Some accountants selling integrity of the profession – Nzekwe, ANAN president
By AMECHI OGBONNA
Monday, September 24, 2007

•Nzekwe Photo: Sun News Publishing

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Mr. Samuel. N . Nzekwe, the current president of the Association of National Accountants of Nigeria (ANAN), is a man who believes that accounting is an honourable profession, having been in it for several decades.

He is however, worried that some practitioners have desecrated the ethics of the profession, by abandoning some of the time tested virtues that gave it credibility, for filthy lucre, leading to the prevailing poor image of the accounting profession.
He spoke to Daily Sun on the need for practicing accountants to maintain standards in order to restore the lost glory of the profession.

Accounting standards for the informal sector.
I have said it in several fora, that the informal sector is always left out in policy making process by regulatory authorities. If you look at what operates in banks for instance, you discover that it is mostly the formal sector that is recognised.

But in actual fact, not many operators of the informal sector go to the banks because many believe banking processes are cumbersome and that getting a loan is difficult. Some even believe that going to the bank will amount to exposing themselves to government in terms of taxes they have to pay.

Therefore, my argument is that in all facets of the economy, the informal sector should be considered, because not doing so might hamper the implementation of whatever economic policy we have in place.
Today, all our monetary and fiscal policies are not working because the informal sector, which is the engine of the Nigerian economy, is not taken into consideration, when those policies are formulated. I once asked the Central Bank Governor Professor Chukwuma Soludo, at the last Economic Summit in Abuja, to reconcile the amount of imports that come into the country and the quantum of foreign exchange officially allocated to importers in the country.

And it was obvious there was no way this can be reconciled, because the bulk of goods that come into the country originate from the informal sector, that sources its foreign exchange from the parallel market. As long as the CBN does not have the records of these transactions, it will be difficult for any one to imagine the quantum of what is imported into the country.

That is why I am advocating that government should device a way of incorporating transactions and activities of the informal sector, whenever economic policies are formulated in the country, so that in that way we can begin to have a better understanding of our GDP and other economic variables.
For instance, when you look at the accounting standards issued by the Nigerian Accounting Standards Board, they are usually tailored towards the limited liability companies, which seem to be the only ones that the Corporate Affairs Commission spells out detailed guidelines relating to their operations.

But regrettably, Business name registration that are larger in number has no standards. How do they keep their accounts? You discover that most of them use the standards applicable to limited liability companies, which should not be so under normal circumstance. The business operator or one man-limited liability entrepreneur operates an incomplete accounting formula because there are no laid down principles applicable to his industry that he should adopt in preparing his financial statement.
You notice that some of these entrepreneurs only keep records of sales and purchases and not other activities and yet business has been going on.

I think that because these businesses form the engine of our economy, the NASB ought to develop a standard accounting format for them, so that they can begin to operate at that level, pending when they graduate to limited liability companies.

Future of informal sector
The hub of the Nigerian economy is the informal sector, and so if we are able to develop it, our growth as a nation is guaranteed. That was how most countries in South East Asia started and today we can see where they are in the economic ranking of the world.
It is in the informal sector that both the developed and the developing economies have the largest pool of active workforce that sustain them.

Think of any big company in this country and find out how many people it is employing. Perhaps some of the largest companies employ between 1,000 – 2,000 people and we may have about 30 or 40 of such companies in the country. The aggregate of these companies’ total workforce at the end of the day may just be a fraction of Nigeria’s over 57 million active workforce. This means that the larger majority of the population is engaged in the informal sector.

It is the informal sector that is absorbing them and yet government has continued to relegate that sector to the background by not making the environment conducive for them.
It is the quantum of activities in this sector that gives any observer a perfect indicator as to whether the economy is growing or not growing, because you see various small businesses doing various things and getting value for what they are doing. Then you can say the economy is doing well.
That again brings me to the issue of access to funds by small and medium scale enterprises.

We have discovered that some of these companies cannot get funds, because they lack basic education to communicate their needs to the banks in terms of generating financial statement that banks are asking for, while some do not have the collaterals. And that is where I believe the accountants should come in, because we have a role to play in helping SMEs access bank loans.

