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"id": 196580,
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"type": "speech",
"speaker_name": "Mr. Kimunya",
"speaker_title": "The Minister for Finance",
"speaker": {
"id": 174,
"legal_name": "Amos Muhinga Kimunya",
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"content": " Thank you very much, Mr. Temporary Deputy Speaker, Sir. Let me take this opportunity to, first of all, thank all the hon. Members who have contributed to this Bill. I also thank them for having shown interest in it as well as for all the good words they have said about it. I appreciate all their input in terms of what, in their view, may be missing from the Bill, which requires to be incorporated or, at least, be re-considered by the time we go to the Third Reading. A lot of things have been said about accountants. But let me also, first of all, reinstate the faith that hon. Members have had in terms of saying that most of the scandals we have had; most of the failures in companies that we have had would not have happened if we had good accountants watching over those institutions, organisations and companies. I believe that is exactly why we want to strengthen the profession through updating the law governing the Institute. Mr. Temporary Deputy Speaker, Sir, like I said in moving, the Institute was established in 1978 - that is 30 years ago. The law that established it was premised on the circumstances at that time. But things have changed and, over the years, the need has come in terms of what else needs to be brought into the law. That is what is coming in. I am sure even as we move forward, in the next one year or so; in the next couple of months, there will be things changing because we are living in a dynamic world. There will be need for other changes to be incorporated. That is why we are leaving some room even for some of those to come through the regulations that will then come on as the time goes. When we feel the matters are weighty enough, then they can be brought to this House. I believe that is part of the changes we are making to facilitate the making of regulations on an on going basis. I will now get into some of those as I move on. I was very touched to hear hon. Members' concerns over small scale traders. The backbone of manufacturing, business, retail and wholesale trade in this country is in the hands of small and medium sized enterprises. Sometimes we call them jua kali and sometimes, we refer to them as hawkers. But those are Kenyan entrepreneurs who are making a decent living from trading. It is those people whom we need to support in terms of the affordability of accounting services. Can they afford to know whether they have made a profit or loss at the end of the day? I was very touched to hear that hon. Members are looking at that. I am aware that the Institute has, through its small practitioners committee, been looking at assisting those small traders through internship programmes, especially for students who are still going through their examination process. They are assisted to help small scale traders in appreciating what accounting and basic book-keeping is all about. The end result is the increase in taxes because the small people become compliant. They appreciate that they are making a profit and it makes it very easy to tell them: \"You are making a profit because you are operating within a society that has given you the conducive environment to operate. Can you contribute to that society through payment of taxes?\" We have seen that happening and you can see between 2002 and now--- I think by 2002, the total taxes that were being collected were just over Kshs200 billion. Now, we are talking about double that figure because Kenyans have realised that they need to pay taxes. All that comes in with proper accounting records that are facilitated by those accountants. 516 PARLIAMENTARY DEBATES April 16, 2008 So, Mr. Temporary Deputy Speaker, Sir, it is something that we will need to consider. Some of those things may well be put within the law. Some may be put within the regulations while some will need to be worked out with the Government on how the Institute could work as an independent body. We can work with the Institute on programs to assist the small traders to access accounting services. I recall - I think two years back - as a Government, we gave a grant to ICPAK as part of enhancing their audit quality review programmes so that, that could then be used to start off some programmes on facilitating the small practitioners and all the auditors to better the quality of their audits with the better knock-on effect on the rest of the country in terms of higher quality services for anyone receiving those services from the auditors and the accountants. Again, it is something that we need to look at. We should come up with the best way of assisting small traders. I am happy that, that thing has come up. I think the other issue that came up - I believe it was yesterday - was something that was contained in page 44, about the definition of where conflict of interest is likely to come from, and that auditors will not be allowed to carry out audit work unless they disclose their interest in businesses where there is a family interest. There is a long worded definition of what immediate family means. I have since been looking at this and I can assure the House that I have received all the assurances that, that definition which is contained within Clause 30 of what immediate family means, was arrived at after looking through all the best practises everywhere and looking at who, in that definition, would compromise the decisions or the independence in the decision making process of an auditor who, by looking at the books, would say: \"Yes, my child is there. If I give an opinion that this company is not doing well, would he lose a job? My wife is a shareholder or a director, if I say things are bad, what would happen?