Updating Accounting and Auditing Legislation

1. Updating Accounting and Auditing Legislation Restructuring the NBAA and establishing ICPAT

2. Agenda • Project Background and Objectives • Approach and Methodology • NBAA/TAA (ICPAT) • Financial Reporting Act • Discussion

3. Project Background and Objectives • ROSC (April 2005) (b) Stakeholders’ Workshop (March 2006) (c) Project Implementation (August 2006)

4. Project Background and Objectives • Improve statutory framework • Strengthen enforcement mechanisms • Upgrade professional education and training • Enhance capacity of regulatory and professional bodies

5. 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

6. 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

7. NBAA and TAA (ICPAT) NBAA today: • Regulator • Professional members’ body • Strong examination system • Highly respected • Board dominated by accountants

8. 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

9. 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

10. NBAA NBAA to be restructured: • Membership functions passed to the new professional body • Technical regulatory departments set up • Examinations retained

11. NBAA New NBAA technical regulatory departments: • Standards Setting • Monitoring • Audit Review • Enforcement • Education (already there)

12. NBAA Reconstituted NBAA Governing Board e.g. • 9-12 members • Chairman • Ex-officio members (6) • Academic member (1) • Representatives of the accountancy profession---expert members (1-2) • Eminent members (1-2)

13. NBAA (vi) Maximum of 3 qualified accountants (apart from ex-officio members) (vii) CEO and Heads of Technical Departments to attend meetings

14. 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.

15. Public Interest Entity First Schedule of the Act: • Listed companies • Banks and financial institutions • Insurance companies • Any entity with an annual revenue that exceeds an amount to be determined by the Board

16. 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)

17. Public Interest Entity (f) Per Second Schedule any Public Corporation or NGO that meets the criteria set out in (d) or (e)

18. NBAA Regulatory functions include: • Register PIEs • Register auditors of PIEs • Undertake practice review of audit firms • Standards setting and monitoring • Accredit professional bodies

19. ICPAT The draft Financial Reporting Act (FRA) establishes a strong professional body for accountants and auditors: “The Institute of Certified Public Accountants of Tanzania”

20. 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

21. ICPAT • Establish disciplinary procedures • CPE/professional development • Technical guidance • Ensure high standards of professional and ethical conduct • Eventually IFAC membership

22. NBAA Funding NBAA will receive income from • the Ministry of Finance • auditors of PIEs registration fees • PIE registration fees • Examination fees • Publications

23. ICPAT Funding ICPAT will receive income from: • Membership fees • CPE • Set up costs from World Bank/Ministry of Finance

24. FRA FRA is divided into the following main parts: • NBAA • Registration of Auditors • ICPAT • Professional Accountancy Bodies • Setting of Standards and Monitoring • Miscellaneous provisions

25. FRA Composition of the NBAA Board: • Chairman • Six ex-officio members (Regulatory Members) • Academic member • Expert member (max.2) • Eminent member (max.2)

26. FRA Objectives, functions and powers of the NBAA: • S12 sets out the objectives • S13 sets out the functions • S14 sets out the powers

27. FRA The Technical Departments will have several functions (S20) including: • Standards Setting • Develop and adopt accounting/auditing standards after consultation with ICPAT • Issue guidelines • Ensure consistency with IFRS/IAS and ISA • Standards for SMEs

28. FRA (b) Monitoring • Review and analyse financial reports • Identify any failures of compliance • Monitor compliance with CPA employment rules • Report to the Enforcement Department

29. 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

30. 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

31. FRA (e) Education • Preparing syllabi • All aspects of the examination process • Accrediting/exempting training providers

32. FRA Enforcement Procedures: • Board Hearing Panel to hear objections from PIEs, auditors etc • The Panel confirms, amends or quashes the recommendations/findings of the Enforcement Department • Accounting and Auditing Appellate Tribunal to hear appeals from the Panel • High Court Judge and • 4 with demonstrated expertise

33. FRA Registration of Auditors: • To audit a PIE an auditor needs to be registered with NBAA • Need to register the audit firm with NBAA • NBAA will review quality assurance procedures of audit firms • Sanctions • Material Irregularities

34. FRA ICPAT: • Covered by S42-64 • Council S45-47 • Establishes a potentially strong professional body • Extensive objectives and functions set out in the Act • Registration, practical experience and disciplinary functions

35. FRA (f) Certification (g) CPE and training

36. FRA NBAA Oversight of Professional Bodies: • For accreditation by NBAA a professional body (including ICPAT) must demonstrate it is undertaking various activities in a satisfactory manner (S65) • NBAA has public oversight of professional bodies

37. FRA Setting of Standards and Monitoring: • IFRS/IAS for PIEs (b) SMEs (c) ISA (d) Compliance and Monitoring

38. FRA (e) Practice review of auditors (f) Powers of investigation (g) Sanctions possible against registered auditors, PIEs and their officers/directors

39. Transitional Provisions • Transfer of professional membership • Continuity in audit of PIEs • Continue audit practice • Standards apply to SMEs • SOEs deferred compliance • IFAC membership

40. Effect on other legislation • S78 repeal of the Auditors and Accountants (Registration) Act, 1972 • Recommendations to amend 25 other listed Acts