opinionBy Robert Llewellyn Kilby
Monrovia — A frustrated Liberian vents her frustration over the misuse of power by a high-ranking Liberian government official.
While surfing the Internet, I came across several newspaper publications involving the Liberia Institute of Certified Public Accountants and ECOWAS Audit Team. The reports stated that the Liberia Institute of Certified Public Accountants (LICPA) and its Executive Director - Sam Mombo, have taken legal action to stop the ECOWAS audit of Liberian Government agencies. The reports further stated that Mr. Mombo and his colleagues are threatening to involve the Supreme Court of Liberia, if necessary to prevent what they claim is "an illegal audit that is intended to bring disrepute to Liberia and make our country a laughing stock". It was also reported that the LICPA is illegally issuing CPA certificates in Liberia.
This writing is intended to shed some light on the role of the Certified Public Accountant (CPA) in our society and rights and privileges of the LICPA in Liberia and the urge the next Administration to take the necessary action to bring the LICPA in compliance with applicable laws and regulations.
Like the medical profession (doctors and nurses), and the legal professions (lawyers); accounting professionals (CPAs) are another class of licensed professional authorized by the State (Liberia) to perform accounting services for government agencies, private organizations and public entities. Accounting services include, auditing, tax accounting, financial consulting, etc. Traditionally, these services are rendered in accordance with auditing standards, tax laws, governmental accounting standards, accounting principles, statute, and regulatory requirements.
Like a company (a for-profit business) and an NGO (not-for-profit organization), accountants have the same statutory rights to operate their business under any legal business form they choose. A CPA firm may operate as a Sole Proprietorship, Partnership, Corporation, Limited Liability Partnership (LLP), Limited Liability Corporation (LLC), etc. The LICPA, Mr. Mombo, and Mombo & Company have no more legal rights that any other businessman or woman legally doing business in Liberia.
At the core of the Ethical Standards of the Accounting Profession is what is referred to as the "Independence Rule". The lack of "Independence" in the CPA nomenclature is synonymous to the term "conflict of interest". It is professionally expedient that a CPA or a CPA firm specializing in public auditing practice be careful not to position itself in a manner that would appear to the public that conflict of interest exist with respect to a situation involving an audit client.
There are reports that Mombo & Company has held numerous audit and consulting engagements with the Liberian Government. In regards to these reports, newspaper editorials, citizens, and various organizations in Liberia have expressed dissatisfaction and disappointment with the LICPA lawsuit to stop the ECOWAS audit. Mombo & Company is in violation of the CPA "Independence Rule" for bringing a lawsuit in the interest of the Liberian Government under these circumstances.
The Role of the LICPA
To gain the public trust and confidence, the LICPA should set high professional and ethical standards for its members. It is based on these principles that the Liberian Legislature may choose to recognize the LICPA and authorize the Institute to oversee the public accounting profession in Liberia. Under no condition should the LICPA intervene in the affairs of Liberian Government and foreign entities.
Traditionally, funding institution like the World Bank, International Monetary Fund, the African Development Bank, and the local banks require an independent audit of their client. Usually, the arrangement to perform an audit of the client organization is stipulated in these agreements. The impetus of such a requirement is to provide assurance that resources are allocated, expensed or invested in a manner consistent with the contract terms. Any material deviation from these contract terms is a considered a breach of contract. I would surmise that such an agreement exist between ECOWAS and the Liberian Government.
The Evolution of the Public Accounting Profession - An American Perspective
This chronology of events is intended to provide insight into the evolution of the Public Accounting Profession and how laws governing the Public Accounting Profession evolved over the years. It is noteworthy that our accounting and financial reporting system is model against that of the U.S.
