The relevance of auditing in the promotion of corporate governance, by Edgar Chibuta

The sudden collapse of Enron Corporation, an American energy company based in Houston in the United States of America, exposed the dishonesty and the abuse that is prevalent in the managerial positions people occupy.

The Enron scandal, revealed in October 2021, also underscored the relevance or the importance of the Audit function as an independent oversight function.

The collapse of the Corporation stated earlier served as a clear-cut indicator of what happened when abuse was let on the loose and the voice of the Audit function was highly neglected.

The scandal stated therefore resulted in Congress passing a law called the Sarbanes auditors as reported by Mahesh R (2016) in his journal publication dealing with the lessons from the Enron scandal.

There is need for all the stakeholders not to tell lies about the financial standing of any organization and the role of the Audit Unit or department was to paint in words the financial picture of the organization in line with the internationally accepted accounting standards and norms with the view of protecting the interests of the stakeholders.

The Enron scandal therefore opened the doors that revealed that power was likely to be abused hence the need for an oversight function to independently perform the checks and balance functions. Li Y (2001), in his paper presentation entitled The Case Analysis Of The Scandal Of Enron, described the Enron scandal as a creatively planned accounting fraud in which the Auditors from an auditing firm owned by Arthur Andersen failed to discharge their duty of factually reporting the financial standing and risks of the Enron Corporation.

The scandal has therefore proved a point to the whole world and without being left behind, Zambia has made strides in ensuring that the Audit function is accorded the independence and the credence it deserves in the public as well as the private sectors.

The Enron scandal also displays the relevance of having in place a strong leadership style in any set up and it is on that platform that the present Republican President of Zambia rode prior to the August 2021 General election where he emerged the victor.

In the paper presentation entitled The lesson from Enron Case-moral and managerial responsibilities, Mahesh R (2016) brought into play the managerial and leadership issues that worked against Enron Corporation resulting in the collapse of this once provider of products and services in natural gas, electricity and communication to wholesale and retail consumers.

We must strive to create a stronger managerial base in all the private and public institution with a strong focus for a series of in-service Corporate Governance tailored courses to improve the managerial skills and competences.

The enactment of the Public Audit Act (2016) wastherefore a clear testimony that Zambia had felt the effect of the Enron scandal and was thus ready to put in place a piece of legislation that guarantees the independence of the Audit Function. Section 5 and Section 6 of the cited Act spoke to the National Audit Office and the position of the Auditor General respectively, a clear indication that the Government of Zambia was very committed to the promotion of Corporate Governance in Zambia.

It was also interesting to note that in accordance with the provisions of the law of Zambia, under Article 250 of the amended Constitution of Zambia (2016), the law provides for the existence of the office of the Auditor General.

It is therefore prudent to conclude that this was the right time for all of us to give maximum support to the office of the Auditor General if we are to render a service that point to and speak volumes about the promotion of Corporate Governance in Zambia.

The Government of the Republic of Zambia, under President Hakainde Hichilema, attached greater importance to the adherence to the ethics of Corporate Governance in both the public and the private sectors.

I have therefore written this article to recognize the important role that the Auditors played in Zambian economic sector in respect to the promotion of Corporate Governance was concerned.

The call from the Republican President has been clarion enough so as the fiscal year comes to an end, we must be in good position to adhere to the Presidential call and therefore make meaningful contribution that can in the end evade the occurrence of the Enron scandal like debacle.

A quick look at the Audit Generals report for 2016 revealed a number of grey areas which we need to deal with if we are to be rated as a country with the zeal, insight and acumen to drive the agenda espousing the spirit of Corporate Governance promotion.

In the 2016 Auditor General report, it was reported that a total K116,759,240 was paid for that notwithstanding, the goods were not delivered to the intended users.

The said report went on to say that in 2015 a total sum of K251,532,804 was paid for the goods that were in the end not delivered to the user department and that in its own rights makes sad reading considering the economic state of the nation of Zambia.

A total sum of K162,095,699 and K 28,153,997 were misapplied by one Ministry for the fiscal year 2016 and 2015 respectively and that in its own right highlights the danger that is connected to neglecting the advice of the AG and the respective organizational Auditors.

From 2003 since the enactment of the Zambia Institute of Purchasing and Supply Act (2003), the Purchasing fraternity has been lobbying for the amendment to the Public Procurement Act (2008,2012 & 2020) for the inclusion of the post of Procurement General (PG).

This has been my position as well considering the fact that we have the position of Accountant General and that of Auditor General connected to Accountancy the sister profession of Procurement.

However, in the absence of the position of PG in the amended PPA (2020), our role in procurement is to ensure that we discharge our duties in line with the principles that go beyond the acceptable Corporate Governance standards or norms.

The role played by the Zambian based Auditors, in both the public as well as the private sectors, can never go un noticed hence the reason why the latter need to be appreciated if we are to adhere to the calls by the Republican President for the promotion of Corporate Governance in Zambia.

If we therefore under estimate the contributions of the Auditors in any organization, then I can rest assure you that such a one is likely to fail and thus fall from the wall of grace to the ground like what happened to Enron Corporation.

Our role as Procurement Officers and Experts is to have a clear and larger than life understanding of the Corporate Governance systems at play in our set up so as to avoid audit queries.

The previous annual Auditors General reports have highlighted a number of grey areas that needs the attention of the stakeholders such as Management as a whole, the Accountants, the Procurement Officers and the entire staff of the organization.

As we enter into the death and length of the new dawn Government, we must be in better position to appreciate that our Republican President is coming from the background of Accountancy and Economics in which Corporate Governance is the hall mark trade for the prosperity of an organization and the nation at large.

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