Over the years the accounting profession has been subject to various forms of oversight with varying degrees of success. Nevertheless, it used to be self-regulating. But a series of financial scandals involving once prominent companies such as Enron, WorldCom and Parmalat lead the authorities to consider whether the accounting profession's self-regulatory oversight system was appropriate to meet the necessary objectives. These corporate failures had shown that the self-regulatory system did not produce credible results and "had the potential to undermine investor confidence in the integrity of the securities markets" (The Treasury, 2006). As a consequence a number of countries have reviewed their arrangements for independent oversight of
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The government has given legal recognition to the profession and has given the professional institute a set of roles and responsibilities and some form of reporting requirement. These responsibilities can include admission criteria, continuing education requirements, disciplinary provisions, standard setting and so on. Reporting requirements often take the form of annual reports by the professional body. Under self-regulation then, the government has delegated the responsibility for regulation to the profession and the profession regulates itself within that framework and then reports on its activities. There can be a greater or a lesser degree of government monitoring and oversight.
Direct regulation, for example, through the establishment of an audit oversight body, simply means that the government itself has assumed responsibility to regulate part, or, rarely, all of the profession. However, like self-regulation, this regulation is taking place within a set of roles, responsibilities and reporting arrangements that have been set by government and established in legislation. To be successful, the regulator needs to have an effective working relationship with the profession.
In discussing methods of regulation, it is important to remember that accountancy is a profession. That means that professional accountants have an overriding responsibility to the community in which they live, not just to their current clients or to themselves. So even in