Africa needs to focus on auditing basics, says ACCA Africa Director
Africa faces similar auditing challenges to global counterparts, plus several of its own, says Jamil Ampomah.
This Future of Audit Series interview is proudly brought to you by ACCA.
The accounting and auditing profession in Africa varies from country to country across Africa, says Jamil Ampomah, Africa Director at the Association of Chartered Certified Accountants (ACCA). Different countries are at different stages of development, and this is clear to ACCA through its engagement with members across 45 African countries.
“Regardless, the most important thing to remember is that audit remains very central; the auditors’ role to verify the authenticity of transactions remains quite critical,” he says. “It's broadly accepted that economic viability and the attraction of foreign direct investments hinge on strong financial statements. It’s our opinion that in the future is that audit will still be very important.”
Jamil points out that the quality of audit work underpins investor confidence, and in turn decision-making, and should therefore be a key focus area. Corporate failures around the world have damaged confidence in audit quality, which needs to be addressed. He says South Africa is a good example. The country was ranked first globally for audit standards for seven consecutive years on the World Economic Forum’s Competitiveness Report, until 2017. It currently ranks forty-ninth out of 141 countries.
Jamil says that this can damage investor confidence and have detrimental effects for the country, and stresses that corporate failures are an issue that need to be addressed not only in Africa, but throughout the world.
He also believes it’s important to address the expectation gap that exist. ACCA has covered this is detail in its report Closing the expectation gap in audit. Part of this is the evolution gap – the difference between what auditors are supposed to do and what the public expects them to do. Jamil believes that collaboration between industry stakeholders, not only within each country, but globally, is important in seeking to bridge these gaps. This is why ACCA engages with practitioners, regulators and industry bodies in every country in which it operates, as well as facilitating regular roundtable events between its members.
To close the knowledge gap (which ACCA defines as the difference between what the public thinks auditors do and what auditors actually do), there needs to be engagement with all the parties involved in the financial reporting ecosystem. “The future of audit is not just going to rest on audit,” says Jamil. “It is going to rest on all actors within the ecosystem. To close the expectation gap means being clear about the responsibilities of all the players.”
He says this includes board appointments, audit committee appointments and company management. “Before the external auditor comes in to do their work, you want there to be that level of confidence that there are the right checks and balances in place,” he says. “I think there’s also work to be done in the education around what the auditor’s role is about and the perennial question around whether it’s the auditor’s role to detect fraud. The primary responsibility for preventing fraud never changes: it rests with management. I think that is something that we need to be very clear on, as well as the role of other experts in complementing and supporting audit work, which will become critical in future. As we become more technology-driven, the need for experts in technology, whether it's artificial intelligence or forensics, becomes even more critical.”
Jamil says that in many countries on the continent, there is work to be done in defining audit thresholds. “What we sometimes find is that audit is mandated for all organisations, even very small business entities,” he says. “For a one-man business, for example, the value of an audit is not clear – it’s just seen as a cost. We need to look at setting the right thresholds for organisations that need to be audited.”
Many African countries also have a high proportion of state-owned institutions. “In some economies in Africa, you actually have more than 50 percent of organisations falling within the public sector, so public sector auditing is important because you want to make sure that your organisations are run effectively, that they have the right governance frameworks in place, which then ensures that the right audit committees are set up and the right questions are asked, and ultimately, the financial reports that are audited deliver the level of confidence that is required. That is an area of concern that needs to be addressed for the future,” he says.
Building capacity within the profession is an ongoing challenge, both in terms of practitioner numbers and within audit regulators. “When we tend to talk about the future of audit, we quickly move to evolution and we start talking about technology and new trends and artificial intelligence, but I think for Africa it's very important to really be clear about the basics, in terms of some of the challenges that we face,” says Jamil. “Then we can begin to look at how we address them.”
Auditor education and the incorporating of more technicians and specialists into the profession is something he believes will play a part in solving Africa’s audit challenges, and that it’s also important to acknowledge that unpredictability will also be with us for some time. “The audit profession needs to be ready to be able to adjust and adapt to the constant change that we are going to be seeing,” he says. “I think this needs to be reflected in how we continually develop the skills of our people to be able to be ready and relevant in the future. We cannot continue to be complacent as auditors. There has to be an element of soul searching and going back to understand our role and how we need to adapt to meet the needs of those who consume the audit report.”
Ultimately, he says, this requires real change from all players in the financial reporting ecosystem. “It's not simply the work of one party, but it has to be everyone involved in that ecosystem,” he concludes.