliate member, or you hold practice entity membership, you are eligible to be a participant in the scheme.

We are the largest group of members that are participants in a scheme.

The scheme really helps a member in public practice to go forward and provide services, knowing if they are sued, they know the maximum amount of the claim.

It's the podcast giving Chartered Accountants the up to date information they need to do their jobs.

Each episode, I share resources, tools and expert advice provided by Chartered Accountants Australia and New Zealand and a range of people across our profession.

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Let's start a conversation.

Today we have Kristen Wydell, FCA General Manager, Professional Standards at CA ANZ and my wonderful colleague.

The topic, the Professional Standards Scheme.

CA ANZ has recently had its Professional Standards Scheme approved until July 2030.

As a relative newcomer to the accounting profession, I've learned that the scheme is very important for CA ANZ members in public practice - so that is the listeners of this podcast.

Kristen has been looking after the CA ANZ scheme for just over ten years, so is our expert, but is also recognised as an expert on the topic outside of CA ANZ as well.

Kristen, welcome back to Small Firm, Big Impact.

Thanks for having me Gill, it's good to be back.

So let's get stuck into it.

First off what is a Professional Standards Scheme and what's all this fuss about the approval?

A Professional Standards Scheme is a legal instrument approved under professional standards legislation.

A member of an association with a scheme may be able to limit their liability in the event that they are sued by a client.

The scheme really helps a member in public practice to go forward and provide services, knowing if they are sued, they know the maximum amount of the claim.

...

Schemes are approved by the Professional Standards Council and they don't do this lightly.

The council will only approve a scheme when the council is satisfied that the association, like CA ANZ, is continuously improving the standards of members.

So to receive this approval is a really positive reflection on all that we do and our CA ANZ members.

Hmm.

Can you give me some background about CA ANZ's involvement with schemes?

Yeah, sure.

So, um, firstly though, Australia is really unique.

This legislative liability cap is only in Australia.

Okay.

And so the legislation came about after a really long period of advocacy.

There's men that have been men and women have been long retired that started this advocacy process in the 90s.

Okay.

Um, it was really triggered by the unavailability of professional indemnity insurance in the 1990s.

So CA ANZ has had a scheme for Australian members in practice since 1997.

Okay.

So been doing this a while.

Um, currently there's 18 other associations with the scheme, but we are the largest group of members that are participants in a scheme and the three other accounting.

So all three accounting associations have a scheme.

Okay.

All right.

So that's a good history lesson.

And you're right, it has been something that has been around for a long time.

Although I do like to think of 1997 just the other day, but it's clearly not.

So no.

So let's and we won't get deep into the memes that remind us how old we are.

Let's cut to the chase.

If my client sues me, for example, how does it work in that scenario?

So if a client sues you, the first thing you need to do is to make sure your legal team knows about the scheme, and to tell the client that you plan to rely on the scheme as part of your defence.

That's step one.

Okay.

Then the court will decide if you can benefit from the scheme, and it's ultimately up to the court.

However, let me run a simple example for you.

You do some tax planning work for a client.

The fee is $10,000 and the client later sues you and claims $5 million in damages.

You go to court and the court determines you are a participant in the scheme.

Mmm.

You have sufficient professional indemnity insurance and you disclose to your client your participation in the scheme.

Those three things are really important based on the fee of $10,000.

The judge should then limit the amount of damages to two, not the five that your client initially claimed.

Okay.

That was a good, easy to understand example.

So thank you for that.

Uh, what do members need to do or contribute to ensure that they are covered by the scheme and thinking that then if they have, um, an issue like they did, or may in the example that you've given there, um, what do they need to do?

I dropped three little hints in my earlier answer, but let me flesh them out a bit more.

So three things.

Be a participant in the scheme.

Have the right PI or professional indemnity insurance and disclose to your clients.

So the first one who's a participant in the scheme.

So if you're a CA ANZ member with a certificate of public practice, an affiliate member, or you hold practice entity membership.

You are eligible to be a participant in the scheme.

Second important ingredient is that you must have the appropriate professional indemnity insurance.

Our CA ANZ Regulation CR2A outlines the required professional indemnity insurance that you need, and we set that so that you will meet the scheme requirements.

And then the third one is to disclose it to your clients.

