"Shady" accountants face P500,000 fines

MBONGENI MGUNI
Staff Writer | Friday August 13, 2010 00:00

This is in accordance with the recent passing of amendments to the Accountants Act.

Before it adjourned last week, the Winter Parliament passed amendments to the Accountants Act and enacted the Financial Reporting Act (FRA), both of which prescribe stiff penalties, including long jail sentences, for professional accountants who fall foul of the law.

The Accountants Act transforms BIA into the Botswana Institute of Chartered Accountants and entrusts this new entity with the registration of all professional accountants, certified auditors and firms. According to BIA's latest research, the organisation has 1,127 members across various categories and more than 500 who are not registered and thus not regulated, monitored or accountable to the existing legal and ethical guidelines and institutions.

Over the next few weeks, BIA will fast-track the cobbling of the new amendments into enforceable regulations before swooping down on unregistered professional accountants.

This week, BIA Chief Executive Officer, Duncan Majinda, told BusinessWeek that the amended Accountants Act was a Godsend to the profession, coming as it does five years after initial efforts to modernise and revamp the profession.

Majinda said the amended law's tougher bite was essential to upholding the highest standards of professionalism in the field of accountancy.

'These fly-by-night accountants are a major problem,' he said. 'They are not regulated or monitored. If something happens and people complain, we cannot do anything. These amendments are ushering in a robust disciplinary regime.

'This Act will improve standards, and Parliament was very strong on this point. The legislators actually said even if the fine goes up to a million pula, they would be happy. The misbehaviour involving these unregistered professional accountants includes cheating clients and providing low quality of service.' Majinda explained that registered professional accountants are subject to various legal strictures and penalties for misconduct. He said BIA members found guilty of flouting the legislation governing the profession and other offences are liable to fines, cautions, suspensions and exclusion from the institute, which is effectively a ban from operating in Botswana as a professional accountant.

Any firm that hires an excluded accountant will also be censured. 'Without this legislation, people will continue taking chances,' said Majinda. 'Now the profession is totally different because of the two pieces of legislation.Batswana should know that this is a very serious profession.'

The CEO explained that the new regime will be tasked to a disciplinary committee chaired by an individual not associated with the accounting profession, most likely a lawyer, in order to add credibility to the disciplinary process.

The Financial Reporting Act (FRA) will enhance the integrity of the accounting profession further through the establishment of the Botswana Accounting Oversight Authority (BAOA), which will be only the third such body in Africa, after Mauritius and South Africa.

Ex-officio members of BAOA will include the Accountant General, the Governor of the Bank of Botswana, the CEO of the Botswana Stock Exchange, the Commissioner General of BURS, the Executive Director of BOCCIM, and the CEO of NBFIRA.

Majinda said the Authority will be a regulator of the profession and that its duties will include the monitoring and improvement of financial reporting and auditing within public interest entities and the corporate sector.

'Although as accountants, we are viewed as policemen, we also need to be policed,' he said. 'All the professional accounting bodies will be subject to the Authority's oversight and will be accountable to it. Every year, each professional body will have to detail what it is doing to protect the public interest. These P500,000 fines are part of protecting the public interest.'

According to the FRA, the Authority will be directly responsible for the financial reporting and auditing of all public interest entities and large corporates, which description covers all parastatals, all listed companies, all deposit takers such as banks and insurance companies, all NBFIRA companies as well as economically significant corporate entities.

Effectively, the Authority will set the standards for registering firms and individuals qualified, in its eyes, to provide financial reporting and audit services for public interest entities and certain corporate entities. Thus, boards of directors of the targeted entities will no longer have the authority to appoint auditors of their own choice.

The FRA also stipulates steep fines for non-compliance to the Authority's powers. 'A public interest entity or other targeted entity cannot be audited by a firm or individuals who are not registered with the Authority,' hMajinda said. 'That's a very serious offence and the firm will find itself in deep trouble.'

Majinda is calling on experienced Batswana professional accountants to form companies and approach the Authority for registration, saying it is in such a manner that citizens and the profession's development will benefit from the FRA. 'If it's individuals, they will not be able to succeed, but it's not that citizens are incapable of registering. They should come together in firms and they may secure access to the public interest entities,' said Majinda.

'Parliament was very emphatic about giving Batswana a chance to do this. It's no longer up to the boards, but the Authority to approve these auditors.'

The BIA CEO emphasised that the new disciplinary regime in accounting was necessary as the profession is critical to the country's economic development. He said high standards of professionalism in accounting and adherence to international standards were critical for the attraction of FDI, the enhancement of transparency and accountability and combating crime.