1887 - Organization of the accounting profession
1896 - First law to accredit the accounting profession by New York State
1899 - First female Certificate issued
1900 - New York U. opens School of Commerce upon request by NY Society of CPAs
1902 - US Congress call for audit report. No formally accepted accounting principles
1905 - Public accounting profession gains recognition as a skilled profession class
1913 - The first Federal Income Taxes were levied
1916 - Accounting educators form association
1917 - First Federal Reserve Accounting Bulletin was published
1920 - CPA organization gets new headquarters
1921 - First African-American CPA was realized
1923 - The first CPA exam top scorer recognized
1924 - Tax Appeal Board recognizes CPAs
1926 - Education becomes the focus of the CPA profession. College degree is required
1929 - Internal control is recognized in the profession
1931 - A major lawsuit places the burden of professional liability on CPAs
1932 - The accounting standard setter formed
1933 - Women CPAs are recognized
1934 - The Security Exchange Commission is born
1936 - The CPAs' aid fund is established to assist needy members and families
1939 - Federal Reserve issues financial statement regulations; education requirements set
1957 - The SEC delegates its authority to set accounting standards to the American Institute of Certified Public Accountants
1959 - The Accounting Principles Board is formed to develop authoritative principles
1965 - Public Law 89-332 confirms the status of CPAs to practice on tax issues before the Internal Revenue Service
1971 - Continuing Professional Education is recommended for CPAs
1973 - The AICPA revises its code of ethics, which require compliance with standards of an outside organization
1977 - Boards are setup for self-regulation of public and private practicing CPAs
1979 - Government Accounting Standards Board succeeds the National Council of Governmental Accounting to set standards for State and Local Government accounting
1984 - The Single Audit Act requires a comprehensive single audit for state and local government that receive federal assistance
1985 - Congress hold hearings focus on CPAs to investigate accountants role in the Savings and Loan failures
1987 - The AICPA held to a higher standard of public trust by the Treadway commission to detect fraud, report errors, irregularities and illegal acts
2002 - Congress establishes the Public Accounting Oversight Board (PCAOB) to oversee CPA firms engaged in auditing publicly held companies. This legislation stem from improprieties by CPA firms due to the lack of integrity of self-regulation.
Reference: Journal of Accountancy - American Institute of Certified Public Accountants (AICPA)
The American Institute of Certified Public Accounts (AICPA) Debacle
In 2002 the United States Congress passed the Sarbanes-Oxley Act, which created the Public Accounting Oversight Board (PCAOB) www.pcaobus.org. The PCAOB was created and granted exclusive oversight authority to monitor accounting firms that audit public companies as a result of the Anderson & Company, CPAs-ENRON fiasco. The Act curtails the authority previously granted to the American Institute of Certified Public Accountants. Prior to 2002 the AICPA was responsible for monitoring member firms that audit public companies. Today, the AICPA is no longer responsible for overseeing these firms.
The Security Exchange Commission (SEC) investigation of Anderson & Company, CPAs role as Independent Auditor of Enron revealed the existence of conflict of interest, with regards to the erroneous financial reporting by ENRON Management. ENRON was an audit client of Anderson & Company, CPAs. Anderson & Company, CPAs also provided consulting services to ENRON. Revenues generated from the consulting practice were approximately ten times more that that of the auditing practice. For fear of loosing the consulting contract, Anderson & Company issued an "unqualified opinion" on the ENRON financial statements, which contained overstatement of assets and revenues. An "unqualified opinion" means that the financial statements were correct in all material respect. Obviously, this made ENRON to look profitable when in fact it was loosing money.
The LICPA must first seek recognition and authority from the Liberian Legislature as the premier body of public accountants authorized to oversee accounting firms that audit public companies and government agencies. The LICPA should also refrain from issuing CPA certificates until the Liberian Legislature grants the approval.
In order to promote transparency, the Institute of Accountants should choose a not-for-profit status and implement high ethical and moral standards for its members.
The Institute's charter should be to:
Promote the interest of its members while upholding their members to the highest professional and ethical standards
Serve the public's best interest
Periodically monitor its members and member firms to ensure that integrity and professional responsibility are maintained.
Absent these basic tenets of public accountancy, the LICPA is acting without proper the authority.
Robert Llewellyn Kilby is a Certified Public Accountant (CPA) and a Certified Information Technology Professional (CITP). He is a member of the American Institute of Certified Public Accountants (AICPA) and is licensed by the institute to audit publicly held corporations within the United States.