We are talking of a situation where somebody gets a bank facility based on reference or report an accountant prepared for him, and when banks are bound to honour such report and give loans to the entrepreneur accordingly.
It is unfortunate that this is not working in Nigeria, because banks have no confidence in the reports of accountants. I am making reference to auditors, whom some banks and other economic observers somehow think, have failed the nation by the quality of reports they have issued about certain companies in the country in the past.
Somehow, many believe that some auditors have failed the nation in terms of the various cases of collapse of banks, and several companies.

Based on some of these experiences, most banks have declined giving loans to people, because the essence of credit is for the bank to be able to get the money back, but when you are not sure it will come back, you have to decline customers’ request.
At the last FSS 2020, the organisers were talking about Financial System Strategy, but I felt the need to ask them about the Financial Reporting Strategy which is missing.
The FSS as presently conceptualised by its proponents creates an image of a farmer that had a bumper harvest, but afterward had no vehicle to bring his produce from the farm to the market where they are needed. It means that the product would decay there for lack of transportation facility.
So, I believe there must be a financial reporting strategy, which is the vehicle to carry FSS 2020 to its destination. I am afraid that vehicle is not yet there.

If you are talking about financial reporting strategy, it tells you what we should do with accountants and auditors that give misleading financial statements that erode confidence in the system.
This is important because there is no economy that can grow without credit. What we have in Nigerian is cash and carry and I am afraid it won’t take us far. For instance, some people have ideas that require just N500, 000 to be implemented, and if they don’t have that money, it means that the idea will die with them.

But when there is a credit window to meet that need, that same idea creates jobs and values that may in due course grow to become a blue chip.
Credit in this sense could also mean that even people who have goods to sell, can give you part of the goods with little or no deposit, so that you pay back after you finish selling to end users.
A good credit culture, either from the financial institutions or producers can stimulate an economy and employment. But because we are operating on cash and carry basis in our economy, that is why we are still poor as SMEs, which is the hub of the economy, are having these problems.

See what the Indian economy has turned to today. If you had gone to India some years ago and visit it now, you will see great changes. Today, every household in that country has one machine or the other to produce one item or the other, husband and wife and children are producing, creating employment and values that are meeting needs.

Today, the Indian economy is one of the highest growing economies in the world. Unfortunately one other problem we have is that we don’t have records. People commit offences and go to another location and there is no way of tracking them thereby creating more confidence crisis when it comes to getting credit from banks.

For instance, if we have records of individuals or businessmen who defaulted on bank loans, the problem of banks not giving loans to people will be ameliorated. But if there is data on individuals such that when you commit offence you can be caught through your finger prints, the situation will be better. There should be records without which problems of the SMEs will not be checked.

Ordinarily, the report of an accountant should be enough to encourage a bank to give loans to an individual, at least up to a certain amount. A bank can ask a loan applicant to bring 5 years audited account and later his cash flow statement, and he goes to his accountant to get them. The next thing they will ask for is the collateral which is about three times larger than the loans being sought. That is an indication that the bank does not have faith or confidence in the report of the auditor or accountant that prepared the statement and this is worrisome.

A Nigerian bank can give loan to a multinational company, but not an indigenous SME firm with financial statement prepared by an auditing firm. That is why we have been advocating that the professional bodies in the industry should be prepared to sanction members that bring the profession to disrepute. It is regrettable, however, that with all the unpleasant reports we have had over the years, I am yet to see any auditing or accounting firm or person that has been sanctioned or deregistered for being responsible for such activities.

Look at the Enron case and the sanction that was meted to the auditing firm, everybody heard about it, but the situation in Nigeria is different because nobody hears about sanctions against auditors or accountants that misbehaved in the course of doing their work.
That is the reason why we have been advocating about fixing the tenure of auditors serving any company in the country. I have been insisting that the tenure of external auditors be restricted to 3 years, because when you know that after 3 years you leave the job, irrespective of how good or bad you are, then you will be more careful not to compromise on certain critical issues.

But when you stay in a company for eternity, you begin to see yourself as a member of that organisation thereby increasing the chances of compromise on certain issues.
I am therefore using this opportunity to call on the National Assembly to legislate that the tenure of audit firms should be pegged at 3 years. When this is done, then I would want to see how people would continue to manipulate figures, just because they want to retain their position as external auditors.
Relationship with ICAN

I see a relationship of no peace, no war. However, I thank the Nigerian Accounting Standards Board, for bringing us together this time around and I think it is a good development, which may one day lead to our talking with one voice to advance the course of the accounting profession.
For instance, President Umaru Yar’Adua, had just appointed ministers who will work with him, and there is no professional accountant among them. That is one of the problems that the collaboration of the accounting professional bodies should be able to advocate.

