Paul Coghlan (Fine Gael)

I welcome the Minister of State to the House and thank him for the comprehensive overview of the Bill. This Bill puts into effect the recommendations of the review group on auditing, which sat between February and July 2000 and was chaired so ably by our colleague, Senator O'Toole. The review group on auditing was established following the inquiry by the Committee of Public Accounts inquiry into DIRT and was asked to address a number of issues about the regulation of accountants and the independence of auditors, which the Minister of State has dealt with at some length.

The review group on auditing did its work in four months and produced a 300 page report with 80 recommendations. That speaks for itself. It was a fantastic achievement. Its output represented a broad consensus among the diverse bodies represented on the review group and provided an effective plan for moving forward. It should be remembered that the review group met and did its work before the Enron and WorldCom collapses and before the accountancy scandals in the US were made public. In that context, its work was far-seeing.

On the issue of regulating the accountancy profession, the core of the review group's work was that we need to move to a new model. The other model was effectively based on complete self-regulation by the profession of the profession. This had developed over the years for two reasons: first, the accountancy profession wanted self-regulation; and second, successive Governments and the Department of Enterprise, Trade and Employment were happy to leave this responsibility with the profession. There was no inclination or desire within the Department to invest the necessary resources to carry out an effective regulatory role and they were perfectly happy for accountants to regulate themselves.

The review group on auditing decided that this had to change. It came to the view that there was a need for more hands-on involvement. We needed to move from delegated self-regulation to a new model of supervised self-regulation. This new model would see the State playing a much more active role in supervising the way in which the accountancy profession regulated itself and, if necessary, undertaking direct regulation itself.

The involvement of accountants in a number of scandals throughout the 1990s and the inability of the professional bodies to demonstrate to the public that they could regulate their members in an open and effective way made some change inevitable. There are no doubts that self-regulation does have some benefits. It can be done at no cost to the State, and it involves professionals who understand the nature of the work and the technicalities of the work in the regulatory process. It also has many disadvantages. It creates a perception of 'chaps regulating chaps', and it is easy for the public to believe that when a profession is faced with a choice between the members' interest and the public interest, the members' interest will always win out.

The Bill is welcome because it provides us with a structure – the Irish Auditing and Accounting Supervisory Authority – which can rigorously examine how the accountancy bodies carry out this self-regulation, can ensure that the right procedures and processes are in place, and can make sure that fair, independent decisions are made.