Auditors Under Fire as City Officials Hunts Billions in Lost Taxes

Apr 19 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

Key Takeaways:

• Over 800 auditors and accountants are under scrutiny in Addis Abeba, accused of tax understatement totalling 10.6 billion Br.
• A comprehensive investigation covered 36,729 files, with alleged discrepancies found in the majority of audit assessments.
• The accounting community faces potential professional fallout, risking investor confidence and economic stability.
• Tensions mount as professional associations contest the allegations, calling for due process and judicial review.

Tax authorities in Addis Abeba have blamed more than 800 auditors and accountants for allegedly understating the tax liabilities of businesses, piling new pressure on a profession already rattled by allegations of misconduct and the threat of losing their licenses.

According to the Addis Abeba Revenue Bureau, an internal review found a 10.6 billion Br shortfall in expected collections for the 202324 fiscal year. The Bureau's officials blame the gap on underinvoicing, inflated expense claims and profit margins that appear “abnormally low” when measured against industry benchmarks.

“Some auditors underreported taxes for every client they handled,” said Sewnet Ayele, the Bureau’s spokesperson. “The unpaid differences have now been settled by the taxpayers themselves.”

The Bureau’s investigation covered 36,729 preaudit tax files and looked at 823 licensed audit professionals. Of those, 334 were allegedly found to have produced financial statements that diverged from official findings by more than 75pc, and another 490 showed gaps of 25pc to 75pc. Only 39 accountants produced financial reports that matched the Bureau’s assessments close enough to merit praise from the city's revenue officials.

The authorities have asked the Accounting & Auditing Board of Ethiopia (AABE), a federal licensing body chaired by Eyob Tekalign (PhD), state minister for Finance, to revoke the certificates of most of the alleged offenders. The Bureau issued written notices to others and complemented the few whose work it said met with its tax findings. If AABE agrees, dozens of practitioners could be barred from accepting any new audit assignments, a move that would be unprecedented in a market where trust in financial reporting is already precarious.

Certified auditors or accountants who help clients evade tax are jointly liable for any underpayment. Once the Revenue Bureau identifies potential wrongdoing, it is obliged to send the file to the AABE, which can suspend or cancel licenses. Although the rules have been on the books since 2016, this is the first time the Addis Abeba Revenue Bureau has published such a sweeping enforcement report.

Reaction from the audit and accounting field was swift. Leaders of the Ethiopian Professional Association of Accountants & Auditors, the Association of External Auditors, and the Accounting Society of Ethiopia called the accusations a “slanderous campaign” that “presumes guilt before AABE’s verdict.” The lobby groups said auditors should be “presumed innocent until proven guilty” and urged the Bureau's heads to retract their public statements. They demanded talks to resolve the dispute.

Officials of the Bureau remain unmoved. According to Sewnet, his office has “no legal obligation” to meet with the associations and has asked them to prove their legal status. He wanted to have them confirm that members hold valid AABE certifications, conditions he says should be met before any dialogue can take place.

“They've yet to respond,” he told Fortune.

AABE Acting Director General, Fikadu Agonafer, confirmed that his office has received the file and is gathering additional documents.

“The Bureau’s role is to report; ours is to decide,” he said. "The agency could refer the matter for criminal prosecution if tax fraud is established."

Yohannes Negatu, president of the Ethiopian Accountants & Auditors Association, believes the "premature allegations" risk damaging investor confidence in the financial reporting standard.

“Auditors work based on documents supplied by clients,” he said. “If the Bureau suspects fraud, it should also investigate the taxpayer.”

The publicity, he argued, has already “unfairly harmed the profession” and may push companies toward foreign audit firms, draining scarce foreign exchange reserves.

Kaleb Wendu, who teaches tax law at Dilla University, concur. He warned that voluntary compliance depends on trust.

“Without it, evasion becomes a survival tactic,” he said.

The potential crackdown by the authorities may come even as the capital’s tax receipts are climbing.

Over the first nine months of the current fiscal year, the Bureau collected 160.9 billion Br, helped by 13,000 new VAT registrants, which officials say doubled monthly revenues from it to 1.7 billion Br. The number of registered income taxpayers jumped to 49,000 from fewer than 20,000 the previous year. The Bureau is also working through a backlog of taxpayer grievances. Of the 12,561 appeals filed, officials disclosed, they have reviewed 97pc and adjusted 52pc “in line with the nature of the appeals.”

Internally, 133 employees and administrators face disciplinary measures or corruption charges as part of the campaign.

Tax officials see tighter enforcement as a way to plug leaks and reassure international lenders that the government is serious about domestic resource mobilisation. However, confidence is a fragile commodity.

Professional firms note that underinvoicing often starts with traders trying to offset inflation and currency depreciation, problems outside an auditor’s control. They argue that differences between the Bureau's assessments and audited statements can arise from timing issues, valuation disputes, particularly over imported vehicles, and unclear industry benchmarks. Many cases, they say, could be settled through routine desk reviews rather than public censure.

The Bureau insists it is acting within its mandate and says the profession has had ample warning.

“The law gives us authority,” Sewnet said. “This is about protecting public interest.”

He declined to say when AABE might issue final rulings but noted that taxpayers have already paid most of the disputed sums.

Tax evasion and fraud are criminal offences, but naming suspects before conclusive findings “can cause irreparable reputational harm.” He urged closer cooperation among AABE, the Revenue Bureau and the professional associations to avoid further tension.

“Tax systems function on good faith,” said Kaleb. “Lose that, and enforcement costs rise for everyone.”

For now, the accused accountants are waiting. AABE’s review could take months, legal experts say, especially if practitioners contest the Bureau’s methodology or file counterappeals. Courts handling tax cases are already clogged, and the outcome may set a precedent for how aggressively authorities police the accounting profession in future audits.

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PUBLISHED ON Apr 19,2025 [ VOL 26 , NO 1303]

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