Professionalism demands that in the appointment of the finance portfolio, if the senior minister is not a professional accountant, the minister of state ought to be an accountant.
The Attorney General of the Federation has always been a lawyer, the minister of health, must be a doctor, but I don’t know why accountants are not considered when it comes to strategic ministries like finance in line with government objectives for probity and accountability.

I believe also that there is a lot of work to be done to move this country forward and one way we can achieve this is by imbibing the rule of law and am happy that the administration so far has a good record in that regard.

Yar’Adua’s economic team
I don’t have any worries about the president’s exclusion of the CBN governor or Mallam el Rufai from his economic team.
I know for certain that the economic team is just an advisory body and it may well be that the CBN governor or El-Rufai could still have a role to play by way of making their own contributions to government economic policy. But I don’t think it is really a big problem at all.

ANAN in 10 years’ time
It is exciting that ANAN is moving at a very fast pace. By November 24, 2007 we shall be having a fund raising event to mobilize funds to finance the development of the permanent site of the Accountancy College in Jos. We are going to build a modern auditorium, a library and other state of the art facilities to train accountants.

Since we started at our temporary site, we have been receiving foreign students from Cameroon, Niger, Sudan, and more applications are being considered. Now consider what will happen when we move to our permanent site, with its world -class facilities. We are looking forward to training accountants from other African countries, because it will be cheaper for them to come here than going to America or Europe.

Even Nigerians would not want to go abroad to read accounting, because we will be having exchange programmes with professional institutes from America and Europe. That I believe will be recorded in history as part of ANAN’s contribution to the economy.
Last May for instance, a total of 3,500 students took our final examination, and this is an indication that people are appreciating the benefit of coming to the College of Accountancy, Jos.
With the caliber of people we are training for the economy and the planned state of the art facility at our permanent site, it is a clear indication that the sky is the limit for ANAN.

Acceptance of ANAN qualification
Anybody that rejects ANAN graduates or certificate holders, is going against the law. ANAN is chartered, which means that, it has been recognized by government, which has also given it grounds to operate, as the second professional accountancy body recognized in this country.
At present, we have two professional bodies in Nigeria. This means that anywhere in this country, ANAN qualification is acceptable and anybody that fails to accept it is breaking the law of the land.
It may be possible that some employers who are not members of ANAN may want to discriminate, but I need to point out that whoever is doing that is breaking a law.

However, ANAN members are more in the civil service, because when we started initially, states and Federal Governments saw the usefulness of the college and sent their workers in large numbers for training.
After training, the workers went back to their places of work to impact the knowledge and that is why you see a lot of our members in the public sector. Today, local, states and Federal Government workers are being trained as professional accountants at our college.
But the private sector is a different thing all together, because if am not favourably disposed to your ideas, the tendency is for me not to recognize it and there is nothing anybody can do about it since it is a free market. Though we have our graduates in the private sector, it is the public sector that has accepted us more. But I know that with time some of these skirmishes will be resolved.

Role of government in ensuring wider acceptability
ANAN is accepted everywhere, but we are more in the public sector. It is unfortunate that most employers of labour in their job advertisement go to the extent of asking for foreign certificates from bodies that are no longer existing today without listing ANAN.
It shows that these employers do not investigate to know that some of the foreign professional accounting bodies they are asking for no longer exist. How can somebody who is patriotic list qualifications obtained elsewhere without accepting one from his country.
If you go to UK, America, Ghana or even Benin Republic, employers there will not accept your certificate for employment except you undergo additional training there.

In fact, Nigerian doctors can only practice in the US or UK by doing additional one year or two over there, because they believe our university system has collapsed. But most of our employers blindly list foreign qualifications because they believe it is better to do so. It is regrettable.
I have no problem if they say they want only ICAN qualification, but where I get worried is when one begins to ask for ACA, ACCA or several others that are no longer relevant even overseas.
It is an insult to this country, because by the regulation, before you can practice accounting profession in Nigeria, you must be a member of ANAN or ICAN.