\" So, by looking through that and identifying all the various people who, if they were related to an independent auditor, would actually impair his or her independence, that is how these names were being picked up. It may look like a mouthful but that is probably the best way of protecting the greater public interest by ensuring that anyone who has a relationship with a director or staff within a company where he or she is also the auditor, would have to disclose that interest so that anyone looking at those accounts knows that they were audited by the husband to the managing director or by the wife of the chairman. People can then make up their own minds and say: Is there a possibility of a conflict of interest having arisen in terms of the truth and fairness of those accounts? Mr. Temporary Deputy Speaker, Sir, I believe that is something we will be looking at as we define the regulations to see whether, further to that, we could re-explain these things, so that we do not become too restrictive. That is what I felt as the fear of hon. Members. That we are getting too restrictive and telling people you cannot audit this or do that. However, I do recall even in my earlier days - and time is running--- It is close to when I was starting my audit training. We had to fill so many forms stating that we had carried no audit or there was no company that you that you are a member of. Should that happen, you will disclose it to your audit partner. That is a standard practice within the profession. But it is done by some companies. But others do not do it. It is important that we do it for the greater public good within the law, so that everyone can comply. But again, we will be looking through that and, with the guidance of this House, we can further simplify or do it within the regulation. The other issue that came up in the course of yesterday, and I heard it today, is whether we should have provisions within this Act or legal aid or pro bono services as happens, especially for those who cannot afford accounting services. What I would like to clarify here is that this Act is about the regulation of the profession. In terms of how the various other people receive services, I am not quite sure whether this would be the place for us to then say that accountants must provide free services. That is because any business that is making money and requires the services of accountants would be encouraged to pay. Accountants usually charge not scale fees like other professions. It is based on time and expertise. Like I said before, there has been very good consistency in terms how those small businesses receive the services of accountants. April 16, 2008 PARLIAMENTARY DEBATES 517 The intention may be good. However, if we say that every auditor must at a given time provide free services, we could end up not being quite sure who will be provided freely. Are we saying, for example, the auditor of Kenya Breweries Limited (KBL) will then have to provide free services to the distributors of KBL or who qualifies for that service? As I said, the intention is good. I believe we can look at it within the other policy frameworks of micro-enterprises to see how small traders can access these services. Mr. Temporary Deputy Speaker, Sir, the other issue which came out very clearly is the role of the public accountants. The district accountants were mentioned as being critical in the national development. I believe Members have been interacting with them and we will continue to do so. Whether we are looking at our CDF or all the funds that flow to the districts. Again, all these funds will be under the district accountants. They must get involved. If we do not have the right qualified people in there, observing professional standards, we could well end up with compromised work. However, looking at it from the perspective of the Accountants Bill as we are discussing it now, I want to clarify that we have the Government Financial Management Act. Currently, this Act is under review. We want to update it and come up with a wider and more comprehensive organic budgeting law and financial management law for the entire Government. Perhaps, when we come to discuss it, I would like to hear some of these suggestions which could provide answers to a number of questions. How do we define who can be an accountant within the Government services? What do we need to do? How do we need to ensure that we can attract the qualified people in Government? Right now, I can tell you we have major problems and challenges. We want to attract the qualified accountants, but we cannot retain them. We are competing with the banks and all companies that are attracting the best from the market because they are paying three to five times more than what the Government is paying. It becomes a major problem retaining the very good accountants. Mr. Temporary Deputy Speaker, Sir, I must assure hon. Members that there are more people who are willing to work for the Government because they have a commitment to this nation. They have a commitment to ensuring that they serve the public and not necessarily because of the money. If they were just looking at the money, they would, probably have moved to the private sector. With regard to qualifications, this is something we can look at, especially within the wider review of the Government Financial Management Act and those other regulations that define who can work for the Government. It will define their qualifications, how they will be sourced and remunerated. I believe also there are some questions which could be answered once we review this Act. Mr. Temporary Deputy Speaker, Sir, there were also some issues which were raised by some Members in terms of the relationship between the Kenya Accountants and Secretaries National Examinations Board (KASNEB) and the Institute itself. Indeed, as I explained, the registration of Accountants Board which this Bill seeks to delete from that tripod of the KASNEB, setting up the exams, registration of Accountants Board registering the accountants and the Institute then accepting one as a member and moving on with them and regulating their conducts in the future. I am happy that there is concurrence in terms of the role of the registration board that we do not need to have it. Its work is actually administrative and making sure that you do an examination and having passed it, will be eligible for registration and becoming a member of the Institute. However, in terms of KASNEB and the Institute of Certified Public Accountants of Kenya (ICPAK), I would just like to really clarify here that their relationship, even under the current law, has been very clear and distinct. The ICPAK has never interfered with the former. I do not believe that even within this law it would have any authority or mandate or scope for interfering with the work of the examinations board. The examinations board also sets the examinations for the Certified Public Secretaries. I believe there is scope for even bringing in other professions, so that no single body can actually go and say we want exams either made harder or simpler because we 518 PARLIAMENTARY