CHAPTER-4

AUDITING IN ETHIOPIA
THE ROLE OF THE AUDITOR GENERAL:
The Auditor General or Comptroller General as it is sometimes referred to in some other
countries such as Nigeria is in general the sole person responsible for audit and control of all
government financial affairs.
In Ethiopia, the audit and control department was established by proclamation 69/1946
under the Prime Ministers office headed by an auditor general and the name of the institution
was “Finance Commission:. This was done subsequent to the financial regulations of 1942,
which for the first time was issued to prescribe modern financial and accounting responsibilities
of government ministries and control, and audit of government receipts and payments including
budgeting.

A separate Auditor General’s office was established by Decree 32/1958, making the
Auditor General directly responsible to the king. In 1961, the Auditor General was made to
report to the parliament by proclamation 179/1961. After the revolution of 1974 the Auditor
General’s reporting function was amended to be to the provisional Military administrative
Council (PMAC), and the council of Ministers until 1987 when it was made to report to the
shengo (council of Representatives) by proclamation No. 68/1997 was issued to redefine the
objective and responsibilities of the Auditor General. This proclamation made the Auditor
General accountable to the Council of Representatives and between sessions to the President of
the Federal Republic.

As one can see the auditor general’s independence and reporting function has been constantly
changing with changes in the government leadership and political-ideology of the times.

OBJECTIVE OF THE AUDITOR GENERAL:

According to the 1997 proclamation, the declared objective of the Auditor General is to

1. Strengthen an audit system required for reliable information necessary for the proper
management and administration of the plans and budget of the Federal Government.

2. Ascertain that all receivable money and property of the Federal Government are
collected, preserved and used properly, in accordance with the laws and regulations of the
Federal Government, and report the same to the Council.

3. Undertake financial performance audits of the offices and organizations of the Federal
Government

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 4. Make efforts, in cooperation with concerned organs, to promote and strengthen
accounting and audit professions.

5. Give professional assistance and advice to Regional and Federal Civil servants and
organizations engaged in accounting and auditing professions.

6. Draw up a standard of auditing by which accounts of the offices and organizations of the
Federal Government shall be examined and follow-up the implementation of the same.

STRUCTURE OF THE AUDITOR GENERAL:

The Auditor General is to be appointed to office by the Council of Peoples’

Representative upon recommendation by the Prime Minister and is accountable to Council of
Peoples’ Representative.

The Auditor General is to report to the Council of peoples’ Representative and the
president between sessions. Thus, the provision seems to make the Auditor General enjoy a
degree of independence in carrying out its responsibility, which is desirable and is as it should
be, since she/he could not be accountable to any other organ whose financial integrity she/he
supervises.

POWERS AND DUTIES OF THE AUDITOR GENERAL

The following are the main powers and duties of the office:

1. Audit or cause to be audited the accounts of Federal Government offices and

organizations.

2. Audit or cause to be audited accounts involving budgetary subsidies and any special
grants extended by the Federal Government to Regional Governments:

3. Audit the accounts of private contractors relating to Federal Government contractual

work which involve a sum exceeding birr 500,000:

4. Carry out or cause to be carried out, as may be necessary, programme and efficiency
audit in order to ensure that the performance of Federal Government offices and
organizations is in accordance with the law, economically sound and has attained the
desired objectives.

5. Report audit findings to the head of the audited Federal Government office and
organization, as the case may be, the result of the audits performed in accordance with
sub articles (1), (2), (3) and (4) of this Article, the result of the audit performed shall also
be immediately submitted to the Council of Peoples’ Representative, where it indicates
the commission of crime:
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6. Issue directives, in cooperation with other offices concerned, regarding accounts and
property auditing procedures and standards.

7. Issue certificates of competence to internal auditors who may be employed by any

Federal Government office and organization:

8. Where it deems it necessary, require internal auditors of any Federal Government office
to audit the accounts and property of their offices and report the finding.

