rE ACCOUNTING AND AUDITING BOARD OF ETHIOPIA Directive to provide License for Accounting and Auditing Professionals and Registration of Professional Accountancy body Directive No. AABE 805/2013 July 2021 Addis Ababa Sf ¥ ¥ ¥ i of i ¥ w ~ ¥ ba ¥ sd ¥ i ¥ ¥ ¥ ro = | ¥ bi w sf ¥ ¥ ¥ ¥ ¥ ¥ ¥INTRODUCTION The Accounting and Auditing Board of Ethiopia is vested with multiple powers and duties by Proclamation No. 847/2014 and Regulation No. 332/2014, among which, to develop criteria for registration of professional accountancy body, professionals and firms that wish to provide accounting and auditing services to the public and issue licenses thereto. Accordingly, as it has become necessary to develop a system through which professional accountancy body established locally and in a foreign country may accreditated and recognized respectively with the Board, this directive provides the criteria such associations of accountants need to fulfill to acquire the status. In addition, it become necessary to lay down criteria to register and license professionals and firms who wish to provide accounting services to the public, this Directive is issued accordingly. OBJECTIVE The objectives of this directive are to lay down the criteria through which professional accountancy body. accounting and auditing professionals and firms register with the Board and obtain license; enable them to provide quality professional services; clearly establish their responsibilities and inform them the accountability if they fail to properly discharge their responsibilities. Accordingly, this Directive is issued by the Accounting and Auditing Board of Ethiopia in accordance with Article 53(2) of the Financial Reporting Proclamation No.847/2014 and Article 32 of the Establishment and Determination of the Procedure of the Accounting and Auditing Board of Ethiopis icil of Ministers Regulations No. 332/2014.L 2 Page SHORT TITLE This Directive may be cited as "Directive to provide License for Accounting and Auditing Professionals and Registration of Professional accountancy body Directive No. AABE 805/2013" DEFINITIONS Unless the context otherwise requires, in this Directive: L "Board" means the Accounting and Auditing Board of Ethiopia established under Council of Ministers Regulations No. 332/2014. "Proclamation" means the Financial Reporting Proclamation No. 847/2014. “Regulations” means the Establishment and Determination of the Procedure of the Accounting and Auditing Board of Ethiopia Council of Ministers Regulat No. 332/2014. ns, "Code of Ethies" means the Code ofthies issued by the Board or the International Federation of Accountants or any of its successor and adopted by the Board which govern accountants and auditors. "Member" means a person who became a member by fulfilling all the criteria set by the Professional accountancy body which is a member of Intemational Federation of Accountants; or accreditated or recognized by the Board. “External audit firm" means the Federal, Regional or City Administration Office of Auditor General, Audit Service Corporation or Audit Firm certified by the Board. "Continuity agreement" means an agreement concluded to continue the accountancy services through another professional certified by the Board in situations where the accountant or auditor is unable to continue with the servicescommenced, due to senous illness, death, incapacity or other unforeseen circumstance that made him unable to perform his obligations 8. "Certificateof registratio# means a certificate issued by the Board to a person who is interested to engage in accounting or auditing services individually or through a partnership. 9. The definitions provided for under Article 2 of the Proclamation and Article 2 of the Regulations shall mutatis mutandis apply to this Directive. 10. Any expression in the masculine gender includes the feminine 3. Scope of Ap tion |. This Directive shall apply on Certified Public Accountant, Certified Auditor accounting and auditing firms and Professional accountancy body. 2. This Directive shall apply, as appropriate on Authorized accountants and Authorized auditors who obtain a certificate issued by the Board prior to the issuance of this Directive, PART TWO. PROVIDING ACCOUNTING AND AUDITING SERVICES INDIVIDUALLY OR ‘THROUGH PARTNERSHIP ‘ChapterOne Issuance of certificate of registration 4, Criteriafor ProvidingAccounting Services Individuallyor ThroughPartnership |. Any person who fulfils the criteria listed under sub article 2 of this Article and wishes to provide accounting services may apply for cert icate of registration by filling the form designed by the Board and attaching receipt for payment therewith, 2 Any person who is interested to provide accounting services individually or through a nartnershin in addition ta those listed winder Article 170) and Article 20. of the shall be a member of a Professional Accountancy Body which is a member of International Federation of Accountants or accredited or recognized by the Board; A4Page b) shall have 3 (three) years of experience as an accountant or auditor before or after being a member of Professional accountancy body; ©) shall have 3 (three) years of experience in governmental institution which is