Ghanaian Corporate Accounting: Value Adding, Preserving or Destroying? An Auditor’s Views.

This is a comment on my post titled, What is accounting? “A good write up. Some auditors do not share the adjustments and journals they passed when reviewing the account at year-end”. Stephen Annan CGMA, ACMA

This article is my response to the obligations implied in the comment. It reflects on my experience in many years of auditing.

In my view, many corporate accountants don't take charge of their accounts. They don't reconcile the trial balance and the financial statements. So, they fail to notice that the auditor passed adjustments till the next reporting date.

The auditors should not pass adjustments without the agreement of the corporate accountant.

Responsibility for financial statements

Many of them do not prepare the annual financial statements. They don’t take responsibility for it. If they did, they would review and pass the adjustments as they complete the accounts.

Who prepares the financial statements - corporate accountants or the auditors? In Ghana, corporate accountants believe it is the auditor’s duty.

It is the duty of the corporate accountants to prepare the financial statement, not the auditor.

Audit reports always acknowledge that “the management of the company is responsible for the financial statement”. Corporate accountants are part of the management; the auditors are not.

Most corporate accountants don’t follow the accounting standards. They don’t advise their management of their implications. Neither do they update their policies when the accounting standards changes.

Are the accounting policies in the financial statements real? Does the business use them in its daily operations?

Suboptimal use of information technology

Accounting is often the first role that most businesses computerize. They often do not get the full benefits because the accountants don’t take charge of the implementation. Common problems I see are:

• Acquisition–they do not do a proper needs assessment before buying the software. Most business buy accounting software based on what their peers use. If you don’t do a needs assessment, the chances are you’ll buy an unsuitable product.
• Implementation–too many accountants play a passive role when implementing the software. The vendors lead and often implement what they know for the business. This may not meet the real needs of the business.
• Knowledge and use–training on the software is often basic. After the first training, they do not get training on improvements to the software. The accountants don’t invest in knowing the features of the software and how it works. So, they cannot take advantages of features that will make their work efficient.
• IT Controls–most don’t install the needed IT controls on the accounting systems, exposing the business to errors and fraud.
• Processes–business processes must change when you put in software. If you don’t make changes, you won’t be as efficient as you could be. Many businesses in Ghana do not update their processes when they install IT.

Ghanaian corporate accounts must improve their IT knowledge. Most know only basic Excel and Word. This won’t be enough to use IT effectively. These days, IT automates the activities that formed the core the accountants work.

They must have knowledge of accounting information systems and controls. They must take charge when they put IT in the accounting unit.

Management information

Most managers do not get adequate information for managing. They need analysis that relates the financials to the drivers of the business. Most are lucky to get monthly financial statements.

This weakness is rife in the corporate world because we focus on financial accounting and auditing, not on management accounting, in training accountants.

We must emphasize management accounting. This is more relevant to their role.

 Conclusion

We know the malaise of Ghanaian public accounting. The World Bank, in its 2014 ROSC reports on Ghana, documented problems with observance of standards and codes. But, in my view, corporate accounting also has problems. Since corporate accountants have a big impact on the health of their organizations, it’s time we give them a critical look.

 Is Ghanaian corporate accounting value adding, value preserving or value destroying? What do you think?

I know managers and accountants have views on this subject. This is your opportunity to air them.