Last week’s article dealt briefly with the requirements for the appointment of auditors of companies. There had been some confusion as to whether or not a practice certificate is needed to undertake audits other than those relating to the examination of the financial statements of an entity and expressing an opinion on them. Specifically, the issue at hand was whether some of the auditors who undertook the forensic audits of a number of State institutions should not have been in possession of practice certificates from the Institute of Chartered Accountants of Guyana (ICAG). The Ministry of Finance had commissioned some 40 such audits, of which more than half were undertaken by auditors who did not have practice certificates.
Today, we examine the requirements for a practice certificate in greater detail.
Company Law requirements
By Section 170 of the Companies Act 1991, an individual is eligible for appointment as auditor of a company if he is a member of the ICAG and is the holder of a practice certificate from the Institute. Here, we are referring to the statutory auditor or the external auditor of a company appointed at an annual general meeting of shareholders to audit the financial statements of the company and to report thereon to the shareholders at the next annual general meeting in terms of their fair presentation, compliance with the Act, stated accounting and financial reporting framework, and other applicable laws, regulations and policy directives.
As a transitional arrangement, the Minister may, after consultation with the Institute, authorise by instrument in writing, any person to be appointed as an auditor of companies if that person in the opinion of the Minister is suitably qualified for such an appointment: (a) by reason of his/her knowledge and experience; and (b) was in practice in Guyana as an auditor at the commencement of the Act. However, an application for such an authorisation must be made to the Minister within 12 months of the commencement of the Act.
In contrast to the work of the statutory auditor, there are several other types of audits that are undertaken which do not require one to be in possession of a practice certificate. These include: internal audit; fraud and forensic audits; performance or value-for-money studies; and general management audits. The key distinction relates to the reporting relationship which, in the case of the statutory auditor, is to the shareholders of the company, or in the case of the Auditor General, the Legislature. For other types of audit, the reporting relationship is to management or to the concerned Minister, and the reports do not reflect an expression of opinion on the financial statements of the entity. As a general principle, a practice certificate is only needed if a professionally qualified accountant wishes to render accounting or auditing
services to the public, holds himself to be such, and the public is likely to rely on his/her work, especially in relation to investment decisions.
Requirements of the ICAG Act
In accordance with Section 11(1) of the ICAG Act, a person shall not engage in public practice of accountancy unless he/she is a member of the Institute and has been issued with a practice certificate. Any such practice certificate must be exhibited publicly at the place of business of the person concerned. Section 11(2) of the Act provides for any person who has become a member of the Institute to be issued with a practice certificate on application, notwithstanding that he/she is also a member of any registered body and receives or has received a certificate to practise from that body.
Membership of the ICAG entitles one to use the designation “Chartered Accountant” or “C.A.” after his/her name. This, however, does not preclude a professionally qualified accountant from using such other designations as ACCA/FCCA (UK), AICPA (USA) and CGA (Canada), once it is clear that such designations do not imply the practice of accountancy in Guyana.
Section 18(3) clarifies the meaning of “public practice in accountancy”. A person practices accountancy as a Chartered Accountant if, for reward, he prepares or examines financial, accounting or other related statements, or issues any written opinion, report or certificate concerning such statements. The Audit Act 2004 describes such a person as a “Chartered Accountant in public practice”. On the other hand, a person does not practice accountancy if he does so in the course of his/her duties as an employee, or engages in bookkeeping or cost accounting or the installation of bookkeeping, business or cost systems.
By Section 11(3), a practicing certificate shall be issued to any member who, after becoming a member of the Institute, or of any registered body, or of any body with objects similar to those of the Institute, has served continuously for at least two years in the office or offices of one or more practising members of the Institute or of any registered body or of such other body. This is akin to a period of apprenticeship in order to acquire the appropriate experience. As discussed below, this requirement presents difficulties for a professionally qualified accountant who would have spent a career as an employee in the public sector, the private sector or an international/regional organization and who, upon retirement, or for other reason, wishes to offer his/her services to the public.
