ESTABLISHING

1
ESTABLISHING STRENGTHENING PROFESSIONAL
ACCOUNTANCY BODIES - INITIATIVES LESSONS
LEARNED
2
(No Transcript)
3

• The purposes of EPAAA similar with other
  professional bodies. Includes

• Establish accounting and auditing standards for
  its members
• Issue a code of ethics
• Prescribe minimum qualifications for
  professional accountants/auditors
• Foster training and development
• Encourage development of accounting education
• Promote broader knowledge about the profession.

4

• As a background, in Ethiopia

• Corporate governance culture/practice weak
• Public awareness about the profession not strong
• No local stock exchange or capital market
• Exception Government Treasury Bills, financial
  institutions main actors
• Neither developed own accounting/auditing
  standards nor official adoption
• of specific national/international one for
  use by business undertakings
• For budgetary organizations accounting
  guideline based on INTOSI in use
• Commercial Code of Ethiopia of 1960 specific
  authority governing profession connected
  with businesses
• Proclamation 57/96 applies to budgetary
  organizations
• Statutory audit a requirement for public
  enterprises, NGOs in general and
  associations
• Two categories of incorporated business
  undertakings

5

• - Share Companies all require statutory
  audits with capital as low as
  Birr 50,000.- (Approximately US5,700.-)
• - Private Limited Companies if
  only number of members gt20
  though most common form and with multi-million
  Birr capital/net assets.
• ? Audit Services Corporation established
  by previous Government in 1978
  empowered by special legislation to undertake
  audits of Govt business
  undertakings
• Private auditors require certificate of
  competence.
• ? Concerning education, many private colleges
  immerging. Adequacy of curriculum to
  assist professional development skills
  considered questionable
• ? Impact of IT on accounting, processing and
  being attractive to trainees already
  being felt.

6

• Actual existing operating structure and mandate

• EPAAA not a regulatory/qualifying body with
  legislative backing
• Unable to issue standards, license and monitor
  activities of Members
• This mandate granted to Office of the Federal
  Auditor General (OFAG)
• A Government body also responsible basically
  for budgetary audits
• EPAAA remains a "voluntary club"
• Only one full time clerk/secretary
• Main sources of finance membership
• Recently Joint Examination Scheme with ACCA
  augmenting

7

• Adoption of international standards

• For many years GAAP/GAAS referred as the basis,
  not identified with specific country
• Recently some reports making references to
  IFRS/ISAs
• Necessary structure not in place in terms of
  realistic compliance
• Cause for concern for EPAAA to preserve
  credibility of local audit
• EPAAA undertook independent study by ACCA
  giving us 'Road Map'
• Attempts being made to implement same
• ECSAFA's SME Guide shared with OFAG, considered
  good input.
• Structure of SMEGAs by UNCTAD being considered.
  

8
(No Transcript)
9

• Challenges lessons learned

• Enabling legislative backing required for EPAAA
  like its peers even to fulfill stated
  mandates
• Membership to EPAAA and certification by OFAG
  not by local exams
• Cost/inadequate training centers and low of
  qualified accountants
• About 10 a decade ago, later increased to 50
  and currently 180 (some out of Country)
• Only 45 members of EPAAA as voluntary, not
  requirement for license
• Some considering the fees prohibitive and
  unable to attract volunteers
• Of those enrolled, limited number paying their
  fees
• Audit remains voluntary for most large business
  undertakings
• Revised Commercial Code hoped to tackle this
• Limited contribution of profession to economic
  development

10

• By enhancing credibility of financial
  statements and investor confidence
• Reliance on audit reports limited. Expectation
  gaps, below standard work
• Contracting audit services-
• - Victim of inflexible competitive
  bidding, initially by Gov't
• - Quantitative factors (fees and stated
  completion time frame) only criteria
• - Fear for being answerable, or no
  appreciation about profession

11

• - Appointment not free from influence of
  executive body
• - Current level of fees inadequate to improve
  quality services and long- term
  professional developments
• - Not conducive for competing for the provision
  of quality services
• - Sometimes working to the detriment of audit
  independence.
• EPAAA's statutes about 34 years old, requiring
  revision to reflect current thinking and
  realities on ground
• Accommodating the needs of profession and
  authorities a challenge
• Use of Audit Committees, at least for larger
  organizations to come
• EPAAA "toothless" even to discipline/monitor
  activities of its Members
• OFAG issued a Code of Ethics in 2004 yet to be
  operational

12

• Without such activities by OFAG and/or EPAAA,
  provision of professional services of up to
  the expected standard mostly tends to be left
  to individual practitioners
• Weak institutional/technical capacity at
  OFAG/EPAAA
• Shortage of finance at EPAAA critical. Unable
  to participate in most workshops by ECSAFA
• Without sponsorship, would not have been here
  

13

• In view of above, EPAAA and the profession in
  general are relatively old but still a long
  way from being strong and effective. Growth and
  adoption of full-blown international
  standards remain to be a challenge.