These are very serious concerns that were recently raised by the Senate when it was probing the books of accounts for Nairobi county.
And right on cue these issues have peppered conversations amongst various accounting and financial professionals. For now, let us not go deeper into what this means or who is responsible as the matter is under probe but looking at the bigger picture we are reminded that signing off books of accounts is a serious undertaking, be it in the public or private sector.
Why so?
First, books of accounts that have been signed off by an accounting professional who is certified shows that these critical documents can be relied on. Additionally, signing off of accounts promotes transparency and accountability, it illustrates the commitment of the management to uphold high ethical standards and ensures the fulfilment of their fiduciary responsibility to all the stakeholders.
To further explain the above let us look at what signing off books means for users in both the public and the private sectors.
The Kenyan taxpayers' pockets are being raided by a raft of new taxes and levies. Increasingly taxpayers are demanding, and rightfully so, full disclosure of where their hard-earned money is going. This is why the Senate and Parliament are under pressure to thoroughly go through the books of accounts for counties, ministries and other agencies.
There is an imperative need to keep in check spending by these entities and arrest any malpractices such as paying ghost workers or payment for work not done. There is also pressure to tame the wage bill which is under pressure as workers demand more pay to keep up with the rising cost of living.
As a response to these demands, both the national and county governments, must ensure that they keep proper books of accounts and to do this, proper, qualified and fit persons must be employed so that information is accurately captured.
However, some counties and departments have been employing unqualified persons who are signing off books which is foolhardy because at the end of each quarter and financial year, these entities are required to prepare financial statements to be submitted to the Office of the Auditor General for subsequent audit verification and issuing of audit opinion.
Needless to say, when books are not properly signed off it becomes a potential landmine for those who sign the books and their supervisors.
The same principles apply to the private sector. Businesses, be they large or small, public or private, must ensure that their books are proper as per the Company Act. This is to ensure that stakeholders’ demands for transparency and accuracy are fulfilled. Shareholders or investors will want to know how the management is running the business to enable them to make strategic decisions such as investing, divesting, or restructuring the business.
A commercial bank or any other lender relies on the accuracy of the books of accounts before committing funds. The taxman also wants to know that the books signed off are accurate and therefore the Exchequer is getting its fair share of revenues. The community will be interested to know whether the business will continue taking into account its welfare, and the suppliers and financiers will be interested to know whether their dues will be paid as and when they fall due.
In summary, signing off books is a serious undertaking and this is why the law requires only certified accounts to do so. This responsibility should only be executed by professionals who are Certified Public Accountants, registered by the Institute of Certified Public Accountants of Kenya and are in good standing.
Finally, it is a criminal offence to pretend to be a professional accountant able to sign off on financial records. So before you sign off books be aware of the seriousness of this undertaking.
Finance specialist