9. Where it deems it necessary, train internal auditor in cooperation with the concerned
organs.

10. Where it has reasons to believe that any account has been kept in a criminal and dishonest
manner, impound such books, documents, ledgers, vouchers and other materials relating
to such account.

11. Give the necessary advice on the financial and accounting regulations to be prepared by
the Ministry of Finance.

12. Make efforts, in cooperation with other concerned Government Offices with a view to
promote the Accounting and Auditing profession, take appropriate measures to ensure
that the development of the Accounting and Auditing profession of the Federal
Governemnt is in the right direction.

13. Maintain close contact and cooperation with the Audit and Control Offices of Regional
Governments with a view to enhance the development of auditing.

14. Issue, renew, suspend and cancel certificates to competence of private auditors and
accountants who provide auditing and accounting services to

a. Organizations which are under the ownership of the Federal Governments.

b. Public organizations which are, by law, under the common ownership of Federal and
Regional Governments;

c. Activities over which the Federal Government has the right to control;

d. Sectors over which the Federal Government has been assigned by law, with the
responsibility of authority to administer;

e. Joint ventures organized under the partnership of the Federal and Regional
Governments, the Federal Government and foreign or local investors, other areas of
activities where the Federal Government has undertaked the responsibility for their
execution.

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 15. Charge fees for the issuance and renewal of such certificates in accordance with
regulations issued by the council of Peoples’ Representatives.

As the government was privatizing the enterprises and the economic units under its
ownership and control following the liberalization of the economy, it was obvious that the
Auditor General’s office focus was on Federal and Regional Government . Despite this the office
is given vast responsibility and sole right to have the authority to “audit or cause to be audited”
all Government agencies and organizations which the Federal Government has partial or
complete ownership. The proclamation attempts to make the office be financially more
independent than any other government departments or ministry by allowing it obtain one-forth
of its annual budget in advance.

In addition, the office was frequently called upon by courts and other agencies to audit or
review complex financial relationship outside its regular audit programme.

However, its capability in material as well as manpower being far from adequate it could
only audit a fraction of all government agencies.

In historical perspective, soon after the 1974 revolution some of the few existing foreign
private auditing firms left the country, the Auditor General’s office had neither the capacity, nor
the confidence of private or international organizations to handle the audit work that used to be
done by the private auditing agencies. As a result, it was necessary to establish a semi-
independent Audit Services Corporation.

To implement the powers and duties given to it by proclamation No. 13/1987 with respect to
issuing certificates of competence in accounting and auditing, the AGO established, in 1991, a
committee composed of representatives of the education sector, ministry of finance, private
auditing firms, ministry of trade, and Ethiopian Management Institute, to help it chart short,
intermediate and long term strategies.

The committee made a study review of the accounting and auditing problems in Ethiopia.
Three selected members of the committee undertook an extensive study tour of professional
Accounting Associations in Tanzania, Belgium, and the United Kingdom. Subsequently a
National Committee for the certification of Licensing private Auditors and Accountants in
Ethiopia was formed in 1991 composed of the representatives of the mainly indicated institutions
chaired by the Deputy Auditor General.

This committee became responsible for certifying many private accountants and auditors
in Ethiopia and recommending their licensing by the Auditor General. As such it was responsible
for establishing a nucleus for a number of accounting and auditing professionals in the country.

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THE ROLE OF AUDIT SERVICE CORPORATION

Historical Background: The Audit Services Corporation in Ethiopia was established after the
revolution in 1974, when the government took over the control and ownership of a number of
production and distribution enterprises.

The responsibility and right to “audit or cause to be audited” all enterprises under
government control was that of the auditor General as was stated earlier. But the Office did not
have either the technical competence or sufficient manpower to cope with such activity,
especially as this part involved “commercial audit”, there was a need to establish a semi-
independent Audit Services Corporation under the aegis of the Auditor General. This was also in
line with Tanzania’s experience and socialist line thinking. The Audit Service Corporation was
thus established in 1977 pursuant to proclamation 126/1977.

