Thursday, February 13, 2025

The absence of citizen auditors in Botswana…

Auditors should be the last line of defence in detecting corporate accounting fraud, irregularities and unacceptable accounting practices. Sadly, global accountants and auditors are hogging news headlines for all sorts of misdemeanours. 

In the immediate past, there have been reports of many areas of audit negligence including signing off on financial statements that overstate the company’s financial position. The unethical act includes inflating revenue, incorrectly accounting for profits from contracts, bringing future profits into the current period, not impairing intangible assets, and failing to ascertain going-concern risk where intangibles exceed tangible assets.

In Botswana the matter goes even beyond that, citizen participation in the audit market remains low. Pundits are of the view that the set up put the local economy at risk as citizen auditors would generally be expected to “put the country first”. 

The Botswana Accountancy Oversight Authority (BAOA) in its consecutive appearance at the Parliamentary Committee of Statutory Bodies and State-owned Enterprises decried the low participation of citizen auditors in the audit market. 

At its last appearance BAOA assured the parliamentary Committee that it would do more research on the subject and revert to the Committee as soon as possible. This week, the Authority said it has carried out a research on the subject covering five countries in the region namely, Namibia, South Africa, Zimbabwe, Zambia and Tanzania.

The research document seen by Sunday Standard shows that Botswana fares badly with its peers in the region. The big brother – South Africa has atleast 98 percent of its certified auditors as citizens followed by Zimbabwe (95%), Namibia and Zambia (88% respectively) while Tanzania data was not readily available. 

With respect to Tanzania, the actual statistics was not readily available. However, our interaction with their responsible officer yielded the information that for them, it was necessary to come up with appropriate legislation, in order to address the significant imbalance that existed in this regard in their country,” reads part of the BAOA research note. 

The research note indicated that for South Africa, the citizen auditors and their firms are fortunate to have the Black Economic Empowerment law which backs them up, whereas in Zimbabwe there is a turnover threshold for the citizens. 

From the research note, the Board of the Authority considered the results of the research and conceded that there was, undoubtedly, cause for concern in Botswana in the area of citizen participation in the running of audit firms. BAOA acknowledges in the research note, “the statistics also shows that our neighbours do not have a similar problem although some countries like Tanzania and Namibia have gone the route of a legislative intervention.”

A brief desk top research conducted by Sunday Standard shows that  out of the 63 active Botswana Institute of Chartered Accountants – BICA certified auditors with 33 audit firms, only 2 firms are wholly citizen owned and the majority are either in small share of partnership between foreign nationals and Batswana, or wholly owned by foreigners.  

In an interview with Sunday Standard, one of the audit firms owned by a citizen said that, start up audit firms complain of stringent requirements for them to operate. 

The anonymous operator of the local firm said, “For one to be approved by BICA to operate they have to be recommended by a firm which they worked for, for a period of 3yrs.  There are just so many obstacles which make Batswana auditors to venture into auditing very difficult. BAOA says everyone should comply with the standards. Currently there are only two indigenous Batswana operating audit firms.” 

The auditor who owns the firm indicated that, he once approached the Auditor General, Pulane Letebele to intervene to atleast come up with laws that can protect indigenous companies. “From our conversation, she said it is a political issue which needed legislators to bring a motion to Parliament that can be passed to protect local auditors and citizen companies.

The other challenge is that Batswana do not support our businesses, they would rather give business to foreign owned companies,” said the anonymous auditor. 

It has emerged that the BAOA Board, resolved that instead of taking the legislative route, the Authority should engage in a consultative process with the audit firms in order to get an appropriate intervention, which should be handled with care to smoothen the process through a phased approach over a given timeframe. This will facilitate a methodical transition to be undertaken that includes appropriate training of potential candidates affected by the proposed intervention. 

It also emerged that when carrying out its research, BAOA sent a letter to audit firms that sought to: apprise them of the results of the research on this issue of concern which has already attracted the attention of the legislature; to request the firms to provide BAOA with statistics of citizen and non-citizen certified auditors in the firms; and provide BAOA with a plan as to how the firms intend to address this issue of citizen participation in the audit market together with the proposed timelines. 

BAOA indicated to the audit firms that, “the legislative approach would only be a last resort measure after all else has failed. You are requested to respond to this request with the required information within thirty days of receipt of this communication.” 

BAOA Chief Executive Officer – Duncan Majinda says Authority has requested all firms to provide information on citizen participation so that based on their responses way forward could be mapped.  As a result, he added, “BAOA cannot give its views before the study is completed otherwise we could influence the whole process and defeat the objective.” 

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