chartered accountants and it: opening the pandora’s box prof. sb junaidu director, institute of...

Chartered Accountants and IT: Opening the Pandora’s Box

Prof. SB JunaiduDirector, Institute of Computing & ICTAhmadu Bello University, Zaria10th ICAN Northern Zonal Districts’ ConferenceZAZZAU 2015SPS Auditorium, ABU Zaria, May 6, 2015

Outline

1. The Accounting Profession2. Roles & Responsibilities of Chartered Accountants3. General Challenges to the Accounting Profession4. Specific Challenges to the Profession in Nigeria5. Keeping the Pandora’s Box Closed6. Summary

2 May 6, 2015, SPS Auditorium ABU, Zaria10th ICAN Zonal Conference, ZAZZAU 2015

The Accounting Profession

The accounting profession originated from emergence of the joint stock company and the consequent separation of ownership from management

Triggered the need for independent and informed opinion on the accounting of the owners’ funds entrusted to the management for their stewardship.


… The Accounting Profession

Justification of the profession hinges on confidence of the investing public

Its continued relevance tied up with retaining this confidence

Initially provided this confidence only to the shareholders of joint stock companies

Today, it provides this assurance to a wider base of stakeholders government, the banking system, regulators and society itself.


… The Accounting Profession

Thus, several stakeholders depend upon the accounting profession

The profession must continue to inspire the trust and confidence of the stakeholders if it has to remain relevant and value adding

To do their work, professionals have a number of roles and responsibilities


Role of Chartered Accountants

Prepare profit and loss statements on behalf of a business

Set up accounting practices and procedures for new companies and advise on how to manage these

Analyse budgets and other financial information and advise where savings could be made


… Role of Chartered Accountants

Help to produce budgets for businesses and implement strategies for cost savings

Ensure company accounts and tax returns are prepared and filed correctly and on time


… Role of Chartered Accountants

Accountancy is one of the most detailed and diverse roles in the finance industry Thus, Accountants require competency in many areas.

Accountants require high standards for both competence and behaviour Lest they fail [in] their job, harm their organization/their own

reputation/the whole industry. Several challenges that could erode confidence

must be addressed


Challenges to the Profession: Competence

The financial sector growing in complexity, new financial instruments emerging

Knowledge base of the profession must keep pace with the new practices and innovations

Requirements Continual review and update of curriculum Active, diversified and constantly updated continuing

professional education program


… Challenges to the Profession: Competence

Formal and professional development programs be geared toward international standards E.g., International Financial Reporting and Standards (IFRS)

Competency should not only cater of the local needs due to globalization the challenge we discuss next


Challenges to the Profession: Globalization

With globalization, countries can no longer afford to remain isolated in so far as their operating and legal systems are concerned

This should be reflected in international accounting and auditing standards As well as in a number of other areas: education, ethics, etc.

Adopt global standards AND actively participate in formulation these standards


… Challenges to the Profession: Globalization

Formulate accounting standards in areas of local concerns E.g., Emerging Market Economy (EME).

ICAN should select and support competent persons to participate in global forums Through a strictly meritocratic, fair and transparent process


Challenges to the Profession: IT

One of the main objectives of audit was ensuring the arithmetical accuracy of financial statements

With the advent of IT, this task has now been taken over by machines

This has both nudged and facilitated the profession to move up the value chain The main task of the profession has now shifted to judgments of

value


… Challenges to the Profession: IT

To make value judgements, auditors have to demonstrate much higher levels of maturity, integrity,

independence and balanced judgment Development of these qualities can be a major

challenge



Most commercial banks have successfully implemented core banking solutions

Challenges to Auditors lack of visible evidence, risk of undetected system errors and

bugs and frauds hidden in a labyrinth of data Retrieving information in the computerized environment and

assessing the implementation of computer related processes will also be critical to the audit process.



Opportunities for Auditors increasing use of Computer Assisted Audit Tools (CAATs) to

access databases beneath the accounting software to create queries, write reports and develop audit trails

Easy, accurate, fast, secure and automatic reconciliations, reporting and other processing on large bodies of data


Challenges to the Profession: Opportunities

There is agitation for expansion of opportunities for the accounting profession Like other professions, especially for its growing membership

So far, the profession enjoyed a monopoly in certain areas of work E.g., in audit of financial statements

Opportunities can be expanded by sustaining the agitation for continued monopoly


… Challenges to the Profession: Opportunities

Can the monopoly be sustained? Core banking and centralized record keeping now

pervasive Reduced relevance of audit of branches of Public Banks

The profession must identify emerging opportunities in the market place, e.g., in the area of concurrent audit prevention and early detection of fraud.

Skill must be developed needed to exploit these


Challenges to the Profession: Independence

Growth of large international firms of accountants created opportunities E.g., for provision of a multiplicity of services

That is, on top of pure audit, audit firms also sold internal-audit and consulting services

Arthur Andersen did extensive consultancy work for Enron Believed to have compromised Andersen’s independence leading

to its failure to detect erosion of accounting standards


Challenges to the Profession: Independence

Possible ways out?1. Systemic reforms

Are self-regulation and peer review the right way to maintain standards?

Perhaps conducts of Enron and Parmalat suggest not!

2. Elimination of conflict of interest in accounting firms

Should auditors be banned from selling consulting services to those they audit?