OBJECTIVES OF AUDIT SERVICE CORPORATION:

According to proclamation 126/1977 the objective of the corporation was:

 To render audit services to production, distribution and service giving organizations of

which the government is the owner or majority shareholder.

 To render management consultancy services to the organizations specified above.

 To find way and means for further development of audit profession and try to make
Ethiopia self-sufficient withing short period, with respect to audit profession.

ORGANIZATIONAL STRUCTURE OF AUDIT SERVICE CORPORATION:

The Corporation had a Board, a general manager, and deputy general manager. The board
was composed of the Auditor General as a chairperson, and the Ministers of Finance, Law and
Justice, and Central Planning as members. It was empowered to approve policy decisions,
budgets, and the appointments of General Manager and Deputy General Manager.

POWERS AND RESPONSIBILITIES OF AUDIT SERVICE CORPORATION

The corporation was established as an independent entity with powers to sue and be sued,
enter into contract, determine terms and conditions of recruitment, as well as charge fees for its
services. At the start, it had a paid up capital of Birr 300,000 out of authorized capital of Birr
600,000.

The intent to make the Audit Service Corporation self-financing and to make it operate as
commercial enterprise which is able to render commercial audit services is obvious. However,
such services cannot be rendered without the necessary manpower skill to perform the services.
Given the shortage of qualified accounting and auditing manpower, the Audit Service
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Corporation could not fulfill much of its function. It tried to render some audit services by
recruiting qualified accounting expatriates from Asia through a UN technical assistance scheme.
The multiplier effect on the growth of the auditing profession in Ethiopia, however, was still nil.

With the limited manpower capability the Audit Service Corporation can only audit some
of the public enterprises without venturing much into consultancy. The audits of public
enterprises had to be subcontracted through the Auditor General to private auditing firms who
still remained in the country after the revolution.

PRIVATE AUDITING FIRMS IN ETHIOPIA:

Private auditing as a commercial auditing service is to have started with the opening of
branch office of the Price Waterhouse Peat & Co. in Addis Ababa, subsequent to the
establishment and growth of multinational British companies like [Link] & Co., Mitchell Cotts
Ltd., Standard oil, Caltex, and Shell: and the issuance of the commercial Code of Ethiopia in
1960. As the multi-national companies required audited financial statements of their overseas
operations, while the commercial code later made the submission of audited annual financial
statements by share companies mandatory for renewal of trade license, the demand for audit
services began to extend. The 1960s were a heyday for growth of accounting and auditing
practices in Addis Ababa and Asmara. By 1967 it was reported there were 167 share companies
who had to have their accounts audited according to the commercial code of 1960 requirements.

A research made between 1968-70 indicates there were 19-24 private firms or persons
rendering “public accounting” services in Ethiopia. Out of these firms, five were foreign public
accounting firms with home base outside Ethiopia i.e. Price Waterhouse peat & Co., Newar &
Co., Mann-Judd & Co., and Whinnery, Murray & Co. Among the others, there were three
Ethiopian “qualified” abroad who were practicing locally.

By the beginning of 1922 there were only two Ethiopians national firms: that of
Getachew Kassaye and Co., and Bequertsion Haile and Co., and one Egyptian firm Newar &
Co., still remaining from the old batch. The rest had closed their practices after the revolution.
Today, it is estimated that there are about 64 qualified individuals, all of whom practicing
independently.

INTERNAL AUDITORS, INSPECTORS AND INTERNAL CHECKERS:

1. Internal Auditors:

Internal audit function in Ethiopia came to be known by the mid 1960s with the introduction of
modern management practices, organization structures, and the need of controlling the internal
operations. However, the demand for internal auditors did not come to surface prominently until
after the revolution in 1974, when the concern for better control of nationalized enterprises and
strengthening the overall internal control systems of public enterprises for facilitating central
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control and planning systems of public enterprises was eminent. This phase was marked by the
establishment of the Central Planning Supreme Council’s Office and the promulgation of the
proclamation for the establishment of Working People’s Control Committees throughout
enterprises and regions.

