‘Currency, Covid-19 major hurdles’
THE deepening economic crisis has affected every facet of the Zimbabwean economy and the accounting profession has not been spared.Senior business reporter Melody Chikono (MC) spoke to Institute of Chartered Accountants of Zimbabwe (ICAZ) CEO Gloria Zvaravanhu (GZ, pictured) to discuss various issues affecting the accounting profession. Below are excerpts of the interview.
MC: ICAZ has made a number of key interventions in the accounting profession in Zimbabwe. What can you say has been your main intervention?
GZ: ICAZ has indeed made several interventions in the accounting profession including key matters of assurance and advisory services, business and governance practices. ICAZ provides assistance to both the private sector and public sector on matters of policy, ethics, governance and good business practices. Singling out prized interventions for an institute that has made an impact for 103 years is difficult and would need a book (which by the way is under production!). For now, I can however share what we are currently focused on.
The positive impact that ICAZ has had in the accounting profession is without question as far as the private sector is concerned. We were challenged by Finance permanent secretary George Guvamatanga when he made a remark some years ago that the Government being the biggest “business” in Zimbabwe did not have a single Chartered Accountant in its employment! Being people of action we made it our focus to address the need for professional accountants in Government, and for one to be called a professional they must be a member of a professional accounting organisation such as ICAZ. This would enhance public sector accountability, transparency and governance.
ICAZ did not have a membership qualification and category for public sector professionals but we are now at advanced stages of introducing a public sector membership category and a public sector qualification. As a matter of fact, we already have a programme underway where selected senior members in the public sector are undertaking a programme which after completion they will become the first Public Sector Professional members of ICAZ in this year. It is important for an accounting practitioner to belong to a professional accounting body for three key reasons;
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They will be required to subscribe to international ethical standards, reducing ills such as corruption and other ethical malpractices.
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Their conduct will be monitored by the institute and any misconduct will be disciplined making them accountable to the Professional body for their actions
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They will be required to continually improve themselves through continuous professional development.
We also have a massive project that we are currently in discussions with the Public Service Commission which we believe will transform accounting professionals in Government. The Public Service Commission has been doing impressive and transformational work with regards public service training and development and we will hopefully partner them on the accounting professionals development aspect.
MC: You have also made efforts to ensure that government and public institutions' accounting books mechanisms are in good standing. What progress have you made so far?
GZ: Yes, in addition to the above mentioned public sector initiatives, we have also been working with the government through the Ministry of Finance to assist in the preparedness to adopt International Public Sector Accounting Standards (IPSAS), through an IPSAS course offering. We have trained more than 300 government accountants so far and the aim is to have all ministries ready by 2023.
So far all senior accounting officials such as finance directors in all ministries and local authorities have undertaken the IPSAS certificate and rollout to the rest of the accountants is in progress.
ICAZ provides a free service of reviewing financials of ZSE-listed entities with the aim of enhancing international reporting in Zimbabwe. From 2021 we want to widen the pool to include other public interest entities, including those in the public sector.
MC: The profession has faced a number of challenges in the past year or so especially due to hyperinflation. What do you think should be the long-term solutions to such challenges?
GZ: Yes, over the past few years there have been cases where audit opinions were modified (commonly known as qualifications) including adverse opinions, due to failure to fulfil the requirements of International Financial Reporting Standards (IFRS). The key standards causing modifications being IAS21 — Effects of Foreign Exchange Rates and IAS29 — Financial Reporting in Hyperinflationary Economies.
Long-term solutions to hyperinflation and exchange rates should be centred on addressing the macroeconomic fundamentals. We hope that the National Development Strategy 1 (NDS1) will deliver that.
Secondly, monetary and fiscal disciplines are critical and we have at least seen some stability on that front.
Policy measures that instil confidence are much needed to attract investments, in particular Foreign Direct Investment.
MC: The country also adopted hyperinflationary accounting standards but companies have continued to get adverse opinions from their auditors .What are the sticking issues here?
GZ :The most common audit opinion modifications emanated from non-compliance with IFRS: International Accounting Standard (IAS) 21 — The Effects of Changes in Foreign Exchange Rates in the prior periods and inappropriate application of IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors, Application of IAS 29 – Financial Reporting in Hyperinflationary Economies based on prior and current periods’ financial information which was not in compliance with IAS 21 /IAS 8,Exchange rates used in reporting which were not aligned to the dictates of IAS 21 and Valuation of property and impact of the IAS21 requirements.
MC: Do you see companies getting clean audits in the near future?