Imagine professionals advertising other peoples’ qualifications and leaving their own and nobody is calling them to order. That is part of the problems we are having in the accounting profession today.
In London or America, do employers advertise ICAN or ANAN, when they are looking for workers certainly they will not, but here we are promoting other countries’ professionals, to our own detriment.
Regulating ANAN members
We are serious in terms of regulating our members. We have investigative panels and tribunals which have the power of the high court. So that if the verdict of the tribunal is not favourable to you, you can go to court.
In order to check our members from indulging in malpractices, we have also introduced the Mandatory Continuing Professional Development Programme (MCDP) and ANAN was the first professional body to start it in 1996.

The objective of the ANAN is to train, retrain and to bring back the ethics of the profession, by letting practitioners know what to do and what not to do. We also have the practitioners forum for members in public practice like auditors.
And that is why I suggested to the Nigerian Accounting Standards Board, to intensify its capacity building programmes. It is important that people, particularly those who prepare the financial statement of companies should know about the various aspects of the NASB standards, because lack of proper understanding could lead to grievious mistakes.
We have always advised our members to ensure that they get acquainted with NASB standards so that they would not fall into problems.

Challenges
It is not always easy to run an institute like this without having challenges. Our greatest challenge is funding.
For instance, all these talk about training and retraining require a lot of fund to implement. In terms of development you can see that the new ANAN secretariat under construction needs a lot of money to be realised. It takes funds to do that. We are also planning the permanent site of the Accountancy College in Jos and it takes a lot of funds to do that.
For you to get funds, you should be able to put in place all that is required to carry your members along. We have the men and materials to realize our dream, but all that is required is for us to harness our energies to achieve this.

Success
When we came in 1979, we had only 45 professional accountants that passed through the Nigerian system. We have trained over 10,000 accountants so far.
This shows that ANAN has come to liberate the accounting profession in Nigeria, and this has impacted on the way our sister body ICAN trains its members. We have raised the standard of confidence and entry requirement for accountancy in Nigeria, which is HND or B.Sc in Accounting from NUC and NBTEB recognized university or polytechnic.

You come to Nigeria College of Accountancy in Jos to get your one year professional training. The kind of training we give there is not the kind you get in the university.
It is such that if we are teaching you taxation, we go to the Federal Inland Revenue Service to bring the subject experts to impact knowledge in you.
We believe that having done the theoretical training in the university, what is left is the practical training at the college.

For instance, if I call somebody from NASB to teach the students the practical application of some of the standards that we are reading in the books, don’t you think that the person will handle it better than a lecturer from the university, who is only rehearsing what he reads in a book.
I went to one of the universities in the country and posed a question to some accountancy students on the dissolution of partnership, and I was shocked at the response I got even when they told me they had studied the topic in the university. That is why it is important for people to merge professionalism with academics.

New curriculum by the Accountancy college
We have just introduced forensic accounting where we don’t rely only on the pieces of information or invoices given to us by companies or clients. Instead, we go a step further to the source of the data to confirm whether what is given corresponds with what exists at that source.
It is a kind of investigative accounting similar to what the EFCC does today in their investigations. For instance, the EFCC tries to trace the movement of funds from one bank or outlet to other and that is what we are trying to do with our forensic accounting. We are planning to collaborate with the commission in this regard and many other ways when we conclude the building of our permanent site.

Problems of auditing firms
That is one of the major problems facing the accounting profession and most of us are not happy about it. That is why we are commending the NASB, because it was that body that discovered the last one involving a big audit firm. These are people who are selling the integrity of our profession. How will the international community see us? It is shameful that we are seen all over the world as corrupt people.
It is this kind of activities that make Nigerian banks not to honour some of the financial reports prepared by accountants for clients looking for loans.

Ordinarily, the confidential report of a chartered accountant ought to be respected by banks as a valid and true representation of a company being referenced. But banks are now scared of reports issued by some accountants even among the largest in the country.

How can you reconcile a situation where prior to the prudential guidelines, a bank would be carrying non-performing loans for years and charging interest on them. It gives you the impression that you are doing well, while in reality, you are dead.
It pains me that what is happening is tarnishing the image of the accounting profession. People compromise when they begin to live beyond their means.