As a result, the increase in demand for internal auditors in public enterprises and
government agencies became widespread. Each state owned corporation, enterprise, and plant
and/or government agency came to establish or be interested in establishing internal audit unit
within its organization.

In spite of this, however, the development of the internal auditors’ function and the
adequacy of manpower placed in these units is far from satisfactory. The managements attitudes
towards internal audit function is no more than lip service. The role and image of the internal
audit remains yet to be ameliorated.

2. Inspectors:

In most government department and ministries internal control and monitoring of

government financial affairs have been performed by the so-called “inspectors”. Particularly with
in the Ministry of Finance “inspectors” are sent annually to ministries and provinces to check
propriety of government budgetary expenditure and to ensure the return of unspent funds (fesess)
in line with lapsing appropriation back to the Ministry of Finance.

In the working and internal organizational set-up of the Ethiopian banking and insurance
sector, the prevalence of “inspectors” positions can be observed for persons whose responsibility
is to assess, appraise, verify, and supervise loan, and mortagaged and insured property.

3. Internal Checkers:

In internal checkers operations of Ethiopia , particularly banks, it is observed that there

are a number of persons designated as “internal checkers” who are mostly involved in pre-audit
function, and or checking of property, cash transfer, and inventory issuance and receipts.

The position and qualifications of the above persons varies from organization to
organization. However, Internal Checkers are slowly changing to internal audit function
positions.

SPECIAL LEGAL PROVISIONS RELATED TO AUDITING IN ETHIOPIA:

1. COMMERCIAL CODE OF ETHIOPIA 1960: The commercial code of Ethiopia of 1960

contains many provisions relating to accounting and auditing requirements instituting the bases
for the first formal means of enforcing accounting and auditing practices and standards in the
country. It contains provisions relating to:

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1. Mandatory books and accounts to be kept and financial statements to be prepared, especially
by partnership and corporations (referred to as share companies). It attempts to define terms, and
prescribe some accounting rules and regulations with respect to types of books and accounts,
classification and presentation of balance sheet, valuation of assets, adjustment, amortization and
provisions, capital, profits, reserve funds, and fixed interest charges. (Article 63-85 and 445-
461).

2. Auditing and requirement of auditing financial statements of corporations (Article 368-387).

Of particular interest are the provisions with regard to:

 Appointment of an auditor and terms of office (Art.368-369).

 Persons not competent to be auditors(Art 370)

 Remuneration(Art372)

 Professional secrecy(Art373)

 Duties and functions of auditors(Art374-378)

 Liability(Art.380)

Appointment:

According to the Ethiopian Commercial Code, the auditors of corporations are to elected by
general meeting of shareholders. However, it is possible to elect more than one auditor and have
a majority and minority auditor who are to audit jointly or separately. The term of office is a
maximum of 3 years. Auditors can be a body corporate not only a person.

Person not competent:

The code provides that persons who are founders and beneficiaries of company or its
subsidiary, or persons related by blood to the fourth degree, or person who receive remuneration
from company founders and directors are not competent to be auditors.

Remuneration:

The remuneration of an auditor is to be fixed by general meeting or ministry of Industry

and Commerce, which was then regulatory agency for all commercial enterprises operating in the
country.

Professional Secrecy:

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 An auditor in Ethiopia is liable for breach of professional secrecy in accordance with
article 407 of penal code.

Duties and functions of the auditor:

The auditor is required to submit written report to the general meeting containing
explanation on how he accomplished his duties, in addition to giving comments on Board
Director’s report and recommending the accounts for approval, or make whatever comments
she/he thinks fit, or refuse to recommend approval.

Auditors are also required to inform executives of irregularities, general meeting of

grievous irregularities, and the prosecutor general of an offence.

The auditor can call general meeting, accomplish the audit work in any way she/he thinks
fit, and call for any information or documents needed for the work.

LIABILITIES OF AUDITORS:

According to the code auditors in Ethiopia are liable to client and third party for losses
they cause in exercises of their duty and are punishable in accordance to the penal code.

