Thursday, September 24, 2020

Accountancy oversight body slams SOEs

The Botswana Accountancy Oversight Authority (BAOA) has expressed concerns over the state of affairs at government owned enterprises, while also for the first time spoke publicly about the fears of KPMG contagion.

Appearing before the Statutory Bodies and State Enterprises committee on Thursday, Duncan Majinda, BAOA’s chief executive officer, said he was disappointed with performances of state owned enterprises, placing the blame on unsatisfactory internal processes and systems.

Majinda explained that most of the internal failures are a result of the organization’s board composition. He said that some of the parastatals have weak board of directors, while others have gone for so long without properly constituted boards, and this has resulted in in the organizations failing to meet their mandates while also raking operational losses.

“The major culprit is at the board level. It is the engine of the business,” Majinda said.

The BAOA top man went on to blast the quality of internal audits done at the state owned enterprises, expressing his displeasure at what he termed “high level dependency of internal auditors on external auditors’ and shoddy work done by accountants. His analogy is auditors and accountants are like doctors, and if the doctor is not doing his job, there will be higher causalities.

Asked by Major General Pius Mokgware to share his insights regarding the embattled KPMG firm, Majinda said issues surrounding KPMG worried him a lot. He said the local KPMG branch audits between 60 to 70 percent of big businesses in Botswana, and any negative developments from the local firm will send shockwaves in the domestic economy.

“We are worried about the news in South Africa where KPMG has lost significant clients following its close association with some of the scandals that have hit the country,” Majinda said. “The situation seems to be getting worse and worse.”

The concerned Majinda has since told the committee that they have escalated their concerns to the Office of the President through ministry of Finance and Economic Development, the regulator’s principal.

Meanwhile, preliminary findings so far point to no wrongdoing from the local arm of KPMG. On Friday, Bank of Botswana which is audited by KPMG assured the committee that upon hearing about the scandals KPMG South Africa was involved in, they immediately reviewed all their audits done by KPMG in the last three years and their investigations have not turned anything out of the ordinary.

Another issue that has kept Majinda awake is citizens’ empowerment in the accountancy landscape, of which he says it is seriously lacking. Majinda said out of the 45 partners of accounting firms in Botswana, less than 12 are Batswana. The accountancy regulator says there is need for affirmative action to promote citizen owned firms, and reduce dependency on the international big four firms (Deloitte, PriceWaterHouseCoopers, KPMG and Ernst & Young).

Furthermore, Majinda says there is need for mindset shift from local business because they tend to skeptical and hesitant to appoint any firm which is not part of the big four brand names. “Some of the best auditors at this international brand names are Batswana. Why not form a company so they don’t depend on international networks?” Majinda asked rhetorically.

Majinda, a man who spent most of his career in promoting the local accountancy depth and breadth, said Batswana are pushed out of these foreign dominated accounting firms. His assertions were backed by Mike Lesolle, BAOA chairman, who said there is not enough citizen absorption in the field.

Lesolle said about 10- 15 years ago there were few citizens chartered accountants, but that has been drastically reversed and there are now more trained citizen accountants. Lesolle, previously with Botswana’s leading accountancy college, said their end goal as the regulator is to get the young people up the career ladder given the difficulties they encounter after graduating.

Lesolle further said the current situation where there is still preference of foreign trained accountants cannot possibly be allowed to go on. He says there are currently dealing with the gaps identified and they have a structure in place to deal with the bottlenecks.

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