Accountants Act Establishes Botswana Institute of Chartered Accountants while Financial Reporting Act Establishes the Botswana Accountancy Oversight Authority

The Accountants Act which has recently been successfully adopted by Parliament seeks to establish the Botswana Institute of Chartered Accountants under the new name of the Botswana Institute of Chartered Accountants (BICA) and entrust it with the responsibility to register professional accountants, certified auditors and member firms.

Key to the Act is the introduction of the principle of public interest protection by making mandatory for the Botswana Institute of Chartered Accountants to report on its performance annually to the Botswana Accountancy Oversight Authority (BAOA). The Botswana Institute of Chartered Accountants is specifically required to state what initiatives it has carried out during the year to protect public interest.

Another major addition to the Act is the establishment of Botswana’s own professional qualification. Since professional accountants in Botswana are a mixture of professionals from across the globe dominated by Association of Chartered Certified Accountants and Chartered Institute of Management Accountants, this will be a significant change as Botswana will now have its own internationally recognized qualification which addresses the economic needs of Botswana. Therefore, Botswana Institute of Chartered Accountants’ qualification will allow it to come up with its own curriculum based on its own circumstances and the needs of its own economy such as for example making provision for public sector financial reporting.

Furthermore, the Act defines who is a professional accountant and has a provision that requires that all professional accountants in Botswana should be registered with the Botswana Institute of Chartered Accountants to facilitate monitoring and regulation. This initiative should therefore assist in identifying and taking to book the so called fly-by-night accountants as currently there are more than 500 professional accountants not registered, a red flag to the Botswana Institute of Chartered Accountants’ role of the protection of public interest.

The Act further introduces enhanced but fair disciplinary processes whose Chairperson should be someone with a legal background, but not necessarily a professional accountant. Another critical change would be the strengthening of BICA to meet the new challenges of a modern professional accountancy body, which has led to the creation of new posts of a Technical Manager and the Director of Training and Development.

Finally, the Act balances the composition of the BICA Council, requiring that at least 50% of Council members should be citizens.

On the one hand, the Financial Reporting Act’s main objective is the establishment of a comprehensive legal framework that would strengthen Botswana’s corporate accounting and auditing practices. This was necessitated by the World Bank carrying out country based studies through what is now known as Reports on the Observance of Standards and Codes (ROSC).

The ROSC report amongst other things, checks the profession’s compliance with International Financial Reporting Standards (IFRS), and also checks on how the profession addresses Audit and Audit Quality Control. To this end, one of the major recommendations of ROSC was that Botswana’s financial reporting infrastructure could be significantly strengthened by introducing an independent oversight body to oversee and improve the reporting of financial matters of Public Interest Entities and also oversee all professional accountancy bodies in the country.

Against this background, the Financial Reporting Act establishes the Botswana Accountancy Oversight Authority (BAOA) as an independent and impartial regulatory body that is to oversee and improve the reporting of financial matters of Public Interest Entities and the corporate sector, and to strengthen the oversight of the accounting and auditing profession.

The overall responsibility for the profession in Botswana therefore lies with the oversight authority. However, the Botswana Accountancy Oversight Authority would delegate most of regular work relating to the profession to the Botswana Institute of Accountants but retains direct responsibility of the financial reporting and auditing of Public Interest Entities as this affects the general public.

Of particular importance is that the oversight authority will be the standard setter for both financial reporting and auditing in Botswana, ensuring that these standards address the specific needs of the requirements of the economy of Botswana and that they meet international benchmarks and hence facilitate Botswana’s participation in global trade.

However, the Act underscores that it is imperative to note that the authority does not oversee the overall running of Public Interest Entities as they have their own respective statutes to play that role. The Act also emphasizes the issue of public interest protection, most importantly the protection of the public from members of the profession through a strict and robust disciplinary process. The Bill will therefore introduce a strict penalty regime for non-compliance with its provisions.