Custodians of integrity in Africa

Philip Ngunjiri reports from a major convention of East African accountants how recent accounting scandals have demonstrated the need for a heightened sense of professionalism, as well as an ethical code that is espoused, owned and “lived” by the profession

The public’s lack of trust in the accountancy sector, exacerbated by the high-profile financial scandals of companies such as Enron, WorldCom and locally the Euro Bank, as well as other corporate failures in East Africa, have been starkly highlighted by more than 300 international accounting and auditing experts at a major convention in Nairobi, Kenya, organised by the East Africa Association of Chartered Certified Accountants.

The convention, which brought together ACCA members from east, central and the horn of Africa, enabled the sharing of professional knowledge and best practice amongst professional accountants. Besides this, the conference provided a forum for professionals to ponder challenges facing business, the industry and society at large.

Moreover, the meeting facilitated valuable business links and interaction between professional accountants and business entities across the region. According to John Nyakahuma, ACCA’s head of corporate development - East Africa: “The convention is part of ACCA East Africa’s overall strategy to provide appropriate platforms for ACCA members to share professional knowledge and best practice, to support the fulfilment of career goals and aspirations and to demonstrate ACCA’s commitment to developing the profession in the region.”

Globally, the profession is faced by a number of challenges, key among them being the convergence to International Financial Reporting Standards, as an alarming number of multi-national companies are not ready for the changeover to what are complicated and lengthy standards, which have a huge impact on the figures quoted in annual reports.

Coming in the wake of political and business sector commitment towards fast-tracking the East African federation, the convention made a strong statement about the commitment of ACCA members and the general accountancy profession in Eastern Africa, to the good governance agenda that is crucial to the fulfilment of the East African community’s objectives of creating an integrated regional identity that fosters close peaceful relations among the partner states, strengthens the region’s economic and political position - vis-à-vis the outside world - and helps to raise the standard of living and quality of life of the people of the region.

Key speakers at the convention held from 30 November to 2 December 2005 - the theme of which was “promoting transparency and accountability for good governance” - included: Dennis Yeates, ACCA’s Deputy President; Anne Simpson, executive director of International Corporate Governance Network (ICGN); and Anna Tibaijuka, UN Under Secretary-General and executive director of UN-Habitat.

Local dignitaries included: Joseph Kinyua, Kenya’s Permanent Secretary to the Treasury; Michael Waweru, head of the Kenya Revenue Authority (KRA); Joe Wangai, chairman of the Institute of Chartered Public Accountants of Kenya (ICPAK); the auditor-general and senior KRA officials, among others.

“With the avalanche of corporate accounting scandals that have rocked the markets recently, it’s getting hard to keep track of them all. In order to attract and protect investors, especially here in Africa, proper professional financial reporting, good governance and accountability is critical. This would manage risk and reduce financial volatility,” said Yeates.

Opportunity

In the wake of these corporate scams, added Yeates, ACCA has taken numerous steps to turn crisis into opportunity. “In particular, colleges, universities and their accounting faculties have changed their course offerings and other aspects of the accounting programme to equip students better to cope with the ethical challenges of the accounting profession,” he said.

But what gripped the delegates’ attention was Yeates’ assertion that, in his coming presidential year (beginning in May 2006), he will commit himself to encouraging African members to put themselves forward for election to ACCA’s global Council, to ensure that this important economic region is appropriately represented at the highest level of the Association, consistent with Council’s commitment to best practice in its own corporate governance. “That is my key message at this convention,” he said.

Come his tenure in office, he would also concentrate on bringing Africa closer to the European Union on major business policy issues. “I will be keen to provide the bridge between the EU and Africa by developing opportunities for its members,” he added.

With the increasing globalisation and interdependence of the world economy, said UN Under Secretary-General Tibaijuka, pressure has now grown for standardised financial information at the regional, national, local and corporate levels.

“Harmonised and high quality accounting and reporting practices enhance stability and coherence not only of our individual countries, but of Africa’s financial infrastructure as a whole.” This, she added, would ultimately lead to efficient mobilisation, allocation and the use of scarce resources so greatly needed in Africa.

Tibaijuka said that delegates present were social auditors. “You are the custodians of our integrity when you perform your duties well. And if and when you fail, the results can be devastating and shatter the livelihoods as they did in the case of Enron, and the Euro Bank here in Kenya.”

Africa is a continent where small and medium-sized enterprises make up more than 90% of businesses. They are a vital source of employment and income in African nations. Despite these opportunities presented by the businesses, the African region is positioned far behind the rest of the world in terms of business development and accounting skills.

“It is ultimately up to you and government to reverse this trend here in Africa. It is against this background that, in Africa, we must tend to our bookkeeping,” said Tibaijuka.

A report of the Commission for Africa, which was constituted by British Prime Minister, Tony Blair, highlights that some leaders in African governments and companies are believed to be corrupt, but nobody asks who is corrupting them. They are supposed to have stolen money, but nobody asks who is banking the money. “Audit presupposes an accounts record. Accountability and transparency depend on your profession. As auditors, you carry a huge responsibility to be truthful to all,” challenged Tibaijuka.

Key role

According to Anne Simpson, accountability and transparency have become the buzz words in corporate governance of both the public and the private sector. In the developing world, and especially in Africa, good corporate governance has played a key role in the attracting of foreign direct investment, which eventually determines the level of development.

The problem in Africa, Simpson observed, is that the region exports capital because some people do not have confidence to invest in the region due to issues like lack of transparency and accountability. “That’s why Africa’s savings largely go abroad.”

African nations, she added, need to build confidence in their investment climate by investing in the region before looking to other investors outside the region. Simpson explained there is great need for structures that promote transparency and accountability in the region.

Corporate social responsibility is likely to grow in importance as companies seek to find ways of regaining confidence, and the investment community grows more alert to the significance of corporate social responsibility issues. In a clear shift, the CSR has moved up the ranks in terms of reasons for respectability of companies.

And, according to John Mark Okondo, ACCA International Assembly member for Kenya, the convention went a long way in enhancing engagement of professionals in the region - with each other and with issues that impact on the development of business and the profession, as well as the entire East African society. The event also provided the accounting profession with another opportunity to discuss their contribution towards the realisation of the goals of integration in the region.

Philip Ngunjiri is a senior reporter with The East African.