If anyone's, and when we say disclose it it's the little statement on the bottom of your letterhead.

It's on your business stationery.

It's on your websites that tells your clients that you are planning to be limited, that you intend to claim the benefit of the scheme.

Okay.

All right.

So, um, I know that we did a a recent webinar with, uh, CA ANZ members who are allowed to come along and listen to some details of the scheme.

And there were a few questions there that were about, um, you know, you talk about communications with your clients and that you need to have this information in, in the, um, communications that you have with your clients, does that include things like text messages?

Uh, text messages is tricky.

And we did get a lot of questions about that one.

Um, I'm nervous about hearing that clients are giving advice via text message.

Um, but it's also if that's the way you engage with your clients, then that's the appropriate way to give the advice.

Um, it's very difficult to put the disclosure statement on a text, but you can follow it up with an email with it in there later.

Yes.

Okay.

That's a very good piece of information.

You should have an engagement letter.

Yes.

And on your engagement letter it should have it on there.

So, um, at every reasonable opportunity to tell your client about the scheme, you should.

Yes.

Um, but yeah, as I say, text messages are tricky for, uh, advice.

That's right.

Logistics?

Yes.

Advice.

Perhaps that's a better way to do it.

Absolutely.

Um, so then thinking, is everything covered?

Yes and no.

Oh the pregnant pause.

Love it.

So all accounting services are covered.

You can be covered for multiple matters at any time.

So if you have an unfortunate year and you have 3 or 4 claims in one year, you can be covered and call on the cap each and every time.

What is it?

But it's only your occupational services that are covered.

So it's when you're doing your accounting work.

Okay.

That makes it clear.

What are the scheme limits then of liability?

The limit depends on the type of engagement and the fee for the engagement.

And there's a great table on our website that will pop a link into.

Yeah.

Good idea.

Um, but if I, if I sort of start at the bottom and the top end so members can understand the range, um, for an engagement fee of less than $100,000, then the cap is $2 million.

And then that will go up to if your fee is greater than $2.5 million.

So a very large engagement, then the cap is $20 million for an insolvency engagement or an other engagement and $75 million for audits.

Mhm.

Mhm.

Yeah that's a good idea.

We will put the um the table.

Uh well a link to the table in the show notes because we know you could be listening as you're out for a walk or in your car and you're not, you're not taking notes and you're trying to absorb this information through osmosis perhaps.

So we'll make sure we we help you there.

I do love to plug our resources and put links, uh, in episode descriptions.

So we will do that.

Um, so, Kristen, how do members know if they have the right level of PII cover?

Yeah, my first advice on the right level of PII cover would be to talk to their brokers.

Um, and it's really up to the individual members to determine if they have sufficient PII insurance for their work that they're doing.

Um, the way CR2A, which is our CA ANZ's regulation for professional indemnity insurance is written, is, is to set a minimum amount of PII insurance.

So the minimum is $2 million because that's the lowest cap.

But as you, as you have larger engagement fees, then you need to adjust your liability limit.

Mhm mhm.

And there is some information on that as well.

Um I think we've got some checklists or something on the website.

Um and we love a checklist.

Um, so we'll whack a whack a link to that as well.

Do the schemes expire?

You know, I know that, um, we've talked about it getting renewed and it's a it's an important part of the process.

But, you know, how long do they last for?

How long do we we need to be aware of what's going on here.

Yep.

So under the legislation, the maximum length of time a scheme can be approved for is five years, and you can seek an extension of another year on top of that.

So one scheme maximum six years.

Um, and that's a legislative requirement.

So we've just recently had our scheme re-approved for another five year period.

Yeah.

So we're we're approved now till July 2030.

Yeah.

Awesome.

So you've mentioned it already in the sense of, um, who it is that's covered different types of members.

But just going further and just to clarify, do all members of CA ANZ need to be part of the scheme?

No.

The scheme is only relevant for members who are in public practice.

So those who are providing services to clients for reward.

If you are a Certificate of Public practice holder, an affiliate member or practice entity member, you are automatically part of the scheme.

There's nothing you need to do.

There's no paperwork.

There's nothing at all.

You automatically become part of the scheme.

You just it's basically if you're offering professional accounting services to the general public, then.

Then that's you.