Disadvantage for accountants in the employ of organisations
The ICAG’s website contains a list of 80 members, of which only about 20 are in public practice and hence have been issued with practice certificates. Compare this with the legal and medical professions where there are hundreds of lawyers and medical practitioners who offer their services to the public. The Institute has explained that its membership has been affected by ongoing migration. However, there are also hundreds of professionally qualified accountants in the country, most of whom serve as employees of organisations. They would not be able to obtain practice certificates when they demit office, unless they serve for at least two years in the office of a Chartered Accountant in public practice. While acknowledging the need to acquire the necessary experience, many of these persons may have already done so by virtue of holding positions such as Finance Controllers/Directors and Chief Audit Executives. In the case of the former, these professionals are responsible for the preparation of financial statements and for liaising with the External Auditors in relation to such statements. As regards the latter, audits are undertaken in accordance with the standards promulgated by the Institute of Internal Auditors, and in most cases, external auditors place reliance on the work of internal auditors.
The last two Commissioners-General of the Guyana Revenue Authority (GRA) – Messrs. H. E. Heyligar and K. Sattaur – are professionally qualified accountants. In the positions they held, they would have spent decades reviewing taxation returns and the audited financial statements of companies and other entities, prepared and/or certified by Chartered Accountants in public practice. They would have also had detailed discussions with these accountants in relation to such returns and statements. It would therefore seem inappropriate for these two former Commissioners to undergo a two-year apprenticeship with any of these local chartered accounting firms. The ACCA would have recognized the Commissioner-General as a person “having in the opinion of the ACCA Council, adequate qualifications and experience” in the context of the Employer Practice Certificate Development Stream. In this case, an accountant serving the GRA for three years, of which two years relate to post-qualification experience, would have been entitled to a practice certificate. If the ACCA sees it fit to consider the Commissioner-General in the same standing as a Chartered Accountant in public practice, it is not difficult for the ICAG to follow suit. Of course, this assumes that the next Commissioner-General will be a professionally qualified accountant. Perhaps, there is need for an amendment to the ICAG Act and/or its bye-laws to give effect to any such arrangement.
A similar situation pertains to the Auditor General, also assuming that he/she is a professionally qualified accountant. Since 1993, the Auditor General has been engaging the services of Chartered Accountants to audit on his/her behalf, and under his/her supervision, a number of State institutions. Upon demitting office, should he/she be asked to undergo a period of apprenticeship before being afforded a practice certificate? Just before returning home in 2012, I had contacted the Association of Chartered Certified Accountants in the UK which was prepared to offer me a Global Practice Certificate. However, at a recent discussion with the President of the ICAG, he made it clear that the Institute would still not be in a position to issue me with a practice certificate in view of the requirements of Section 11 of the ICAG Act. I suggested to him that we should revisit the Act which had not undergone any revision or amendment since it was passed some 25 years ago, despite the enormous changes that the accounting profession has undergone over the years.
In the drafting of the Audit Act 2004, I had included a section which makes provision for the Auditor General to be considered a “principal” for the purpose of issuing of practice certificates from the ICAG. In this way, a professionally qualified accountant serving the Audit Office for at least three years would have been eligible for such a certificate. To my surprise, this section was struck out of the final legislation without any consultation with me. This is perhaps one of the contributory factors why the Audit Office today remains weak and ineffective. The then Administration no doubt would have contacted the ICAG but it is not clear what the latter’s advice on the matter was.
Apart from the two former Commissioners-General and me, there are also several senior accountants in the country who are willing and able to share their knowledge and experience to the public but who are not afforded an opportunity to do so because of their inability to obtain practice certificates from the ICAG. It seems unrealistic to ask them to serve a period of apprenticeship before becoming eligible for a practice certificate. As it stands, they are left to languish on the sidelines after retirement. Some of them earn a very modest pension on which to live.
