Updating Accounting and Auditing Legislation

Restructuring the NBAA and establishing ICPAT

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Agenda

Project Background and Objectives

Approach and Methodology

NBAA/TAA (ICPAT)

Financial Reporting Act

Discussion

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Project Background and Objectives

(a)ROSC (April 2005)

(b) Stakeholders’ Workshop (March 2006)

(c) Project Implementation (August 2006)

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Project Background and Objectives

•Improve statutory framework

•Strengthen enforcement mechanisms

•Upgrade professional education and training

•Enhance capacity of regulatory and professional bodies

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Project Background and Objectives

• Raises the status of the profession in

Tanzania and internationally

• Increases the flow of well qualified

accountants

• Supports economic and business

development

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Approach and Methodology

• Extensive consultation with stakeholders

• Safeguard existing strengths e.g. examinations

• Consider international/regional practice

• Design NBAA and ICPAT structure (separation of government and private sector)

• Draft a Financial Reporting Act

• Workshop

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NBAA and TAA (ICPAT)

NBAA today:

• Regulator

• Professional members’ body

• Strong examination system

• Highly respected

• Board dominated by accountants

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NBAA and TAA (ICPAT)

TAA:

• Members’ association

• Little incentive for qualified accountants to join

• Limited resources

• No real disciplinary powers

• Participation by senior well respected professional accountants

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NBAA and TAA (ICPAT)

What is needed?

Need to separate roles and responsibilities of a regulator from those of a professional members’ body

Develop and strengthen NBAA as a regulator with public interest oversight functions

Establish a new stronger professional body using the experience in TAA

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NBAA

NBAA to be restructured:

• Membership functions passed to the new professional body

• Technical regulatory departments set up

• Examinations retained

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NBAA

New NBAA technical regulatory departments:

(i) Standards Setting

(ii)Monitoring

(iii)Audit Review

(iv)Enforcement

(v)Education (already there)

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NBAA

Reconstituted NBAA Governing Board e.g.

(i) 9-12 members

(ii) Chairman

(iii)Ex-officio members (6)

(iv)Academic member (1)

(v) Representatives of the accountancy profession---

expert members (1-2)

(vi)Eminent members (1-2)

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NBAA

(vi) Maximum of 3 qualified accountants

(apart from ex-officio members)

(vii) CEO and Heads of Technical

Departments to attend meetings

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NBAA

The NBAA will act in the public interest as a regulator of accountants and auditors in Tanzania to ensure integrity, best practice and compliance with international standards in the preparation of financial statements and the audit of those statements.

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Public Interest Entity

First Schedule of the Act:

(a)Listed companies(b)Banks and financial institutions(c)Insurance companies(d)Any entity with an annual revenue

that exceeds an amount to be determined by the Board

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Public Interest Entity

(e) Any entity that meets any two of the

following as determined by the Board:

• Revenue less than (d)

• Number of employees

• Total assets

• Total liabilities (excluding shareholders’

equity)

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Public Interest Entity

(f) Per Second Schedule any Public

Corporation or NGO that meets the criteria

set out in (d) or (e)

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NBAA

Regulatory functions include:

• Register PIEs

• Register auditors of PIEs

• Undertake practice review of audit firms

• Standards setting and monitoring

• Accredit professional bodies

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ICPAT

The draft Financial Reporting Act (FRA)

establishes a strong professional

body for accountants and auditors:

“The Institute of Certified Public

Accountants of Tanzania”

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ICPAT

As a members’ body ICPAT will

represent the interests of its members

and, in particular:

• Register members and students

• Determine practical training

requirements

• Issue certificates for public practice

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ICPAT

• Establish disciplinary procedures

• CPE/professional development

• Technical guidance

• Ensure high standards of professional

and ethical conduct

• Eventually IFAC membership

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NBAA Funding

NBAA will receive income from

(a)the Ministry of Finance

(b)auditors of PIEs registration fees

(c)PIE registration fees

(d)Examination fees

(e)Publications

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ICPAT Funding

ICPAT will receive income from:

(a)Membership fees

(b)CPE

(c)Set up costs from World

Bank/Ministry of Finance

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FRA

FRA is divided into the following main parts:

• NBAA

• Registration of Auditors

• ICPAT

• Professional Accountancy Bodies

• Setting of Standards and Monitoring

• Miscellaneous provisions

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FRA

Composition of the NBAA Board:

(a)Chairman

(b)Six ex-officio members (Regulatory

Members)

(c)Academic member

(d)Expert member (max.2)

(e)Eminent member (max.2)

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FRA

Objectives, functions and powers of the NBAA:

• S12 sets out the objectives

• S13 sets out the functions

• S14 sets out the powers

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FRA

The Technical Departments will have several functions (S20) including:

(a)Standards Setting

• Develop and adopt accounting/auditing standards after consultation with ICPAT

• Issue guidelines

• Ensure consistency with IFRS/IAS and ISA

• Standards for SMEs

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FRA

(b) Monitoring

• Review and analyse financial reports

• Identify any failures of compliance

• Monitor compliance with CPA employment rules

• Report to the Enforcement Department

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FRA

(c) Audit Review

• Register PIEs and auditors of PIEs

• Conduct practice reviews

• Ensure auditor compliance with the Act

• Accredit and oversee professional bodies

• Report non-compliance to the Enforcement Department

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FRA

(d) Enforcement

• Review findings reported by other departments or directly to the Board by other Government Agencies

• Recommend the appropriate course of action/sanctions

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FRA

(e) Education

• Preparing syllabi

• All aspects of the examination process

• Accrediting/exempting training providers

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FRA

Enforcement Procedures:

(a)Board Hearing Panel to hear objections from PIEs, auditors etc

(b)The Panel confirms, amends or quashes the recommendations/findings of the Enforcement Department

(c)Accounting and Auditing Appellate Tribunal to hear appeals from the Panel

• High Court Judge and

• 4 with demonstrated expertise

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FRA

Registration of Auditors:

(a)To audit a PIE an auditor needs to be registered with NBAA

(b)Need to register the audit firm with NBAA

(c)NBAA will review quality assurance procedures of audit firms

(d)Sanctions

(e)Material Irregularities

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FRA

ICPAT:

(a)Covered by S42-64

(b)Council S45-47

(c)Establishes a potentially strong professional body

(d)Extensive objectives and functions set out in the Act

(e)Registration, practical experience and disciplinary functions

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FRA

(f) Certification

(g) CPE and training

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FRA

NBAA Oversight of Professional Bodies:

(a)For accreditation by NBAA a professional body (including ICPAT) must demonstrate it is undertaking various activities in a satisfactory manner (S65)

(b)NBAA has public oversight of professional bodies

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FRA

Setting of Standards and Monitoring:

(a)IFRS/IAS for PIEs

(b) SMEs

(c) ISA

(d) Compliance and Monitoring

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FRA

(e) Practice review of auditors

(f) Powers of investigation

(g) Sanctions possible against registered auditors, PIEs and their officers/directors

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Transitional Provisions

(a)Transfer of professional membership

(b)Continuity in audit of PIEs

(c)Continue audit practice

(d)Standards apply to SMEs

(e)SOEs deferred compliance

(f)IFAC membership

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Effect on other legislation

• S78 repeal of the Auditors and

Accountants (Registration) Act, 1972

• Recommendations to amend 25 other

listed Acts