There is a long standing joke that if you ask an accountant what is two plus two you will most likely hear « what would you like it to be? ». That does not mean that accountants are not honest people, it is just that there exists mechanisms within the profession such as inventory valuation methods and depreciation methods which would have different effects on your financial statements. However that is not a problem in itself. The standards are not what is hampering our profession. My main issue especially in West Africa is that the notion of working for the greater good of the public has been a non existent factor in our profession. This profession is not just accounting but public accounting. This so important factor « the public » is often forgotten until some disastrous event happens and then policy makers try to right the wrongs.
In the 1990s and early 2000s, the accounting profession in the United States was not regulated and the greater good of the public was shelved in the back burner. the consequences were felt in every corner of the universe with the collapse of giants like Enron, World Com and many other firms. The tragedy in their stories is not the fact that these companies are no longer in business but the people whose retirement and life savings depended on these companies were left to fend for themselves. How could this have happened if there was a more than competent accounting firm periodically auditing and monitoring their financial health you may ask? That is a question to ask Arthur Andersen LLP. Oh yeah that is right, it does not exist anymore (well at least as we knew it prior to 2002). Arthur Andersen through its leader Leonard Spacek in the late 1940s through the 1960s started out actually as an advocate for a transaparent and ethical accounting practice. It went as far as to accuse the Securities and Exchange commission of not doing enough to crack down on companies that « cooked » their books. Serving the public was their main goal but the lack of oversight changed the firm’s culture to profits before the public.
« Moral hazard » – is a term which is usually associated with bankers, especially those who were responsible for the financial crisis in 2008. This term describes ones tendency to take risks knowing the consequences of such risk will not be borne by one. The bankers and loan officers who provided loans to people they knew would not be able to repay their debt, only cared about making a sales commission but knew that the bank alone bore the risk of loss. This same notion of « moral hazard » has trickled down to the accounting profession in the United States in 1990’s and now in West Africa, especially in Senegal where I am currently employed. It is a country of roughly 13 000 000 people. According to the Ordre National des Experts Comptables et Comptables Agrees du Senegal (ONECCA), there are 126 Certified Public Accountants (Expert Comptables) and 64 Public Accounting Firms. All of these firms including the one I am employed at are regulated through this Board. There are rules and regulations that govern the profession – or are there? There are lots and lots of documents outlines the Do’s and Dont’s of the profession, what accounting standards companies are supposed to abide by. Now I ask you – What good does it do to have standards, rules and regulations if there is no one policing these standards. A lot of you may disagree with this claim with the assertion (Oh so what is the job of ONECCA?). Uhhh if you know it, then you could maybe enlighten me on that subject. The only thing I have noticed since being in this country is that they make it really tough for anyone to join this so so so (adding one more SO just to drive my point home) exclusive club of Expert Comptables (Certified Public Accountants). There are people with grey hair (well that is not saying much as I have grey hair and I am in my mid 20s) but there are accountants in their 30s and 40s and even 50s trying to become Experts Comptables but still cannot be recognized by this body as there is no set standards on how to become one. The procedure consist of something like this: « Oh you have this diploma? how wonderful, well you need to intern somewhere for three years. Oh you have interned for the past five years? well that diploma is no longer recognized, you need to go get this new diploma (Its shiny) ». I am exaggerating a bit but it is a never ending process. It is well documented that many people with good intentions gave up their dreams of becoming CPAs due to their barriers to entry. Some of you may be asking « why are you complaining? you are a CPA » well that is not the point. The point is to hold a body accountable for policing a profession that is supposed to be here for the public and not for the financial gain of only those who are lucky enough to be part of it.
Certified Public Accountants count for 0.0009% of the Senegalese population in contrast with 0.028% in France and 0.2% in the United States. Now 0.0009% are policing the financial health of the Senegalese economy but no trustworthy body exist to really police the profession. Isn’t that a recipe for disaster? Out of all of the companies in Senegal, how many do you think receive an adverse opinion on their financial statements? not many. How is it that in a country where financial crimes are rampant and corporate mismanagement of funds is a daily topic of discussion, accountants provide unqualified opinions more than 95% of the time?. It is important to note that auditors do not give 100% assurance. It is a culture where the accountant has no incentive to provide a qualified opinion even if there is a flagrant issue where a disclaimer opinion would have been more appropriate. Any unfavorable opinion given in an audit report, the standards state that it should be reported to the country’s attorney general for further investigation, but does anyone do it? rarely if ever. An unfavorable opinion results in your removal as the auditor by the client and you lose that business. Keyword being business. The ferocity with which the competition for scarce business is, has made it such an environment where accounting firms are afraid to report cases of mismanagement of funds. The fear of losing business has won the industry to the point that intellectual integrity cannot be guaranteed in the work. The only way this could be restored is if government action is taken to setup a body similar to the Public Corporation Accounting Oversight Board (PCAOB) which calls for independent review of firms work periodically to ensure that they are doing a service to the public rather than just being a part of the perpetual cycle.
The doctrine of substance over form isn’t just a tax doctrine but also a way of leading one’s life. Wearing a nice suit, calling yourself an a financial policeman (Accountant / auditor) while all you do is self preservation rather than protect the public’s fund is an abomination. It is exactly like living in a glass house and closing the blinds. The accounting profession in Senegal at least is selling an illusion, form over substance and its strict oversight and regulation is a vital undertaking if this country expects to shed the ING in developing and develop. Drastic measures could be taken to regulate this profession but it will only happen if something extraordinary happens (majority of people lose their pensions, massive job losses etc…). The Senegalese economy to a certain extent depends on foreign aid and foreign loans to operate. The service industry is the engine and glue for the economy. The bodies providing aid or loans to the country need to have assurance that their funds are being spent in the way intended in the agreements. This need for assurance is provided through periodic audits. These periodic audits are performed by Experts Comptables (Certified Public Accountants). Now it is on us PUBLIC accountants to manage this delicate balance between pleasing the client while standing up the for the public’s interest.