Close to two-thirds of audit teams hired by commercial banks must hold credentials from the Association of Chartered Certified Accountants (ACCA), a directive in the making by regulatory authorities prescribes. The head of an audit team should have five years of experience in auditing banking, and half of the team members have three years of experience.

Regulators at the National Bank of Ethiopia (NBE) say the amendment aims at ensuring auditing standards are enhanced. But industry practitioners fear that this may cause syndicates to emerge.

The draft will replace a directive that has been enforced for over a quarter of a century. It is outdated and does not recognise the roles played by the Accounting & Auditing Board of Ethiopia (AABE), according to Solomon Desta, a vice governor of the NBE.

Based in London, the ACCA is among the largest accredited professional associations in the world. Its qualifications can be attained through ACCA-Ethiopia, which has over 1,000 trainees and over 560 certified members.

There are around 150 audit firms in Ethiopia, registered under and accredited by the Board. Firms providing auditing services to financial institutions are few, with a handful dominating the market. Many banks and insurance firms hire one of the big five, including A. A. Bromhead & Co, Degefa & Tewodros, Getachew Kassaye & Simon, and TAY Authorised Accountants & Auditors.

Forty-five years in the audit service, A. A. Bromhead & Co serves institutions such as Dashen Bank. Last year, the firm charged Dashen 1.7 million Br in audit fees. Getachew Kassaye & Simon, whose founder passed away a couple of years ago, has been auditing the Bank of Abyssinia (BoA). It was paid 684,000 Br last year. The other player, TAY, audits several financial institutions, including Berhan and Bunna banks. Incorporated in 2005, TAY has 50 employees, of which about 40 are auditors who have experience in auditing banks. Ten of them are ACCA-certified accountants and auditors.

“Candidates must be ACCA members at the very least to be hired as an auditing manager at our firm," said Tesfa Tadesse, managing partner at TAY.

He is bullish that his firm will meet the requirement the national bank will impose on the industry. Tesfa believes the changes proposed by the regulators for the selection of external auditors will have a positive impact.

"However, it'll be difficult for firms that haven't been in the business long," he said.

TAY has a consulting wing helping companies comply with International Financial Reporting Standards (IFRS), module preparation and capacity building.

Tesfa's observation is reflected in the views of Tensae Nebiye, a managing partner of Tinsae & Zelalem (TZ) Audit Partnership, established last year. The partners have 15 years of experience in auditing.

Tensae foresees the certification requirements as "unrealistic" for few ACCA-certified auditors are in the labour market. He argues conducting a bank audit would require a team of 10 members, and more than 100 qualified professionals would be required to meet the auditing needs of the banking industry.

"Only a few companies would be able to work in rotation," said Tensae. "The rationale behind introducing a new directive isn't clear.”

There are few audit firms competent in handling the demand of the banking industry, according to Desalegn Fissehatsion, director of finance and treasury at Berhan Bank.

“Some firms provide their services to more than five banks," he said.

Berhan Bank selects an auditing firm through a bidding process held every three years.