ARTICLE 380 LIABILITIES OF AUDITORS

The commercial code states that:

1. Auditors shall be civilly liable to the company and third parties for any faulty in the
exercise of their duties, which occasioned loss.

2. An auditors who knowingly gives or confirms an untrue report concerning the position of
a company or fails to inform the public prosecutor of an offence which he know to have
been committed shall be punished under Art.438 or Art.664 of penal codes as the case
may be.

The civil-liabilities of the auditors arise if she/he has caused a loss to his clients through her/his
negligence or non-performance. These liabilities are governed under contact provisions of article
1790, 1799-1805, 2636 and 2638 of the civil code.

Under article 2031 of the civil code, the auditor is liable extra-contractually towards
her/his clients and third parties.

ARTICLE 2031-PROFESSIONAL FAULT:

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 1. A person practicing a given profession or activity shall in the practice of such profession
or activity observe the rules governing that practice.

2. He/she is liable where after due consideration of scientific data or rules recognized the
practitioners of his/her craft, she/he appears to be guilty of imprudence or negligence
constituting definite disregard of duty.

In addition to the civil liabilities, the auditor can also be held criminally liable as indicated by
art.380 (2) referring to article 438 and 664 of the penal code.

ARTICLE 438-FAILURE TO INFORMATION THE LAW:

1. Whosoever without good cause

a. Knowing the identity of the perpetrator of, or the commission of and offence
punishable with death or rigorous imprisonment for life: or

b. Is by law or by rules of her/his profession, obliged to notify the competent authorities

the interests of public security of public order of certain offence or certain grave facts,
and does not do so, is punishable with fine not exceeding five hundred birr or simple
imprisonment not exceeding three months.

The commercial code of 1960 is in the process of revision and it is likely many of the
above provisions will change, but it would be important to know the above provisions in
perspective.

PROCLAMATION 286/2002

This proclamation is promulgated to change the then income tax system to principles of
fiscal treatment in a free market economy.

According to regulation No. 78/2002 (issued pursuant to proclamation 286/2002), firms

are grouped into three categories, category A,B, and C, in light of the requirement of preparing
and submitting their report on financial accounts(balance sheet and profit and loss statement).

 Category A: any company incorporated under the laws of the Ethiopia or in a foreign
country and any other business with an annual turnover of Birr 500,000. Businesses
under this category are required to submit their financial reports within four months of
the lapse of the fiscal period prepared following GAAP and accrual basis.

 Category B: Unless already classified in category “A” any business with an annual
turnover of over Birr 100,000. Businesses under this category are required to submit their
financial reports within two months of the lapse of the fiscal period.

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  Category C: Unless already classified in category “A” and “B” whose annual turnover is
estimated by the Tax Authority as being up to Birr 100,000. Businesses under this
category are not required, by law, to prepare and submit financial reports but are required
to file tax returns within a month of the lapse of the fiscal period.

To what extent has the above requirement been implemented is highly doubtful (in this regard
see Johannes 1970, and 1990).

This proclamation also includes specific account regulation with regard to capital determination,
reserves, appropriation, provisions and exemptions with auditors must take heed.

In a parallel development, as of 27 august 2000 a new public enterprise proclamation No.

25/1992 super ceding proclamation No. 163/1977, which establishes public enterprises legal
entity, and new accounting and auditing guidelines on public enterprises, net profit
determination, setting up of legal reserves, and state dividends payments is put in effect.
According to this proclamation, books and accounts are to be closed 3 months after the end of
fiscal period, following GAAP or as determined by the supervising authority.

MINISTRY OF FINANCE FINANCIAL REGULATIONS AND INLAND REVENUE

PROVISIONS:

Ministry of Finance regulations came out first in 1942 to establish modern directives for
government financial administration and to institute record-keeping and control of government
expenditure. Since then it has been revised several times, the last one being in 1981.

This regulation contains a number of points with regard to inspectors and controllers of
the Ministry of Finance, and internal control procedures to be adhered by government
departments. It is the basic guidelines for all auditors and accountants in the Ministry of Finance.

