Institute of Chartered Accountants in Ireland bye-laws

Judgment Date12 October 1998
Date12 October 1998
Docket NumberCA/826/92E
CourtCompetition Authority (Ireland)



Institute of Chartered Accountants in Ireland


Chartered accountants - Statutory audits - Section 4 Competition Act 1991

The Institute of Chartered Accountants in Ireland sought a certificate or licence for its bye-laws, which detail the Institute’s internal rules. The rules allow the Institute to decide who could become a member, to prescribe training conditions and to invoke disciplinary procedures.

The Authority, issuing a certificate, said controlled entry into a profession and reasonable discretion to refuse membership did not contravene the Competition Act, as long as such restrictions were not used artificially to control the numbers entering the profession. Indeed, the growth in the profession, if maintained, would lead to a doubling of the number of chartered accountants in Ireland within 12 years. Restrictions on the right of students to change firms during training allowed the training firm to gain some benefit from the training, so did not contravene the Act.


Competition Authority Decision of 12 October 1998 relating to a proceeding under Section 4 of the Competition Act1991.


Notification No CA/826/92E- Institute of Chartered Accountants in Ireland/Bye-Laws.

Decision No. 520
£1.60 including postage

Competition Authority Decision of 12 October 1998 relating to a proceeding under Section 4 of the Competition Act, 1991.


Notification No. CA/826/92E- Institute of Chartered Accountants in Ireland! Bye-Laws

Decision No. 520

1. Notification was made of an arrangement by the Institute of Chartered Accountants in


Ireland on 30 September 1992 with a request for a certificate under Section 4(4) of the


Competition Act, 1991 or, in the event of a refusal to issue a certificate, a licence under


Section 4(2) of the Act.

  1. (a)Subject of the Notification

    2.Thenotification concerns the Bye-Laws of the Institute. In addition, there are two related notifications relating to the Rules of Professional Conduct of the Institute (CA/827/92) and the Ethical Guide for Members of the Institute (CA/828/92). The three notifications deal essentially with the professional rules and guidelines for members of the chartered accountancy profession in Ireland as well as with the internal organisational rules of the Institute itself

  2. (b)The Parties Involved

    3. The Institute of Chartered Accountants in Ireland (ICAI) was established by Royal Charter on 14 May 1888. In 1997 it had a membership of the order of 10,000 and 2,300 students. Membership had been growing at a rate of5%p.a. in the years up to 1997, as illustrated by the figures below.


    1990 7,181 2,200

    1992 7,982 2,200

    1995 9,500 2,500

    1996 9,900 2,300

    1997 10,400 2,500

    4. The parties stated that the recruitment of trainees had been running at 600 to 700 per

    annum in recent years. Every person of satisfactory educational standard who obtains a

    training place in any of the526training firms approved by the Institute is accepted as a

    student and can sit the Institute’s examinations leading to membership.

    5. The parties claimed that the mission of the Institute is to enhance business performance through providing accounting and financial knowledge and services of the highest professional standards delivered with integrity. The Institute is dedicated to leading and promoting Chartered Accountancy, assuring quality to the public and achieving

    excellence in education and in support of its members. The Institute pursues this

    mission through a combination of the following measures:

    The education, training and qualification of prospective chartered accountants.

    The support of members through services such as continuing professional development, technical advice and practice review.

    The maintenance of high professional standards among members by regulation.

    The representation and advancement of members’ interests in public policy issues.

  3. (c) The Products and the Markets

    6. The parties claimed that the relevant market is the provision of accountancy related-services in Ireland. Within this general market there is an important distinction between two broad categories of work carried out by chartered accountants: (i) the statutory audit of company accounts, which may only be carried out by registered members of approved bodies and (ii) general work of a financial nature carried out on behalf of industry, financial services, the public sector or other sectors, which work draws considerably on the professional training and expertise of chartered accountants but which is not necessarily confined by statute or regulation to any one professional discipline. To illustrate this point, the parties claimed that some 60% of the current active membership of the Institute work in business as opposed to being in professional practice.

