Mounting demand for accountancy, audit in Ethiopia

Growing demand for accountancy & audit in Ethiopia
Growing demand for accountancy & audit in Ethiopia
Demand for accountancy and audit in Ethiopia is mounting.

By Asrat Seyoum

A few years back a college graduate in Ethiopia was considered to stand a better chance of getting a job a lot sooner than a graduate from any other discipline. Whether the case is still true or the observation is wrong altogether, one thing we can say for sure is that with the flourishing private businesses the need for accountancy service is also mounting.
In the corporate world elsewhere accountants have a strong hold in the day-to-day activity of the business. Starting from the simple task of handling the daily financial life and drawing up periodic reports of the company, the accountants in the developed corporate environment assume the responsibility of trusted business advisors. Critical factors that influence the profit of business such as cost reduction, risk assessment and so on are within the realm of the responsibility of the accountants. On the other hand, account ants could also assume the role of external auditors who have the power to evaluate the financial undertakings of the business and securitize the work and the reports of the in-house accountants. Hence the auditors, especially in the corporate context that we are talking about, command a greater power in influencing decisions. Shareholders and executive board members depend on the auditors’ report to steer their decisions. In a way, it is clear that they control and monitor the management and, it is believed, that they exercise this power with the shareholders’ interest at heart.

Even though the Ethiopian business environment has a long way to go before it meets the high standards of the western corporate settings, the infant private businesses in the economy still require accountants and auditors to perform at least part of the above-mentioned tasks.

Here it should be noted that the accountants’ responsibility also entails an even greater accountability. Business entities obviously are there to make a reasonable profit and proper financial management is a key factor in attaining that goal. As a result, the demand for accountancy service has been and still is on the rise in Ethiopia.

However, Gemechu Dubiso, auditor-general of the Federal Audit Bureau, tells a different side of the strory. In his paper, which focused on the audit profession in Ethiopia, he identified the basic problems in the profession. Dubiso said that at the moment the private business structure in Ethiopia is evolving into a corporate set-up. He said most of businesses, whether the newly-forming or the already established ones, are forging their efforts to transform into shareholders’ ownership. According to the auditor-general the development paves the way for businesses to implement more sophisticated accounting practices. Furthermore, prior to the early 90s the demand for accountancy services, particularly for auditing, was almost non-existent in Ethiopia, he noted. On top of that, he pointed out that except in a handful of institutions, still audit report is not among the requirement to conduct business interaction. He went on to say that in the developed world financial institutions and most business partners demand appropriated periodical audit reports to do business. In this respect, he praised the encouraging initiatives taken by the Commercial Bank of Ethiopia and the Ethiopian Commodity Exchange. Despite all of the above points, however, Dubsio is optimistic about the growing demand for the audit service in the economy.

On the other hand, the paper also sheds light on the problems associated with the mushrooming audit service providers. The bureau conducted a joint assessment of the audit service in Ethiopia with the World Bank. According to the auditor-general, the assessment came out with somewhat expected inefficiencies in the sector. Among other things, the quality and the credibility of the audit reports produced by the audit firms was highly scrutinized by the assessment. However, Dubiso was not keen to put all the blame on the young and less experienced audit firms. “In the face of inadequate training and insufficient supervision, we can’t blame the firms”, he says. The bureau, which is responsible to properly monitor and issue license for the audit firms, according to its head, partly shares the blame for the prevailing inefficiencies.

In response to the assessment and its adverse findings the government, at the moment, is working on a draft law that would govern the overall financial and audit reporting in the country, it was learnt. The document, among other things, aims at streamlining the issues in the auditing sector to one responsible body. The draft contains detailed plans to set up an independent body which would be responsible to evaluate professional standards and work out baseline standards for the overall audit reporting process. Dubiso notes that adopting a monotonous and acceptable reporting system throughout the country would be on top of the agenda for the impending governor of the sector. Furthermore, he said that it was a critical task to choose the most favorable audit and financial system in due consideration of the country’s financial realities. Hence, this independent body would assume sole responsibility to perform all of the aforementioned duties in addition to the licensing and monitoring of the operators in the auditing sector.

On a related note, it was also learnt that the draft law also aspires to set up a strong academic institution that would work on the development of professionals. The plan aims to have an institution like the Association of Certified Chartered Accountants (ACCA) to provide professional training and certification locally. The institution would work to certify professionals based on the local demand of the profession and the sector.

It is to be remembered that ACCA offers trainings and qualifications in the areas of accountancy and financial management all around the world.