Battle of the Auditors
There is an ongoing behind the scenes war in the Auditing Sector as foreigners of Asian origin are accused of elbowing citizens out of business, Botswana Guardian has learnt.
The Asians who own and run big firms have also been accused of conniving with the Botswana Accountancy Oversight Committee (BAOA) to disadvantage citizens and drive them out of business. BAOA was established through the Financial Reporting Act, 2010 (the Act) as the independent oversight body of the accounting and auditing profession; to regulate the reporting of financial matters of Public Interest Entities and the corporate sector.
Investigations by Botswana Guardian have uncovered that the big war has been triggered by citizen-owned auditing firms asking to be allowed as part of Citizen Economic Empowerment to undertake works or tender for Public Interest Enterprises (PIE). PIE tenders are worth millions of Pula and citizen-owned companies are demanding a piece of the cake.
Before anyone is considered a certified auditor there are requirements that they have to meet and if one has met them, one can start a practice.
According to sources, in terms of the Financial Reporting (Amendment) Act 2020 relating to registration of PIE Auditors it has been argued that citizen owned audit firms have not graduated from small to PIE level due to failure to meet certain requirements.
“Those requirements that seem to be applying only to them seem to relate to reviews. I am bringing this out because lately there have been scandals from big firms who have never been seen anywhere threatened with closure or certificate withdrawal.
“No one is disputing the fact that compliance should be met, but the problem is when it is selective. We can state scandals by the PIE auditors. State one by a citizen-owned firm? To say citizen-owned firms are not making the grade is an understatement,” a source within the ministry of finance said.
Citizen-owned firms/Certified auditors are said to be few because of the structure which has been intentionally made by certain individuals running BICA and lately BAOA.
For one to be approved by BAOA, one must have been approved by another certified auditor. It is alleged that these certified auditors have since decided to limit the number of locals into the market.
“The regulator will rather have local auditors practise under the big firms rather than stand alone. With this they can continue to do business within the country without anyone asking the whereabouts of locals. We are now threatened with closure if we don’t join these big firms.
“There is this concept that the three local firms should merge to meet the set requirements. You have three local firms and you're suggesting that they should merge! Anyone would want to see them increase and giving them support,” a local auditor, who did not want to be named for fear of victimisation, said.
Citizen auditors decry that this is the level of thinking which they are subjected to, which will eventually drive them out of the market, while big firms remain to benefit from PIEs. It has been argued that Batswana firms are doing a great job and should be supported.
There have been calls for the closure of BAOA and have its duties carried out by the Auditor General, as “this institute has become a weapon for foreign nationals in the field not only to control the audit market but to exclude locals who
are trying to get into any business”.
According to sources, any firm should have more than one auditor as it grows. For start-ups it is not a necessity since one can ask another certified auditor to review their work for quality assurance purposes.
There are claims that Minister Peggy Serame might have misled Parliament during the Parliament Budget Session this year when answering a question regarding this matter.
Minister Serame stated that when it comes to citizen empowerment, in terms of Economic Inclusion and Public Procurements Acts, wholly-owned citizen audit firms are given priority when awarding tenders for statutory audit work.
She said however, citizens have not fully taken advantage of this policy by opening their own citizen firms but instead opted to join international network firms.
According to the minister, there are very few citizen-certified auditors as they make only 16 percent of the certified auditors of both PIE and Non-Public Interest Entities (Non-PIE).
She said there are no 100 per cent citizen-owned audit firms of PIE in Botswana. According to Serame, there are 44 certified auditors of PIE of which only nine (9) are citizens and 29 are certified auditors of Non-PIE, with only three being
citizens.
She added that out of the nine citizen certified auditors of PIE, all of them have opted to join multinational audit firms with international networks and six of them are actually managing partners in those firms.
“I am not aware that the Financial Reporting (Amendment) Act of 2020 results in the exclusion of 100 per cent citizen-owned companies. However, I am aware that based on the audit practice reviews conducted since 2015, citizen owned audit firms are struggling to meet the minimum requirements for certified auditors of PIE,” the minister told legislators, when responding to a question in Parliament.
Sources have argued that the PIE thing was done to counter Economic Inclusion Act.
“If there are no locals categorised as PIE the better. I urge the minister to engage local certified auditors for more clarity on these issues raised. No one has ever engaged us.
“In short we are not failing to take advantage of empowerment laws instead those laws have closed us out. We therefore request the minister to make a provision for locals to be able to audit parastatals and NBFIRA licensed entities”.
BAOA Public Relations Officer, Oupa Gaofise says the Financial Reporting (Amendment) Act, 2020 (the Act) requires that no person/firm shall hold any appointment or offer audit services as a certified auditor/audit firm unless registered with the Authority.
He said there are specific registration requirements, as per the Financial Reporting Regulations, 2021, that individuals/firms are required to meet before they can be registered with the Authority.
“One of the requirements to register as a certified auditor is that before or after admission to membership of the Botswana Institute of Chartered Accountants (BICA), the individual should have completed a period, of at least 30 months of approved accountancy and auditing experience in an Audit practice under the supervision of a Certified Auditor of an audit Firm.
“For one to become a Certified Auditor/Audit Firm of PIE, the Act requires that no person/audit firm shall practice as a Certified Auditor/Audit Firm of PIE unless such person/audit firm has passed the most recent audit practice review and the audit firm has at least two Certified Auditors,” he said, in response to a questionnaire sent to him.
According to Gaofise, two Certified Auditors cater for the Engagement Quality Review, which is a requirement on all audit engagements on PIEs. He said the role of the Engagement Quality Reviewer is to review the work of the Engagement Partner in order to minimise the risk of an inappropriate audit opinion being issued.
The BAOA spokesperson stated that Certified Auditors/Audit Firms should, therefore, have performed satisfactorily at the lower level of non-PIEs audit operation before they can be considered for registration as Certified Auditors/Audit Firms of PIEs.
He pointed out that all Certified Auditors/Audit Firms registered with the Authority are allowed to audit non-PIEs. These registration requirements, he said, are standard and are applied consistently across all who apply for registration as Certified Auditor/Audit Firm. There is no reference to citizen or non-citizen in this regard.
“With respect to citizen empowerment in terms of Economic Inclusion and Public Procurement Acts, wholly-owned citizen audit firms are given priority when awarding tenders for statutory audit work.
However, citizens have not taken advantage of this policy as they have either opted to join international networked (multinational) firms or they do not meet the requirements of the Financial Reporting (Amendment) Act, 2020 which were designed having in mind the protection of public interest.
“At the end of the day, while we are strong proponents of citizen economic empowerment, the policies put in place to implement these initiatives should not result in undue risk to the public.”