DEBATES April 16, 2008 want more or less members in the ICPAK. I think that has been clearly observed over the last 30 years. I think with this board, it can only be strengthened rather than weakened. Mr. Temporary Deputy Speaker, Sir, the ICPAK has an affiliate body known as the Kenya College of Accountancy (KCA). I believe there may have some been some confusion. The KCA started as an accountancy training centre. I believe one hon. Member talked about it. It has now since become the KCA University. It just shows us the dynamism of what would happen when people are committed to develop the accounting profession because by starting from very humble beginnings from rented premises to now own premises on Thika Road and with our own campus competing with the very best in production and the development of the human capital, that this country requires a bias towards management and accounting. That is where we need to start moving and to see all the others getting there. So, the ICPAK has those projects and it should continue with them. We are giving more power to it to actually be able to do so. Mr. Temporary Deputy Speaker, Sir, there were some issues in terms of council and committees that we have not quite defined. For example, when they should meet, how often they should meet and what should be the quorum and so on. Again, this will be the subject of regulations because things change over time. If we put it within the main law, then we would have to be coming back here to Parliament to say that in the last month there was no quorum and can we now change the law. These are issues that will be addressed within the regulations and, indeed, those regulations do exist. They will be reviewed as and when it becomes necessary. Mr. Temporary Deputy Speaker, Sir, an issue has been raised on the gender sensitivity of the Bill. I do accept that I am not a lawyer. We are all law makers. However, I have been advised that the male gender encompasses the female gender in legal making. So, here within the reference of he or she, it also encompasses the other gender. This is an issue that we need to take care of. I believe by the time we go to the Committee Stage we would have taken note of some of this language of the Bill. Looking at the representations within the committees and council, I can almost say even without it being stated by law that the membership of the accounting fraternity is the one that actually appoints the membership and it will be very sensitive. As I know it, people volunteer to serve on the council because it is a voluntary job. There is no remuneration. They volunteer to serve on the council and then they are vetted by their fellow members. They are voted for in the general meeting and usually that gender sensitivity comes in, but there have to be volunteers to serve on the council. Mr. Temporary Deputy Speaker, Sir, in all the other nominations in terms of the other people, again, it is necessary that it is taken care of. We can actually put it within the law that people can only be elected into the council so long as we have the gender balance. How do you then force the people to actually volunteer to serve on a council so that there will be enough candidates of either gender to be elected? It is the same thing that we have in the House. Much as we would have, probably, wanted to have one-third of the Members of this House being ladies, how do you force ladies to actually be candidates and go through the nomination exercise before you even force the electorate to elect them? So, you must vote for them unless we are going for direct nomination which, again, is not envisaged in this Bill. We could, therefore, end up with a law which cannot be implemented. Mr. Temporary Deputy Speaker, Sir, we must include many things like gender balance but the mechanics for doing it might not achieve that situation. What I can assure you is that when you look at the membership of the Institute of Accountants, you will be very pleased to note that we have very dynamic young male and female adults joining the institute. They have been giving a challenge to one another. It is one of the very few institutes that have had a lady chairperson in the name of Rose Ogega. She was the chairperson of the Institute for two years. I am sure that there April 16, 2008 PARLIAMENTARY DEBATES 519 will be scope for many more to come on board. The door is very much wide open and we do not have to legislate for that. However, the issue will be open to the House for further guidance as we go to the Committee Stage. The issue of international accounting standards and the international auditing standards came into play over 10 years ago, I believe, when I was the Chairman of the institute. That must have been in 1999, 2000 or in 2001. Kenya adopted the international accounting standards as the framework for reporting. Since then, Kenya as a country has demonstrated the way a Third-World country can take up such a challenge and succeed. The accounting standards at the international level keep on changing. Kenya is represented at the international level by our own staff. That is funded through the membership of the institute. Suggestions that the international accounting standards or auditing standards should be appended to this Act may find problems in terms of the change by the day. The changes depend on the circumstances. I am not quite sure that we need to worry about that, as members, except to refer to the fact that we are operating within the international accounting or auditing framework. The suggestion that we should have a schedule of that may perhaps not add a lot of value to the Bill, but could also constrain. We need to keep on changing every time one has been added or deleted. Mr. Temporary Deputy Speaker, Sir, one other issue which came up - I have no intention of responding to all the issues but to help as much as possible as we go to the Third Reading - is the fellowship of ICPAK. The fellowship of ICPAK is the highest honour that any accountant practising in Kenya can be accorded by the institute. There is a very clear criteria that was set up. I believe one had to serve as an accountant for a minimum number of years from the time he or she is registered. You had to set your accounting in good standing, pay your subscription fee, attend seminars, go through professional education, do something which can be noted in your citation in terms of being a good member so that you can be elevated from being an ordinary member of the institute to a fellow of the institute. I am