As African professional qualified accountants meet in Kigali, some experts have said that fraud and corruption that arise from poor financial reporting practices and flawed rules are some of the big concerns the industry is grappling with.
Members indicated this on Tuesday during the Association of Chartered Certified Accountants (ACCA) Africa Members’ Convention, which is bringing together nearly 1000 participants from across the continent.
Professional accountants are simply people who prepare and examine financial records. Most of them work in the banking space, investment areas, tax collection units, and other organisations.
They suggest ways to reduce costs, enhance revenues and improve profits.
Yet, experts say, some are still characterised by poor ethics, making it impossible for many entities that rely on them to retain the right business value and meet expected financial results in some cases.
In Rwanda, for instance, some accountants have been blamed for endorsing books of accounts without verifying the facts and evidence, which in most cases lead to financial fraud and loss of revenues for public entities.
“There is fraud, there is corruption. How can professional accountants play a role to address these issues?” Brigitte Nangoyi Muyenga, the finance commissioner for Zambia Revenue Authority, wondered.
Muyenga lamented that most of the controlling officers, those entrusted with overseeing tax collection revenues, most of the times are not appointed on merit, saying that is the basis of fraud that characterize most countries.
Africa currently losses billions of dollars in illicit financial flows. Professional accountants have been blamed for not playing a critical role, just as much as many public organisations that deal with finance matters.
A report of the High-Level Panel on Illicit Financial Flows from Africa commissioned by the African Union (AU) and the Economic Commission for Africa indicated in 2015 that Africa loses $50 billion a year in illicit financial flows.
These flows relate principally to commercial transactions, tax evasion, corruption, and criminal activities like money laundering, among others.
“Until we start recognising who’s supposed to be placed where, then Africa will become a developed continent because we have all the resources,” Muyenga said.
Transfer pricing manipulation is one of the specific ways experts pointed out through which countries lose millions of financial resources.
Generally, transfer pricing happens whenever two companies that are part of the same multinational group trade with each other: when a Rwandan-based subsidiary of Coca-Cola, for example, buys something from a US-based subsidiary of Coca-Cola.
When the parties establish a price for the transaction, this is transfer pricing.
In itself, this practice is not illegal or necessarily abusive. What is illegal or abusive is transfer mispricing, which essentially includes trade between unrelated parties.
Taiwo Oyedele, the Tax Leader for PricewaterhouseCoopers West Africa, indicated that transfer mispricing is one of the major components through which Africa loses financial loses.
While he believes professional accountants have a role to play, he thinks political leaders similarly have a big role to play.
“We (ACCA) are working with governments to write the rules around transfer pricing. This means we will be able to curb some of the illicit financial flows,” he noted.
Experts also indicated that the issue is partly attributed to lack of enough qualified professional accountants.
Jamil Ampomah, director of ACCA Sub-Saharan Africa highlighted that only Kenya, Nigeria and South Africa control the majority of professional accountants that work in Africa, reflecting the need to invest in accounting education.
In Rwanda, Innocent Bulindi said, the Institute of Certified Public Accountants of Rwanda – the regulator of the profession in the country, has laid out a strategy that will address most of the existing problems.
“Under our strategic plan, we want to make revisions in the law that establishes the institute, as well as upgrade and strengthen our curriculum to ensure that the profession is grounded,” he noted.
It was indicated that technology will also disrupt the accounting industry in the coming years.