Accounting Scandals: is Kenya the worst in Africa or just more remorsefully transparent?

Dear Africa interested individuals:  

                                                                Kenya has been in the nose in recent years with one accounting scandal after the other.  The scandals came into the public domain through aggrieved parties, Institute of Certified Public Accountants of Kenya (ICPAK) or foreign parent companies.  Investigations into the "cooking of the books" exposed corrupt dealings and outright looting in some cases.  These are definitely worrying developments as is the recent case of Tesco in the UK and Toshiba in Japan where profits were overstated.

In Kenya, accounting scandals of note over the years are:

1. Uchumi Supermarkets

2. Mumias Sugar

3. Haco Tiger Brands

4. CMC Motors

5. Kenya Airways

The only acknowledged accounting scandal in Nigeria till date is that involving Cadbury Nigeria.  On paper, corporate governance and cooking of the books is more prevalent in Kenya, than in Nigeria.

I am of the strong opinion that the collective system is less cooperative in Kenya to suppression of accounting and false reporting incidents.  The collective system in Nigeria is a lot more cooperative to suppression of accusations of creative accounting and false reporting.  This has ensured that acknowledged accounting scandals are almost non existent in Nigeria and gives the Nigerian financial reporting stakeholders a better image.  An incident ten months ago brings this suppression to the forefront.

The Financial Reporting Council of Nigeria (the equivalent of ICPAK in Kenya) is a federal government agency responsible for developing and publishing of financial accounting standards to be observed in the preparation of financial statements of public entities in Nigeria.  Its main objective is to protect investors and ensure good corporate governance practises in the public and private sectors of the Nigerian economy.  Many people actually do not know this body exists as they are reticent in their activities.  Five months after the inauguration of a new government in Nigeria, the FRCN came out of hibernation with a bang.

The FRCN on October 26, 2015 asked the directors of Stanbic IBTC TO WITHDRAW the financial statements of Stanbic IBTC for the years ended December 31, 2013 and 2014 and restate them in accordance with the law.  The FRCN also directed that the board members who attested to the financial statements now deemed to be inaccurate and misleading are suspended from attesting to the authenticity of any financial statements "until the investigation as to the extent of their negligence in the concealment, accounting irregularities and poor disclosures in the said financial statements is completed in accordance with Section 62 of the Financial Reporting Council of Nigeria Act Number 6, 2011.  Accordingly, they are not allowed to vouch the integrity of any financial statements issued in Nigeria."

Stanbic IBTC released a counter statement to the media dismissing the claims of the regulatory agency in its entirety stating that "Stanbic IBTC has met the disclosure requirements of the international financial reporting standards."  Stanbic IBTC failed at the first court level as the judge ruled in favor of the FRCN and the matter is now at the appellate court as FRCN is determined to ensure that its directives are carried out.  Things like this do not happen in Nigeria and the public reaction was more of opprobrium towards the FRCN.  The Central Bank has not admonished the bank so who is FRCN? The Central Bank released a statement a few days later, admonishing the FRCN for overstepping its boundaries and absolved Stanbic IBTC of any wrongdoing in its statements.

The FRCN stated that the Central Bank has embarrassed it and the government of Nigeria by its statement.  According to the 9 page letter sent to the Central Bank by FRCN, the Chief of Staff to the President said that the Central Bank should also be sanctioned if it is found that it is collusion with Stanbic IBTC given that it approved the financial results before they were publicly released.  The CBN governor has been focused on proving that the FRCN does not have the powers it has abrogated to itself to save face for himself and the regulatory body he heads.

I personally had an issue with Stanbic IBTC's 2014 audited report and brought this to public knowledge in 2015. Read my two articles on this blog about the bank's result by doing an archive search. Two other disturbing financial results that quickly come to mind are Dangote Cement 2010 and Continental Reinsurance 2009.  

I need to close this out a bit prematurely.  I may revisit this more in-depth at a later time.

Kenya's corporate governance and financial reporting is bad; Nigeria's is worse.  This is not apparent because Kenya is more transparent while Nigeria is more opaque about scandals.  The system in Nigeria is driven to protect individuals and not values the system was crated to uphold.  If the FRCN wins this case, the immediate casualties are Godwin Emefiele, Atedo Peterside, Sola David-Borha, Yinka Sanni,  Standard Bank group and frankly the holding company system in Nigeria.  FBN Holdings profit warning, FCMB Holdings profit warning and Stanbic IBTC falsification of results which if they were transparent, would have likely led to another profit warning.  The bank holding companies are apparently not holding on tight enough.  Another topic for another day.  

Patrick Njoroge keep on striving to preserve the Kenyan banking system by openly cleansing it while Godwin Emefiele strives to protect Nigerian career bankers (self inclusive) and their legacy by suppressing the reality of the rot within the Nigerian financial system and poor corporate governance OVERSIGHT. 

Corporate governance and transparency is below required standards in Kenya.  Some other countries are in the same boat, but, have decided to be dishonest instead of being honest about the realities in their business environments.  

Tell others to tell others about this Africa research Blog.  The TRUTH will set us FREE. I will keep telling it.