happy to report that yours truly has been such a fellow for 12 years. I know that the criteria has been very solid. Having gone through the rigours myself and being honoured as a fellow 12 years ago, I know it is not open to abuse. By putting it within the law, the Council would have to sit and work out a clear criteria. At that point it was administrative, but now it will be legal and if you see anyone with the writings FCPAK after their names, you will know that he or she is not just an accountant but someone who has served the institute well in accordance with the regulations. Again, we will capture a number of things of working together with the institute on what we can capture within the regulations which will become part of this law. Mr. Temporary Deputy Speaker, Sir, there was also a very interesting observation that was made by one hon. Member regarding the age one must attain in order to qualify for registration as an accountant. I know it is something that went through a lot of discussion. I would like, for purposes of letting the House know, say that because of our children in this country being very bright or getting the best in education and support from their parents, we see many young students finishing school. Between their time in school and the time they take to join the university, the two years they are out, they attend colleges, commit their time and by the time they are joining universities, they have already qualified as accountants. Probably, they do not have an accounting record. They have the theoretical knowledge and technically, after sitting all the examinations, they pass. If they were to be registered immediately and be authorised to practice as auditors, in theory, they would take even the biggest companies in terms of capitalization, for example, Safaricom, and say that they are qualified to be the auditors of this company. They could sit their with their book knowledge and come up with the accounts for Safaricom. If the shareholders of Safaricom are in their millions, then they see an 18 year old saying he or she is the auditor of the company who has done the job, even if the chap has done well, it is a perception issue, they might 520 PARLIAMENTARY DEBATES April 16, 2008 start wondering how the youngster audited the work and how he can be saying that things are fine. They would say that something must be wrong. Mr. Temporary Deputy Speaker, Sir, audit opinion is not just a matter of it being true or fair. It also has to be seen to be true and fair. To provide that comfort to the investing public, the person who is giving that opinion should be mature enough to have looked at the books so that they are sure that their money is safe. It was decided among all the various stakeholders that there must be some certain age limit that would be set. It is just like the age limit for becoming a Member of Parliament, where before you are 21 years old, you cannot be entrusted with a constituency or become a Member of Parliament. So, there must be some reason to say that before you attain a certain age, you cannot be entrusted with the instruments to give a true and fair opinion of the accounting records of a huge corporation in which the public have put their money. The public have to satisfy themselves by knowing that things are either right or wrong. That seems to be the real reason why that has been put here. Without saying at what age people are mature enough to be respected by an investing public, this is something which needs to be done by the Council. It is very broad based in terms of its representation. The Council should come up with a team of stakeholders and agree whether they should put the age limit at 20, 25 or 30 years and at what age someone is not clear enough in their minds to give an opinion. Those are things which can be worked on and can change over time. They should be covered within the regulations. Mr. Temporary Deputy Speaker, Sir, as I said, I could go on and on and attempt to respond to all the issues that were raised by hon. Members. However, I am very happy to note the interest that was shown in the Bill, with regard to the work of accountants. I urge the House to continue to support the institute. I also want to say, as I mentioned while moving the Bill, unless it is granted, the accountants institute is not funded by the Exchequer. The registration of the accountants board was a department within the Treasury, so it was being funded by the Exchequer. Therefore, neither the institute nor the examination board is funded by public funds. It is all self- financing including the monies that were used for the construction of the Thika Road property. All that construction has been through self-financing activities of the institute and through members of the institute. An impression may have been created that this would be another body that would be funded through the Exchequer. I am aware that there was a grant that was processed through the Appropriations in 2006 for the purposes of the Government showing its investments in the improvements of audit quality, and knowing that so long as you have better quality auditors who can help the public further, the investment will be repaid through more taxes being collected because there are more compliant people. The quality of the audit will be such that auditors will not be compromised by clients, because they can see the greater public good is better than the fee that they will be receiving. Mr. Temporary Deputy Speaker, Sir, again that is just more of a clarification. I hope I have done justice in terms of issues that were raised by the hon. Members. It is not possible to respond to every bit of them, but I thought that the ones that required clarification I could as well look at and help hon. Members as we go on. Mr. Temporary Deputy Speaker, Sir, I gave my undertaking that we will wait for the relevant committee to be appointed, which I am sure will be very soon. We will commit the Bill to them with your remarks. I will be happy to go and give further clarification to them, so that by the time we bring this Bill for the Third Reading, we will have agreed on all the issues that need to be amended. We will have a law that serves the greater public good, which is in line with what accountants profess; accountability in the public interest. April 16, 2008 PARLIAMENTARY DEBATES 521 Mr. Temporary Deputy Speaker, Sir, I would like to thank hon. Members very much for their input. With those many remarks, I beg to move."
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