GZ: The opinions qualified based on economy-wide issues relating to exchange rates, that is , SI33 which imposed exchange rates which were not aligned to IAS21, will eventually clean out the impact of prior qualified periods lesson over time. We however also need to watch the gap between official exchange rates and parallel market rates. Convergence of those two will aid IAS21 compliance.
It is also important to note that in spite of the general modified opinions that most entities had, users need to understand the basis of qualification at entity level as some were qualified based on unique circumstances pertaining to themselves. The cleaning out of such opinions depends on the efforts the specific entities put in addressing the matters that led to the qualifications. We encourage financial statement users to read the basis of the opinion section of the audit opinions carefully so that they are well informed.
MC: I understand currency changes have played a key role in some of these challenges. What other issues have been problematic for the profession in Zimbabwe?
GZ: Currency issues have been the most pervasive as they affect all players in the economy. Other entities will have their own peculiar challenges which will be reported on by their auditors as mentioned above.
Currently, the ongoing Covid-19 pandemic has an impact on reporting globally and Zim is not spared, for example it impacts the going-concern status of some entities. It also introduces the need for additional judgement when coming up with accounting estimates such as allowances for credit losses. Currency and Covid-19 dynamics are the major hurdles currently faced by the profession in Zimbabwe as far as reporting is concerned.
MC: What do you recommend in line with such?
GZ: With regards to the currency changes, as mentioned previously, a host of measures are required to ensure economic stability.
On Covid 19, PAAB came up with guidance on key matters to consider in reporting. ICAZ has various guidance papers on same available on our website or can be requested from technical@icaz.org.zw
Other entity specific challenges can be managed fairly well, especially with the assistance of the ICAZ Technical Helpdesk that is available to our members and the market in general.
MC: Covid-19 has had a bearing on everyone. What can you say has been the impact on your operations?
GZ: Covid-19 has certainly wreaked havoc across the world. One was either infected or significantly affected by it in one way or another. We also lost some members of our Institute and close members of our families.
However, it certainly fast-tracked most operations into adopting emerging technologies that ensured products and services are sold online and employees can efficiently work from home or anywhere for that matter. It was not without teething problems but it certainly improved digitalisation statuses of most entities in Zimbabwe. Covid-19 threw us into the deep end of digitalisation!
For ICAZ in particular, we have managed to continue delivering value working from home for the greater part of the past year due to the technology we have in place. Of special mention is that we held our annual Winter School virtually for the first time and it recorded the highest number of attendees from across the world. It was the same for our Public Sector Convention. We have also been able to deliver continuous professional development seminars and courses online, bringing global experts into conversations, something we would have struggled to do if the engagements had been physical. I guess that’s the silver lining in this Covid-19 disruption.
MC: What are the long-term plans for the institute into the future?
GZ: Growing the accountancy profession in Zimbabwe is our key mandate. ICAZ is now training Chartered Accountants for the world. CA(Z) is globally recognised in most jurisdictions and 50% of our members’ work outside Zimbabwe. We therefore need more CA(Z) to serve our own market plus meet the global needs. There are now over 60 ICAZ training offices in Zimbabwe.
Most of the big organisations in Zimbabwe are actually ICAZ training offices. I have already mentioned the public sector work. We will also look at how we can professionalise accounting at technician/bookkeeping level.
We are also focused on modifying the Chartered Accountancy qualification and the continuous development of members in line with global and technological trends to ensure the agility and adaptability of the future Chartered Accountant. This is in keeping with the global brand that the CA(Z) is.
MC: What has been the extent of your regional Influence?
GZ: Regional and International influence has been significant. As earlier mentioned, 50% of our members are working outside Zimbabwe, with most in South Africa, UK, Australia, Botswana and the United States. Global influence is already there through all these members who mostly occupy influential positions.
ICAZ is a member of the Pan-African Federation of Accountants (PAFA) and the International Federation of Accountants (IFAC) and I (the CEO of ICAZ) serve on the Board of PAFA and on an advisory committee of IFAC.
ICAZ is also an associate member of Chartered Accountants Worldwide (CAW). This is a grouping of the top 15 Chartered Accountancy bodies in the world. To be part of that grouping speaks volume about the global recognition and quality of the CA(Z) brand!
In addition to that the ICAZ qualification is mutually recognised by Australia and New Zealand, England and Wales, Ireland, Canada, South Africa, Namibia and Hong Kong. More mutual recognition agreements are being sought in line with where most of our members prefer to work.