In addition, it is important to note and be aware of other provisions and directions issued
by the Inland Revenue Authority especially tax-laws (rules and regulations), as most tax auditors
to be will have to rely on these provisions in accomplishing their task.

STATUS OF ACCOUNTING AND AUDITING PROFESSION IN ETHIOPIA:

The historical development of the accounting/auditing profession, in Ethiopia broadly be

categorized into four phases or epochs i.e.

Phase I- pre 1960

Phase II- 1960-1974

Phase III- 1974-1991

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 Phase IV- post 1991

Phase I: Pre 1960:

In pre 1960 there was no coordinated effort of individuals or grouping directed towards
setting up of accounting or auditing professional association reported, except by way of the
former commercial school graduates alumni association who tried to fill the aspirations of those
trained in commerce at the secondary school level and working in banking and financial related
clerical and administrative jobs.

Phase II: 1960-74

This period witnessed significant events in the accounting/auditing profession i.e. the
promulgation of the commercial code and coming into force of the same, the college of business
administration offering major studies in accounting was established in 1963 at Addis Ababa
University (AAU) to meet partly the manpower demand at the grass-roots level. The faculty of
law was also opened during this period. Private auditing firms with international practices such
as Price Waterhouse, Peat & Co., Whinnery, Murray & Co., and some local auditing offices were
opened to offer these services.

1. Public Accountants Certifications Committee (PACC):

After the issuance of the commercial code of 1960, which instituted mandatory annual
audit requirements of share companies, the demand for specialized manpower that can render
services in this area, and the need to monitor the quality of their work to avoid malpractices,
became increasingly obvious.

These events made all the more conspicuous the need for establishing a body responsible
for guiding the accounting and auditing profession and monitoring its practices. Its absence came
to be strongly felt in preparation of financial statements, determination of financial position of
companies, taxable income, evaluating loan proposals, distribution of profits and, promoting the
capital market. The issuance of securities by companies and the securities exchange market
under the name of Share-dealing Group was just then taking foothold.

As a result, a legislative draft proposal to set-up accounting and auditing supervising

body, named PACC, under the Ministry of Industry and Commerce was prepared by Fred
Fechhimer (from Law Faculty-AAU). This was prepared at the suggestion of the Ministry of
Industry and Commerce who was then responsible for all commercial and industrial activities in
the country, and as a result of various researchers, which cast doubts as to the standard of
accounting and auditing work in the country.

The draft contained proposal for setting a certification committee under a Board
composed of various institutions who had vested interest. Their role was not only to issue
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certificates and licenses but also to set-up accounting and auditing standards. However, the draft
law was never enacted.

2. Ethiopian Professional Association of Accountants and Auditors (EPAAA):

In 1971 an ad-hoc committee composed of the Auditor General, the Addis Ababa
University(Accounting department), and representatives of private auditing firms in Ethiopia
called a general meeting of prospective accounting and auditing professionals to form an
association aimed at promoting the interests of accounting and auditing profession and its
development in Ethiopia.

In 1973 the general assembly rectified the memorandum of association and the
establishment of Ethiopian Professional Association of Accountants and Auditors(EPAAA) after
registering with the Ministry of Interior under Reg. No.82 in accordance to the legal
requirements of the country, thus becoming a legal body. The purpose and objectives of the
Association are declared to be:

 Establishing standards for accounting and auditing for its members:

 Prescribing minimum qualification for professional accountants and auditors to the

members of the Association:

 Issuing a code of ethics and conduct for the regulation of professional accountants and
auditors:

 Evaluating examining, and certifying applicants for membership:

 Fostering the training and development of professional accountants and auditors in

Ethiopia by encouraging the development and improvement of accounting education:

 Cooperating and counseling with other organizations in the advancement of the

profession and the public interest in Ethiopia.

