Non-compliance depicts need for corporate governance

The Business Times this week reported that an overwhelming majority of large tax payers registered with Rwanda’s tax authority, RRA, had not declared their corporate accounts for the fiscal year 2008 as at September 16, 2009. It is a statutory requirement in the law of direct taxes for all corporations to have their audited accounts certified with the Institute of Certified Public Accountants of Rwanda (ICPAR). For RRA, the interest in the financial statement of a company is to ascertain the respectability and accuracy of taxes plus other duties declared and paid. But one needs to understand that alongside the regulators (government), business has many stakeholders who are interested in its fiscal financial statements. For example owners and managers need this information to make business decisions while prospective investors and suppliers will need it to make investment decisions and assess the creditworthiness of the business respectively. Financial institutions use company accounts to decide whether to finance the business while employees, media and the general public are also interested in these accounts for many reasons. So these recent pitiable revelations about failure to adhere to the customs, rules and policies that ensure accountability to stakeholders demonstrate how our firms are directed, administered and controlled. To a large extent, this is the reason why CEOs, MDs and Finance Managers in this country are increasingly finding it difficult to distance themselves from the recent wave of accounting scandals, increasing the corruption web amongst corporate leaders. If a company can take this long to honour a government obligation, then how do you expect it to be more transparent in its annual reporting to other stakeholders and people with interest in it. With the exception of banks and a few financial institutions, hardly will you find an advert of local company about its quarterly or annual performance. Well, one may urge that it‘s not mandatory for a private company to make such disclosures but then it one way they can enhance corporate governance and transparency. For public companies, which are quoted on a stock exchange, the disclosure requirements are very strict demanding for detailed operations of the company, financial statements audited by an independent certified public accountant etc. Most companies don’t want to list their shares because they fear to be exposed. Besides being accountable to stakeholders, this government demand of certifying financial statements can help firms to strengthen the accounting field in the country. It is an international norm that that is also embraced by other East African Community (EAC) member sates of Kenya, Uganda and Tanzania to minimise errors in tax payers’ books of account. History sows that in the region, Rwanda is lagging behind in this practice compared to Uganda that has had a similar institution for 18 years, Kenya for 40 and Tanzania for 34 years. Ends