Parliament is moving close to establishing the country’s first institute for certified public accountants and auditors, as a draft proclamation was submitted for ratification following a final public consultation last week.
The legislation aims to overhaul the country’s accounting and auditing standards, addressing the acute shortage of internationally certified professionals and improving the credibility of financial practices. The law will also ban regional offices from certifying accountants and auditors to ensure reliability and consistency across the country.
The Ethiopian Institute of Certified Public Accountants, once established, will focus on training and certifying professionals in International Financial Reporting Standards (IFRS).
Stakeholders argue that this is a critical move as the country opens its capital market and seeks to attract foreign investors who demand reliable, globally certified auditors for financial decisions.
Prepared by the Accounting & Auditing Board of Ethiopia (AABE), the institute will initially be overseen by the Board which is accountable to the Ministry of Finance (MoF) for seven years before transitioning to self-governance by auditors and accountants. Fikadu Agonafir, director of AABE, acknowledged that "auditors are not capable of being sole administrators for the time being."
Currently, the country has only 500 internationally certified auditors, with less than half licensed by AABE. Legal head Samson Negash says that there is an urgent need for reform. “There is a severe shortage of capable professionals in the country,” he said.
The institute is expected to improve regulatory oversight, aligning operating procedures with global standards such as the International Standards of Auditing (ISA) and the International Public Sector Accounting Standards (IPSAS). It will have the authority to regulate, certify, and oversee accounting students and professionals, ensuring compliance with the International Federation of Accountants (IFA).
The governance structure of the proposed institute includes a general assembly, an administrative council, an accountancy education committee, a discipline and audit committee, and executive bodies. The general assembly will oversee strategy formulation, approve annual budgets and bylaws, and hire independent auditors.
The administrative council will include six certified accountants, five government and academic officials, and a president and vice president, both of whom must be accounting professionals.
The institute’s funding will come from annual membership fees, school fees, government sponsorships, and donations.
However, participants during the consultative meeting questioned the availability of professionals capable of training and examining at international standards and the credibility of certifications for global recognition.
A scattered licensing system and overlapping mandates between the AABE and regional auditing bureaus were raised as major issues. Fikadu says that there are ongoing discussions with regional states to transfer full licensing authority to AABE. The general assembly will determine whether regionally licensed accountants or AABE-licensed auditors will need additional certification.
“It’s a work in progress,” Fikadu stated.
The bill also proposes a discipline tribunal comprising certified accountants, a member of the Federal Lawyers Association, and three government officials. This tribunal will have the authority to suspend, revoke, or repeal certifications and publicly announce disciplinary actions.
Participants voiced worries about the potential human rights violations of publicly shaming temporarily suspended professionals. To address this, an appellate committee will be established by the general assembly to handle disputes and appeals.
Gashe Yemane, CEO of Auditors Service Corporation, says the absence of a reputable national institution has forced companies to rely on international firms for auditing services. He says overlapping mandates between the AABE and regional auditing bureaus has led to inconsistent licensing requirements.
Neighbouring African countries, such as Kenya, Uganda, Rwanda, and Tanzania, established certified accountants institutes in the 1970s and 1980s. Kenya, with a population of 55 million, established its institute in 1978 and now has 45,000 certified accountants.
According to Tesfa Tadesse, an auditing consultant, Ethiopia's accounting profession has lagged behind. He questioned who would oversee the quality of certified public accountancy and whether there are enough qualified professionals to ensure fair assessments within the institute.
Yidnekachew Gezahegn, a lecturer at Dilla University worries about the high cost of international certification. He stated that many aspiring professionals have abandoned certification efforts due to unaffordable costs.
“For years, the country moved forward with principles but lacked uniform standards,” Yidnekachew said. This inconsistency, he says, has resulted in overvalued and undervalued financial and tax audits performed by auditors.
"Auditors have long been overlooked," he said.
PUBLISHED ON
Jan 25,2025 [ VOL
25 , NO
1291]
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