    7. The statutory audit market is regulated by a combination of (i) EU law, (ii) domestic statute and (iii) professional rules of conduct. At EU level, the Eighth Company Law Directive(84/523/EEC) lays down criteria in relation to education and training of accountants, certain requirements in relation to standards of ethics, codes of conduct and practice, independence, professional integrity, technical standards and disciplinary procedures, to be observed by recognised bodies and by authorised personnel in undertaking audit work in all Member States. The parties drew the Authority’s attention to the provision in Section II (“Rules on approval”) and Section III (“Professional integrity and independence”). The parties stated that the Eighth Directive has been transposed into Irish law by the Companies Act, 1990 (Sections 187-191) and by the Companies Act 1990 (Auditors) Regulations, 1992 (SI No. 259 of 1992). Prior, and in addition, to these EU requirements, Sections 147-164 of the Companies Act, 1963 provide for the proper keeping of accounts and the audit of company accounts, as well as the appointment of auditors and the qualifications required for such appointment. Section 162 of the 1963 Act, in particular, provides that, amongst other things, “a person shall not be qualified for appointment as auditor of a company or as a public auditor unless- (a) he is a member of a body of accountants for the time being recognised for the purpose of this section by the Minister

    8. The parties claimed that there are six professional bodies of accountants in Ireland. These are:

    1. The Institute of Chartered Accountants in Ireland (ICAI)

    2. The Association of Chartered Certified Accountants (AC CA)

    3. The Institute of Certified Public Accountants in Ireland (ICPA)

    4. The Chartered Institute of Management Accountants (CIMA)

    5. The Institute of Incorporated Public Accountants (IIPA)

    6. The Chartered Institute of Public Finance and Accountancy (CIPFA).

    The first four bodies are long-established and together they form the Consultative Committee of Accountancy Bodies of Ireland (CCABI). The first three bodies are recognised accountancy bodies for the purposes of Section 162 of the 1963 Act and Section 190(1) of the Companies Act, 1990. The members of the fourth body, the chartered Institute of Management Accountants, do not audit the accounts of companies, but rather work mainly as professional accountants within companies. That body has not sought recognition under Section 190(1) of the 1990 Act. The members of the Chartered Institute of Public Finance and Accountancy work primarily within the public sector, are relatively few in number and also do not audit the accounts of companies. The fifth body - the Institute of Incorporated Public Accountants - was first recognised for audit purposes under the Companies Acts in 1996. This recognition is the subject of judicial review proceedings at present. The IIPA is believed to have less than 100 members registered as auditors. The parties claimed that, for all practical purposes, the first three bodies represented the overwhelming majority of qualified auditors within the State and they had set the standards and rules of conduct and performance required of an auditor.

    9. The parties estimated that there are approximately 11,000 professional accountants active in the State, of which the ICAI accounts for 60%. (Almost 4,000 of ICAI’s members are in Northern Ireland, Great Britain or overseas).

    10. On the demand side of the market, the customers are all companies, individuals and other organisations throughout the State ‘which require statutory audit services or more general business advisory services entailing expertise in accountancy matters. The latter services are provided by accountants either as employees within business, or as consultants/advisors in a professional-client relationship.

    11. The parties estimated that the total income generated by the provision of accountancy services on a professional basis within the State is in excess of £400 million, of which over 80% accrues to chartered accountants.

  4. (d)Structure of the Market

    12. The parties stated that the audit and general accountancy markets can be seen as two broad areas of work within the accountancy profession. From the consumer s perspective, the demand for audit services is distinct from the demand for general accountancy services and they are clearly non-substitutable. Audit is a statutory responsibility that firms have to meet under the Companies Act. However, the audit work of firms and general accountancy work are very good substitutes in supply, in that a given chartered accountancy firm can easily shift resources to increase its audit capacity at the expense of its general accountancy side of its business. Furthermore, with the increasing importance of consultancy to the fee income of chartered accountants, the audit function of firms gives them a competitive advantage in

    competing for lucrative consultancy work’. Thus, the Authority considers that the audit market does...

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