Organization and Administration:

The association is composed of:

 The General Meeting of the members

 The Board of Directors-not less than 7 and not more than 9: composed of a chairperson, a
vice-chairperson, and an executive secretary.

 Financial Committee:

 Applications, Examination, and Membership Committee:

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  Professional Standards, Investigation and Disciplinary Committee.

Membership:

It had two kinds of membership. General Members referred to as Ethiopian Certified

General Accountants (ECGA), and members in public practice as Ethiopian Certified Public
Accountants (ECPA). Close to 90% of the members of EPAAA were foreigners having qualified
abroad, and had already membership in metropolitan home-base chartered accountants’
association. On the other hand, the membership also was comprised of three interest goups that
is, the government sector, the education sector, and the practicing accountants. As such it was no
surprise that differences in expectations would arise which could at times be hard to resolve.

Since its establishment, the association issued three guidelines called Boards of Directors
Directives (BDD).

 BDD# 1 on Special Investigation tasks by auditors (1973)

 BDD# 2 on Bidding for Audit work (1973)

 BDD# 3 on Financial reporting guidelines with respect to nationalized companies:

heading, treatment of land, severance pay, pension, capital surplus(1975).

These guidelines have contributed something towards shaping some of the accounting practices
observed today, and providing guidance in auditing in Ethiopia.

Phase III: 1974-1991:

After the revolution, the EPAAA lost the majority of its members as the foreign private
auditing firms closed their practices in Ethiopia, and the Office of the Auditor General took over
the control of all audits in the country. Consequently, according to proclamation 17/1987 the
Auditor General was given control over the development of the auding profession in Ethiopia,
and powers to issue certificate of competence, and renew and or suspend licenses. To implement
its juridical authority the Auditor General Office established, in 1992, a Certification Committee
under its chairpersonship composed of representative of Ministry of Finance, Ministry of Trade,
Ethiopian Management Institute, the Addis Ababa University, the Audit Services Corporation,
and private auditing firms. The Committee was to assist the Auditor General in evaluating and
screening candidates to be certified as “Qualified Authorized Accountants”, or “Qualified
Authorized Auditors”.

In the meantime, the EPAAA remained dormant for 17 years with rather low profile until
it began to be reactivated again in January 1992 by the remaining founding members.

1. Chartered Institute of Public Finance and Accountancy Study (CIPFA)

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 In 1985 the Ministry of Finance sponsored a complete study of accounting and auditing
services in Ethiopia by consultants from CIPFA-London (Chartered Institute of Public Finance
and Accountancy) under a World Bank fund grant aimed at improving the financial control
infrastructure capability in Ethiopia.

The study took over a year to complete. The main conclusions and recommendations of the study
were that:

 A professional training programme designed for providing accounting professional

qualification scheme in the country be instituted within the university in lieu of a masters
degree programme.

 The size of the professionals, which they estimated then to be 7100 was projected to be
14200 in 10 years times.

 The then existing accounting professionals were classified to be composed of 80%

technicians, 15% sub-professionals, and 5% professionals.

Technicians were those bookkeepers with diploma or certificates in bookkeeping or accounting:

sub professionals were accountants with bachelor degree in accounting: and professionals were
qualified accountants with CPA and or masters degrees and doctors degree with several years of
practical experience.

A professional association be established under either of the following options:

---Existing institutions responsibility

--- Joint standing Committee

--- Workers party of Ethiopia(WPE)

--- Independent professional association

2. Professional Education:

Until 1990 the accounting and auditing education was provided through:

a. The Addis Ababa University – Accounting department (CSS/FBE) degree and

diploma programmes through regular and extension division. The annual intake in
the regular degree programme is 100 students, graduating at 60-80 per year.

b. The Asmara University – Faculty of Commerce degree and diploma programme.

The annual intake was close to 150 students, graduating 100 in both degree and
diploma programmes.

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 c. The Junior College of Commerce diploma programme, which had an annual
intake of 200 and graduating close to 100 students annually.

Phase IV: Post 1991

The change in government and the consequent ideological shift was followed by the
embrace the free market economy principles. Various educational institutions entered in to the
market to fill the demand and a growing number of certified accountants joined the ranks.

