Most top finance bosses fall short of ICPAK standards

Half of senior finance executives in Kenya’s listed companies do not meet the standards of the national accounting body, posing a corporate governance concern for the market regulator.

Capital Markets Authority’s report for 2009 cited poor CFO standing with the Institute of Certified Public Accountants of Kenya (ICPAK), as one of the gaps in corporate governance.

But the market authority’s report, showed improvement in key corporate governance parameters for listed firms.

While to be in “good standing”’ with ICPAK primarily refers to adhering to the membership rules of the accounting body, it is the disciplinary element that comes with the membership and the ability to weed out unqualified personnel that stands out as a thorny issue.

“The challenge is how to discipline the FD in a professional manner in case of misconduct,” says Mr Kassam.

According to the CMA Annual Report for 2009, only 31 chief finance officers (CFOs) in the 60 listed companies at the Nairobi Stock Exchange are in the good books of the national accounting body.

Out of six possible parameters that the CMA looked at to gauge the corporate governance levels among listed firms, the poor standing of CFOs with the national accounting regulatory body stood out as the biggest failing for listed companies.

For the CFO to be in good standing with the regulator, he must first be a registered ICPAK member who is a Certified Public Accountant (CPAK).

As a member of ICPAK, he must pay subscriptions, updating the CPD (Continuous Professional Development) hours and abiding by the professional ethics .

The concern is valid and with good reason.

In the finance department, two thirds of fraudulent acts occur within the controlling departments while one third of such acts happen in accounting.

Although procurement and production departments were also found to be prone to fraud, they accounted for less than 10 per cent.

“But it is in a situation where he engages in fraud and other illegal negotiations or transactions, that the officer is subject to disciplinary action,” says a member of the ICPAK secretariat but who is not authorised to speak to the media.

In the event that a senior finance executive is involved in fraud, a local body will evaluate and take action.

“Having a professional discipline is a good thing,” says, Ashif Kassam, the managing partner at advisory firm RSM Ashvir.

Mr Kassam, who was a former ICPAK council member, says the aim is to encourage finance executives to become members of a local body that has the ability to ensure the integrity of the accounting profession.

Finance fraud

Fraud busters are advising employers to tighten internal controls o check cheating, with experts sayung financial pressures facing most employers are likely to force workers to engage in white collar crime.

These financial pressures are mainly the product of the slowing Kenyan economy and the surging cost of goods and services, which has left a huge fraction of the working population with a battered purchasing power.

A huge chunk of the fraudulent dealings are more likely to involve staff in the finance, operations and sales departments.

Low cadre staff and their supervisors on the other hand are likely to file fake claims.

Currently, 60 per cent of fraudsters sit in the executive suite, says the report..