2001年-世界发展银行全球_Kenya___Accounting_and_Auditing_13页_261kb

Summary of the ROSC Report on Kenya: Accounting and Auditing Practices

Core Content

This report, prepared by the World Bank staff, evaluates the observance of international accounting and auditing standards in Kenya. It highlights the progress made in aligning national practices with the International Accounting Standards (IASs) and International Standards on Auditing (ISAs), while also identifying key challenges in the institutional framework, professional education, and compliance with these standards.

Main Points

I. Introduction

• Kenya is a major economy in East and Central Africa, with potential for regional economic development.
• Despite some reforms, economic performance and social indicators continue to decline.
• The failure of several banks in the late 1990s, which were not flagged by financial statements, has raised public concerns about the quality of accounting and auditing.
• The report aims to identify measures to improve the financial reporting regime.

II. Institutional Framework

A. Statutory Framework

• The Accountants Act (1977) established three bodies: ICPAK, RAB, and KASNEB.
• The law has not been updated to reflect the requirements of the IASs, leading to ambiguity in disclosure requirements.
• A draft revised law has been submitted to the Treasury for review.

B. The Profession

• ICPAK is a member of IFAC and governs the profession through a council.
• There are approximately 3,000 qualified accountants in Kenya, with 2,500 registered with ICPAK.
• The profession is dominated by four large international firms, which audit most publicly traded companies.
• There is a significant shortage of qualified accountants, with many companies relying on unqualified personnel.

C. Professional Education and Training

• Entry requirements for the CPA qualification are the same as public universities, but stakeholders believe they are insufficient.
• ICPAK is working to raise the minimum entry level to a bachelor's degree.
• Many educational institutions lack well-trained instructors and practical-oriented courses, leading to poor quality training.
• Professional ethics are not taught in prequalification programs, affecting compliance with ethical standards.
• Continuing Professional Education (CPE) requirements are below IFAC standards, and enforcement is lacking.

D. Setting Accounting and Auditing Standards

• ICPAK is responsible for setting accounting and auditing standards in Kenya.
• IASs and ISAs have been adopted as national standards, with compliance required for financial statements starting from 1999.
• The tax authorities require IAS-compliant income statements for determining accounting profit.
• The revised CMA rules made IASs mandatory for listed companies, and the NSE issues a manual requiring IAS compliance.

E. Compliance with Accounting and Auditing Standards

• Compliance with IASs and ISAs is partial due to weak enforcement and lack of implementation guidelines.
• The CBK reviews and approves financial statements before public release, but its effectiveness depends on the knowledge of IAS requirements.
• Self-regulatory organizations lack monitoring and enforcement mechanisms.
• ICPAK has initiated a peer review program but has not launched it due to resource constraints.

Key Findings

Accounting Standards as Designed and as Practiced

• Basis of presentation: Many financial statements incorrectly claimed compliance with IASs without meeting all requirements.
• Consolidated financial statements: Inadequate disclosure of subsidiaries and accounting policies for consolidation.
• Revenue recognition: Lack of disclosure on revenue recognition policies, leading to potential misstatements.
• Related-party disclosures: Poor transparency in related-party transactions, which may allow for misappropriation of corporate resources.
• Segment reporting: Most listed companies failed to disclose segment information, despite awareness of IAS requirements.
• Interest rate risk: Minimal disclosure on interest rate exposure and related financial liabilities.
• Deferred taxes: Inadequate disclosure of deferred tax information, especially on revaluation surpluses.
• Post-employment benefits: Noncompliance with disclosure requirements for defined benefit plans.
• Revaluing fixed assets: Improper application of IAS-16, leading to distorted asset values.
• Impaired assets: Limited recognition and disclosure of impairment losses.
• Assets pledged as security: Lack of required disclosures on asset restrictions and security pledges.
• Lessees' disclosure: Noncompliance with IAS-17 requirements for lease disclosures.
• Financial risk management: Inadequate disclosure of financial risk management policies.
• Investment in securities: Improper classification of investment securities, often grouped at historical cost.
• Loan-loss provisioning: Insufficient information on non-performing loans and provisioning practices.
• Concentrations of assets and liabilities: Lack of required disclosures on significant concentrations of risk.

Policy Recommendations

• Strengthen the legal framework to ensure clarity on disclosure requirements.
• Enhance professional education and training to meet international standards.
• Improve the institutional capacity of ICPAK to monitor and enforce compliance with IASs and ISAs.
• Implement structured CPE programs that meet IFAC guidelines.
• Develop a comprehensive system for tracking and ensuring compliance with professional standards.
• Improve access to training materials and resources for small and medium-sized practitioners.
• Enhance the role of the CBK in reviewing and enforcing compliance with IAS requirements.
• Establish effective monitoring and enforcement mechanisms for financial reporting standards.
• Address the shortage of qualified accountants and ensure that all companies have access to appropriately trained professionals.