Challenges to the Profession: Inter-disciplinary Approach

In a complex world, no single profession can meet all the requirements of market participants Neither can individual professions operate in silos catering to

specialized needs. Thus, inter-disciplinary interaction not only

desirable but unavoidable Potential problem areas:

disciplinary jurisdiction as professional standards in different governing bodies may be different and members of such bodies may be differently regulated


Challenges to the Profession: Value Systems

There is agitation across the country about erosion of values in the public domain

The norms of a society are determined by the dominant sections of that society the accounting profession is a dominant section of society

The value system you practice professionally influences the value system of the society


… Challenges to the Profession: Value Systems

Sadly, we see several transgressions wrong classification of capital expenses, boosting reported

profits overstating profits, understating liabilities, and overstating

cash


… Challenges to the Profession: Value Systems

Possible ways out?1. Forensic auditing

books should be reviewed on the default assumption that there could be fraud afoot

Even though forensic auditing that reconstructs fraud is time-consuming and expensive

2. A strong internal audit and control system3. Build a corporate culture in which ethical

conduct is exemplified and encouraged


Challenges: The Nigerian Context

Training and production of accountants in Nigeria anchored by both academic institutions and professional accounting bodies

The professional mode of accounting education places emphasis on in-house, on-the-job training based on

a program of internship in approved accounting firms


… Challenges: The Nigerian Context

The academic mode of accounting education prevails in polytechnics and universities places emphasis on a mix of broad based accounting education incorporating core accounting skills development courses as well

as related ancillary courses drawn from other disciplines in the management sciences



The B.Sc. accounting curricula tend to be narrow in the coverage of core accounting courses

A new trend suggests degree syllabi driven by the ICAN syllabus

This trend could jeopardize the basic role of a university first degree Provision broad based education students spend more time preparing for ICAN examination while

in the university instead of focusing on the B.Sc curricula



Another aspect of the narrowness of the accounting curricular: insufficient coverage of courses in ethics, financial management

and corporate governance. This shortcoming is particularly worrisome in this

age in which most global financial crisis and big corporate failures

have been attributed to failures in accounting audit and financial management practice



Similarly, the curriculum, as presently structured, lacks enough exposure to ICT courses which equip students to address the modern day ICT challenges

in accounting services delivery Another serious limitation is lack of exposure to

practical work experience as originally envisaged by the industrial attachment component

of the curricula Due an ever increasing number of accounting students


Keeping the Pandora’s Box Closed

To overcome these challenges, accounting graduate must inculcate three competencies Education Skills Attitudes

These developmental traits must be incorporated in the accounting curricula


… Keeping the Pandora’s Box Closed

Universities should endeavor to put in place credible accounting degrees curricula

The degree should be broad-based, rich in theory and principles to equip students adequately for the diverse roles they may play

after graduation in the modern economy Include relevant courses on ICT, other areas mentioned and more



Skills– Effective accounting education delivery lays

emphasis on skills building and the development of problem solving techniques

– ICT a major enabler



Attitudes– Must demonstrate by conduct, a concern for

upholding a value system within the profession and within the clientele

– Create sensitivity to the need for greater ethical conduct


Summary

Accounting professionals owe huge responsibility to many stakeholders

– provision of confidence and assurance of the finance industry

To discharge this trust, accounting professionals have a number of roles, responsibilities and challenges


… Summary

Challenges to Accounting Profession1. Competence2. Globalization3. Information Technology4. Opportunities5. Independence6. Inter-disciplinary approach7. Value systems8. Suboptimal educational system


… Summary

To keep the Pandora's box closed, accounting professionals must wear three developmental traits1. Education2. Skill development, and 3. Good work attitude


… Summary

These traits are interlocking and must all be catered for in the accounting curricula With ICT being a major component and enabler


… Summary

Finally, again, the profession has a significant role as the conscience-keeper of the business world!


The End

Thank You


References

1. Olaolu, O, Opportunities and Challenges for New Chartered Accountant, Induction Ceremony, Institute Of Chartered Accountants Of Nigeria, Monday November 3, 2014.

2. Subbarao, D., Challenges to the accounting profession – some reflections, Inaugural address, 26th Regional Conference of the Western India Regional Council of the Institute of Chartered Accounts of India (ICAI), Mumbai, 16 December 2011.

3. Benefits of ICT in accounting and Book-keeping, http://www.olevelprinciplesofaccounts.com/benefits-of-ict-in-accounting.html. Accessed, April 30, 2015.

4. Okafor, R.G., Accounting Education in Nigerian Universities: Challenges and Prospects, Journal of Economics and Sustainable Development, Vol.3, No.14, 2012, ISSN 2222-1700 (Paper) ISSN 2222-2855 (Online).

5. Krishna Moorthy, M., et al., The impact of information technology on internal auditing, African Journal of Business Management Vol. 5(9), pp. 3523-3539, 4 May, 2011. Available online at http://www.academicjournals.org/AJBM

6. Investigative Forensic Audit into the Allegations of Unremitted Funds into the Federation Accounts by the NNPC, PricewaterhouseCoopers Limited, February 2015.


http://www.olevelprinciplesofaccounts.com/benefits-of-ict-in-accounting.html

http://www.olevelprinciplesofaccounts.com/benefits-of-ict-in-accounting.html

http://www.academicjournals.org/AJBM

http://www.academicjournals.org/AJBM

chartered accountants and it: opening the pandora’s box prof. sb junaidu director, institute of...

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