1. National Direction:

In 1994, after the Transitional Government was instituted in Ethiopia, significant

measures were taken to redress the poor economic condition of the country through emergency
recovery reconstruction programme. This program brought the accounting and auditing
profession to the forefront as vital component of appropriate economic management.

Thus, a “Capacity Building” project study was formulated to prepare a national capacity
building program in the areas of accounting and auditing in order to harmonize the professional
development with the changing policy environment.

In 1994 the British Oversees Development Agency (ODA) launched and made an
extensive review of past studies, interviewed professionals and sub-professionals and institutions
and recommended the establishment of “National Accounting Audit Development Program”
(NAADP).

Later on, in 1999 a special coordinating committee was set up to evaluate NAADP. The
committee evaluated the quantity and quality of academic institutions, identified physical
capacity constraint, staff shortage and suggested the establishment of Ethiopian National
Accounting and Auditing Board (ENAAB).

2. Education:

In a parallel development, following the introduction of market economic policy

participation of private investment in education started to take foothold. Many private colleges
were opened with business programs. Specially, the latter part of 2002 has seen tremendous flux
of new colleges opening up in Ethiopia. Data collected in the same period’s shows that 65% of
the private colleges offer accounting, management, business and computer programs of various
levels. Another data collected in 2003 shows 16 accredited colleges out of which 81% of them
offering accounting programs. The same data confirms that out of the total enrollment in 21
subjects in these colleges 40% are in accounting (Highest).

More recently, the government’s plan to open 13 new universities, bringing the total
number of universities to 21, in various regional towns of the country will add significantly to

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the number of enrollment and corresponding graduates as almost all of the new universities offer
business courses.

During this period the country embraced the free market economy principles. Various
private educational institutions entered into the market to fill the demand and in a parallel
development a growing number of certified accountants joined the ranks.

3. Accounting Society of Ethiopia:

This is a recently established body with the intent to cover accounting and finance
educators and practitioners. It was established in June 2004 and reported to have membership of
close to 120.

4. Institute of Internal Auditors-Ethiopian Chapter (IIA-EC)

The institute of Internal Auditors Ethiopian Chapter (IIA-EC) was legally established in
March 1995 though it started its activities in early 1996 and has now fully paid members of over
200. It is the most active and dynamic accounting and auditing professional association in the
country providing continuing education programs to its members, holding frequent events to
keep its members in professional enhancement by arranging public speakers from abroad and
locals. It also arranges for teach-in by members for CIA-examinations, and has a newsletter.

5. ACCA Ethiopian Office:

Following the increasing enrollment of students for the ACCA program and the
corresponding number of certified public accountants, the ACCA Ethiopia Office was set-up in
2004.

The office set-up is in line with the growing number of CPAs in Ethiopia. Since its
establishments, the office is playing a proactive role in bringing the accounting profession to the
limelight by conducting various forums, workshops and discussion forums with the aim of
bringing together policy makers, practitioners and academicians to deliberate on issues of
national importance. The ACCA is extending its proactive role by inviting professionals from
other countries with a view to share their experience. These efforts are significant and vital in
bridging the gap towards the formation of a National Accounting Board and the enactment of the
Accountant’s Act.

6. Audit Firms and Authorized Accountants:

According to the information obtained from the office of the Federal Auditor General,
today there are 62 licensed audit firms and 500 authorized accountants.

This is a big leap forward as compared to the situation predating this period. On the other
hand, the service providers seem fragmented and stakeholders are apprehensive in the sense that
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they are bidding each other out in the market. This fact may entail undesirable consequences for
a profession that is coming out of the shadows. Rather it may be time for the audit firms or the
authorized accountants to form an alliance in their own sphere respectively and establish a firm
that could undertake major assignments locally or on international scale. Such development
would also strengthens the capacity in drawing policy makers attention to critical issues related
to the profession or can be of better service as a vocal in policy matters.

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