And don't forget, you know, Kristen mentioned off there the three things you need to do.

And and step two is to don't forget to do step two and three, which we don't need to go over because we've talked about that already.

But um, there's information on the website.

So a lot it feels hangs on working out the engagement fee.

So how is this determined.

So there's two probably two elements to to consider for that.

The first is the engagement.

So what is your engagement?

And then the second part is what is your fee?

Um, sometimes when I was working in audit, we would do, um, a number of different entities under one engagement letter, or we might do the audit and then some other permissible related services as part of that service.

But they would be more than they wouldn't be the one engagement.

Um, and then it's about quoting the fee for each engagement.

So what we encourage members to do is to be very clear in their engagement documentation that this is this is the fee for this engagement or this subpart of my engagement, so that it's really clear, if you ever do need to provide the documentation in court, what you know, what what was related to what which engagement.

Yeah.

Yeah.

And it's not all engagements for a client.

It's each individual engagement.

So if you do ten engagements for client X, it's all ten engagements.

Like an itemised list.

Yeah.

And we've got plenty of information on the website, as well on engagement letters and how to ensure that they are in top shape.

So we'll put a link to that in the episode notes as well.

And Gill, if anybody's unsure, then we have the Professional Standards line and the ladies on the Professional Standards line are really experienced and they will be happy to answer member queries via email or phone call.

Yeah, we'll put a link to that as well on how to contact them.

I feel, um, that many of my commentary on this podcast is telling everyone I'm going to put a link to it in the show notes, but you know, we love it, so we do.

Uh, what about if my practice is a mixed firm?

I know that members have raised that with you before, that they've got some people who are CPAs, IPAs, and CA Principals.

What does the new CA ANZ scheme mean for their practices?

So the scheme is designed to incorporate real life, i.e.

people will work with chartered accountants, IPA members and CPA members.

Um, so it's actually a specific clause in the scheme that says that you will use the one that gives the highest cap.

Mhm.

Okay.

So it's clause 3.13.

Okay.

All right.

And that'll be um quite straightforward for people to work out.

Um okay.

Look we're running out of time because I do like to keep these things nice and tight.

But what about a couple of things?

Um, what about if you have an overseas office that provides some services to Australian clients?

Does the scheme still apply?

That's a really tricky question, Gill.

The scheme is Australian legislation.

And so the court, as it looks at the matter, will determine if this is relevant for Australian legislation.

So they might look at how much of the work was done overseas.

They might look at how where the accountant was was living and working, where the client's main base of operations are.

So, um, I think the the court will determine ultimately what, you know, where the jurisdiction is, but make it as Australian as you can.

Yes, that makes sense.

And what about, for example, the big four?

Is the scheme just for them?

No, the scheme is for all members in public practice.

Same rules, same requirements for every practice, regardless of size or location in Australia.

Good to know.

All right.

So then a final plug of where we can find besides obviously reading the episode description, where can people, uh, see as members get some more information, um, if they want to know more or have some specific question.

Yeah.

So there's a, there's some great information on our website.

Um, so we will I'd encourage people to go to the website first.

Um, there's a great sharing knowledge session that you mentioned earlier, Gill, that we did.

And that will also be in the show notes.

And then lastly, I mentioned the amazing Professional Standards team.

They are fabulous and they are there to help and answer questions.

So um, that's right.

It's always good to be able to know you can speak to someone and kind of nut out the scenario rather than having to do it over email.

That's a great service that your team offers.

Each scenario is different.

I gave a very brief example of a client engagement that is one of thousands that you could have.

So yeah, feel free to call us.

Yeah.

Awesome.

All right.

Look, that is all we have time for.

If you're new to the podcast, I encourage you to check out the podcast page on the CA ANZ website.

There's plenty of great content experts, interviews and resources tailored to you.

We will put a link to it in the episode description, so don't you worry because it's easy to find there as well.

All the other useful resources that Kristen has mentioned today.

If you'd like to get in touch with the podcast or have any other further questions you'd like to flick through to Kristen that I can pass on, email us at podcast@charteredaccountants.com and follow the podcast.

Let's start a conversation.

Thank you, Kristen, for being my expert today on Small Firm, Big Impact.

Thanks for having me, Gill.

Bye bye.