The Accountant-Mar-April 2017

Financial reporting and assurance
THE ROLE OF AUDITORS
DURING THESE TRYING
TIMES OF CORRUPTION
By Bernard Ouya B.Com, bernuya@gmail.com
Someone once said that behind
every case of embezzlement of
funds there is an accountant
who made changes to the
books of accounts and a lawyer
who defended the wrong-doer in court.
The truism of this statement, if was to
be measured on a scale, in my humble
opinion, would incline unfavourably on
the true side rather than on the false side.
In most instances the embezzlement of
funds is done by merely making changes
to the books of accounts, rather than
stealing the physical cash as many may
think. It’s the accountants who prepare,
amend and keep these books.
Accountants prepare books of
accounts and a set of financial statements
in accordance with International
Financial Reporting Standards
(IFRSs), International Accounting
Standards(IASs) and International Public
Sector Accounting Standards (IPSASs)
together with generally agreed accounting
principles (GAAPs). In some instances,
though, like in cost and management
accounting they are allowed to tailor-make
their work to best fit the organisational
requirements without sticking too much
to the conventional requirements. These
standards are designed to offer guidance
when preparing financial statements
whilst ensuring high quality work is
produced that meets globally set standards
and also puts all accountants on the same
level ground by ensuring homogeneity
of the accounts. The regulatory body for
accountants in Kenya is the Institute
of Certified Public Accountants of
Kenya (ICPAK). It is an affiliate of the
International Federation of Accountants
(the global umbrella regulatory body
of the accountancy profession) and
is charged with the watch-dog role of
ensuring the profession meets the high
calibre international bench-mark and
promotes the profession locally.
Further to the regulations above,
section 159 of the Companies Act requires
every public company to appoint auditors
to safeguard the interests of shareholders.
The shareholders neither have time
nor expertise to keep track of their
investments and wealth maximisation
objective, hence need for a watch-dog
that will ensure checks and balances and
report the same to them. In a government
set-up, the taxpayers are analogous to
the shareholders of a company while the
executive (of both national and county
government) are those charged with
management and governance. In the
recent reports released by the auditor
general, the government’s chief watchdog
including but not limited to the press
releases from non-governmental anticorruption
agencies, there has been lots
of reported corruption cases in the public
domain. There is a myriad of incidences of
misappropriated funds (funds used for the
purpose for which they were unintended),
unnecessary spending, circumventing
procurement procedures, ghost purchases
and expenditures, and worst of all,
overstatement of expenses just to mention
but a few.
This begs the question, “What is the
role of auditors during these trying times
of corruption?” Is there anything more
that they can do? Generally, an auditor’s
role is to express an opinion whether the
financial statements represents a true and
fair view. It’s the auditor’s report that the
shareholders and taxpayers rely on and it’s
from that they build trust and confidence
on those charged with management and
governance. Auditors can foster confidence
and trust by promoting accountability
of those charged with management
and governance. For instance, external
auditors may recommend penalties for
those managers or accounting officers
that breach procurement procedures and
defalcate funds. They could be compelled
to take personal responsibility like
recommending their sacking, an amount
to the tune of what is lost under their
watch recovered from their salaries or their
personal property taken. Some of these
measures may seem very stringent but
may go a long way to eradicate impunity
in corporate governance.
Auditors can also help to stem graft by
enhancing compliance with policies, laws
and regulations. Even though these are
not the primary roles of an auditor, they
can engage management in understanding
the laws, policies and regulations in
place as well as putting them on toes to
adhere to them. Working with regulatory
bodies can also enhance management
compliance and strengthen ties between
the regulatory bodies and management.
For instance, regulatory bodies like
8 MARCH - ApRIL 2017