In addition to the commendable job the East African Community has done so far, setting and promulgating standards for facilitating trade and investment in East Africa, it should also set standards for Financial and Audit Reporting, to facilitate a uniform presentation and understanding of business accounts and Financial Reports.
In addition to the commendable job the East African Community has done so far, setting and promulgating standards for facilitating trade and investment in East Africa, it should also set standards for Financial and Audit Reporting, to facilitate a uniform presentation and understanding of business accounts and Financial Reports.
Although the exercise ought to be gradual, the Community which by its very existence aspires to economic and social integration, and eventually political federation, should not give allowances for confusion caused by cockpit-like prepared and audited accounts and financial statements; that are not easily understood in bilateral and multilateral transactions that are binding.
Standardised Financial Reporting requires that the accounts of a business entity, be it a sole proprietorship, partnership, private limited liability company, public limited liability company, cooperative, club or similar, must be well recorded and kept in a professionally recognised set of books of account or records of accounts. It also requires that basic financial statements, recognised professionally and internationally, must be produced and communicated to the concerned who usually are the stakeholders.
Those of a public limited liability company must also be submitted to the Registrar of Companies within a specified period of time after audit. Those of a cooperative must also be submitted to the Registrar of Cooperatives also within a specified period of time after audit.
Basic financial statements include the Balance Sheet also known as the Financial Position Statement, the Income Statement formerly known as the Profit and Loss Account (in the case of profit making entities), the Income Statement formerly known as the Income and Expenditure Account (in the case of non-profit associations), and the Cash Flow Statement.
The standard may also require a particular entity such as a public limited liability company to produce a Value Added Statement. It may also require every audited entity to produce an Audit Report in respect of each accounting period, audited and signed by a professionally qualified, registered Auditor, such as a Chartered or Certified Accountant, duly appointed by the entity’s previous Annual General Meeting (AGM) to carry out the exercise.
The standard may also require production and presentation to the Annual General Meeting, the Directors’ Report or Board Chairperson’s Report, highlighting the entity’s past year performance, achievements, failures, challenges and a brief on what is anticipated to be done in the following year.
Using their own accounting systems
Unfortunately, each of the five countries, at the moment, has its own way of reporting financial accounts and statements; and its own way of auditing them. Kenya, Uganda and Tanzania have a somewhat similar way of doing so, modeled on that of their former colonial masters, the British.
The primary objective of the East African Community benefiting from regional integration economically, socially and eventually politically; to continue preparing accounts and financial statements similar to those of the British does not enhance it. Doing so would have been acceptable if East Africans saw themselves only as members of the wider group, the British Commonwealth.
Nevertheless we ought to see ourselves as members of our households before seeing ourselves as members of the district, country, African Union, British Commonwealth or the much wider world.
Much as the majority of partner states are members of the British Commonwealth, they have no binding economic cooperation agreement as they have with the East African Community which is at their door step. It is important to know that their membership to the Commonwealth will be more recognised and respected if back at home they have a strong economic regional bloc like the much desired East African Common Market-cum-East African Community.
Rwanda and Burundi are also accustomed to reporting and auditing their financial accounts and statements according to systems and standards inherited from their colonial masters, the Belgians and perhaps their World War 1 colonialists, the Germans.
Some Rwandans and Burundians who lived in exile in Commonwealth countries and returned to their countries recently or some years ago, also report and audit their financial accounts and statements according to the British accounting and auditing systems and standards that they acquired from the countries. In that way, their countries, unfortunately, have a mix-up of financial reporting and auditing, including a very difficult task of assessing taxes.
For this reason, the five countries, spearheaded and inspired by the Community, ought to reconcile and harmonise these historical differences, and standardise their financial reporting and auditing.
Doing so will gradually and effectively enhance the Community’s primary objective of economic integration as well as its secondary objectives. It will also promote easy understanding of business transactions between states for use in decision making, planning and control.
Given that the East African Governments have so far agreed on the practice of reading in Parliament their national Budgets for the next financial year(s), on the same date, with similar financial periods, standardised Financial Reporting and Auditing will increase chances of understanding and interpreting of these Budgets.
Left-hand driving standardisation also overdue
The Community should also standardise left-hand driving throughout the Region as a means of accelerating the movement of people and goods.
This is because the three older members of the Community, which were later joined by Rwanda and Burundi, and who by number are the majority, drive on the left.
Another reason is that most imports bound for the landlocked Uganda, Rwanda and Burundi from the Indian Ocean in the ports of Dar es Salaam, Tanga and Mombasa, pass through two of the older member countries of Tanzania and Kenya, such that by continuing to drive on the left, the practice will help maintain a steady flow of goods and people by road to the three countries.
In that way, trade and investments between the countries will be ensured though ideally, availability of an efficient railway transport between the sea and the landlocked countries would have been better.
The thought of compelling Tanzania and Kenya to change towards driving on the right like Rwanda and Burundi would, on the contrary, slow down road traffic from the Indian Ocean ports moving towards the three landlocked countries. The process of covering stretches of well over 1,500 kilometres of road from the sea ports to Uganda, Rwanda and Burundi respectively, would cause drivers of heavy duty vehicles, most which are trailers, to spend unnecessarily long periods adjusting themselves to drive long distances on the right side of the road.
It would also increase the risk of road traffic accidents of such vehicles and loss of cargo on the way.