HomeOpinionThe role of accountants in combating corruption

The role of accountants in combating corruption

Owen Mavengere Accountant
Corruption has been a topical issue lately as all sectors look for ways of eradicating it. The cost of corruption has been estimated to be in billions every year the world over. Corruption in the private sector and public sectors, both in the developing and developed world has, in my view, cost many their livelihoods.

I believe that the true cost of corruption is what it does to society in terms of the loss of the opportunity to develop. To start off, I will define what corruption is.

I have come across many definitions of corruption, and I will borrow from a presentation recently made by a Commissioner of the Zimbabwe Anti-Corruption Commission (Zacc) when she spoke at an online Accounting and Financial Reporting Seminar held on January 28, 2022.

The seminar which was targeted at Finance Directors and Managers employed by Zimbabwe Independent Commissions was in response to the findings and recommendations by the Auditor-General where she lamented the non-compliance to international accounting and reporting standards among other governance issues in the public sector.  Non-compliance to these standards creates opportunity for corruption.

Zacc as a body mandated by the Constitution of Zimbabwe was concerned with the failure of some public institutions to adhere to international accounting and reporting standards.

To pilot the capacity-building initiative in the form of seminars that would ensure that finance directors and managers employed in the public sector, are able to implement the recommendations made by the Auditor-General, the Zacc invited the Institute of Chartered Accountants of Zimbabwe (Icaz), Office of the Accountant General, and the Central Internal Audit Unit (CIAU) in the Ministry of Finance and Economic Development to partner. These seminars would focus on preventing corruption in the Public Sector by ensuring that Accountants and Finance Directors/Managers conduct their duties in a professional and ethical manner.

Back to the Accounting and Financial Reporting Seminar, the Commissioner stated that, “corruption and lack of integrity undermine government efforts to achieve key national development goals, aspirations and are impediments to the fulfilment of sustainable development goals. Notwithstanding the fact that the vast majority of officials who work in the public sector perform their duties honestly, all organisations and government institutions face the risk of corruption.

Whether through the awarding of public contracts, collection of taxes or other revenues, payment of social benefits, or in any of the other ways in which a government interacts with its citizens, there is the ever-present chance that a public official will engage in corruption through misuse of specific powers, insights and access to information.  Likewise, persons interacting with government institutions and public officials might try to use corruption to, for example, influence or circumvent rules, procedures and decisions.”

There is no standard definition of the word “corruption”. The legalistic dimension in Zimbabwe lists the practices that constitute corruption per se without defining the concept. Some of the key elements of corruption include:

  • Contamination of public professional morality for personal private gain;
  • Abuse of private and/or public official for financial gain or otherwise;
  • Violation of rules and statutes for personal gain;
  • Betrayal of private and public trust with a deliberate intention to extract undue benefits through abuse of office;
  • Prominence conferred to personal/group private interests at the expense of public morality and trust; and
  • Undue influence over public policies, institutions, laws and regulations by vested private interests at the expense of the public interest.

Analysis of the key elements
From all the six elements of corruption stated above, a clear pattern emerges which is that corruption is founded on a principle of personal gain at the expense of the organisation.

A key aspect would be the desire to benefit financially in one’s own capacity but usually to the detriment of the entire organisation. This could simply be theft of resources or more complex activities such as embarking on a white elephant project, paying for undelivered goods/services, tax evasion and so on.

Another example in my view would be besides obtaining an advantage for oneself, a person can seek to benefit a third party. The end game is almost always so that the third party or the individual can obtain a financial reward. The aspect of a financial reward then leads me to the next section.

 Finance department
From the above elements and analysis, the pattern that is apparent is that there is a flow of financial resources. That being said I also believe that not all corruption will have a direct flow of financial resources that can be easily observed.

This therefore puts the accountancy profession in a strategic position as virtually every transaction has to pass through the finance department for processing in one way or another. This especially holds true for large organisations, and I will continue the rest of the article with a slightly larger focus on such entities.

Whilst the corruption can emanate from outside the organisation or in a different department, the accountancy professionals will ultimately be responsible for processing a payment for the financial resources to flow.

Other cases such as theft of non-monetary resources might not require a finance professional to allow for the transaction but through systems and procedures it is again the finance or audit department that can pick such cases since the entity should have an asset register.

The asset register will then show what resources an entity should have and any missing resources will then be picked up.  Asset Registers must always be kept up to date, whether new non-current assets have been procured in that year or not.  This ensures that theft of non-monetary resources is prevented or detected early enough for appropriate action to be taken to reduce the impact on the organisation.

From the above, it is quite clear that the finance professional is therefore involved in all transactions, be they positive or negative. A key question would be whether they would be aware that the transactions are dubious or not. My view is that there are instances when the accountants are not aware and there are also instances when they are fully aware.

In situations where the accountancy professional is aware of a dubious transaction, but they still allow the transaction to go through, my belief is either that person is simply afraid to speak up or they are part of the corruption. Most professional accountants are men and women of integrity so they would not be part of the corruption.

But of course I am one such professional accountant so I might not be the best to pass an opinion on that. As usual, I have oversimplified my analysis, however, the point remains that ignorance, fear and lack of integrity are the requirements for a corrupt transaction to pass through the finance department. The Public Finance Act provides for appropriate action to be taken when an unlawful instruction is given to the public official.

As I proceed it is important to make a separation between a professional accountant and a regular accountant. A professional accountant is one that belongs to a PAO. A few examples of such PAOs are Icaz, Acca, Cima and SAAA. PAOs must have a code of ethics to which their members must subscribe to.

The PAAB has also prescribed the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA) supported by the International Federation of Accountants. PAOs also have structures for investigation and discipline to ensure that their members are always ethical. Icaz, for example, has the Latin phrase Semper Integritas on its crest, which means always integrity.

Each professional accountant belonging to Icaz and other PAOs is expected to uphold the principles of integrity and thus cannot be involved in corruption, at least not without consequence. Other principles of the code of ethics include professional competence and due care, thus requiring a professional accountant to always stay on top of their game to avoid situations where one would then profess ignorance when things go wrong.

Furthermore, PAOs support their members over and above ensuring compliance to ethics. Through continuous learning and development professional accountants are kept abreast of developments locally and internationally to ensure they are equipped to handle and identify potential loopholes and gaps.

PAOs can also support through facilities such as Tip Off Anonymous. In addition, as technology evolves so too does the sophistication used in malpractices, and PAOs are leading in coming up with developmental programmes to ensure accountants and auditors can best detect and prevent corruption and other ills from happening in their organisations.

The engagement that I referenced above which Icaz is involved in is also another role PAOs can play in the fight against corruption. This is particularly important for institutions that have experience and structures founded on ethics, good governance and integrity.

Mavengere is the Acting CEO at the Institute of Chartered Accountants of Zimbabwe (ICAZ), which is the largest and longest standing Professional Accountancy Organisation in Zimbabwe. Owen can be contacted on technical@icaz.org.zw or twitter: @OwenMavengere

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