responsible for regulation of audit performance and financial reporting preparation and submission or; as an instructor of accounting courses in private or government ‘owned higher education institution and has | (one) year experience as an accountant or auditor before or after being a member of Professional accountancy body; 4) If the work experience referred to in sub-article | (b) and (c) of this Article is obtained in a foreign country, shall aquire atleast 1 (one) year experience as an accountant or auditor in Ethiopia. e) According to Continuous Professional Development (CPD) policy ofthe Board, he shall take at least 40 (forty) hours/units of CPD, which has not lapsed a year, out of which 20 (twenty) hours/unit must be supported by evidence and duly filled in the confirmation form prepared by the Board; For the implementation of this directive one unit is equivelant to one hour. f) shall submit 2 (two) reference letters from his immediate supervisors in the organizations he worked for however, if he has worked only in one organization shall submit reference letters from his immediate supervisor and his colleague in the organization; if the applicant has worked as a finance manager, he shall submit areference letter from his immediate supervisor in the organization he worked for and from an auditor who audited the accounts of the organization; ‘The Board, after ascertaining that the applicant has fulfilled the criteria listed under sub article 2 of this Article, shall issue certificate of registration upon submission of the following by the applicant: severe administrative a) written confirmation that he has not been sentenced witl punishmendisciplinary action in the last 3 (three) years b) duly filled confirmation form showing that he has good ethical behavior and not any country due to participation in crimes of dishonesty or fraud; convicted ¢) written confirmation that he will abide by the Code of Ethics issued by the Board;4) if the applicant is rendering accounting services as an i vidual, @ confirmation that he has continuity agreement; ©) letter of release from the organization in which he was employed last: f) a firm name acceptable to the Boat 8) renewed residence identification card; and hh) one passport size photograph taken in the last six months A person who has acquired certificate of registration shall submit to the Board. the following within two months of the issuance of the certificate; before the ‘commencement of delivering services: a) a professional indemnity insurance in an amount of Birr $00,000 (five hundred irr); b) abusiness license; thousand, ©) if established as a partnership the memorandum of association and article of association; and 4) ifthe applicant owns his office building the title deed, if the office is rented a valid lease agreement notarised by the public notary and if the lessor is a government agency a lease agreement signed with the appropriate government agency A person who has acquired a certificate of registration fails to perform in accordance with sub article 4 of this article the certificate shall be cancelled considering that he is not interested in providing accounting services. 5. Criteriafor ProvidingAuditing Services Individuallor ThroughPartnership 5 Page I Any person who fulfils the criteria listed under sub article 2 ofthis Article and wishes to provide auditing services may apply for certificate of registration by filling the form designed by the Board and attaching receipt for payment therewith. Any person who is interested to provide auditing services individually or through a partnership, in addition to those listed under Article 18(3) and Article 20 of the Regulation, shall meet the following criteria:6Page a) he shall be a member of a Professional Accountancy Body which is a member of International Federation of Accountants or accredited or recognized by the Board; b) he shall submit a valid Practicing Certificate from the Professional accountancy body in which he is a mer 4) he shall have 3 (three) years of experience in governmental institution which is responsible for regulation of audit performance and financial reporting preparation and submission; or as an instructor of accounting courses in private or government owned higher education institution; or as an internal auditor and has | (one) year experience as audit manager in Extemal Audit Firm after being a member of Professional accountancy body: ©) If the work experience referred to in sub-article | (c) and (d) of this Article is obtained in a foreign country, he shall have atleast | (one) year experience as audit manager in an audit firm registered with the Board; 1) According to Continuous Professional Development (CPD) policy ofthe Board he shall take at least 40 (forty) hours/units of CPD which has not lapsed a year out of which 20 (twenty) hours/unit in audit and assurance must be supported by evidence and duly filled in the confirmation form prepared by the Board 2) he shall submit 2 (two) reference letters from his immediate supervisors in the organizations he worked for; however, if he has worked only in one organization shall submit reference letters from his immediate supervisor and his colleague in the organization: The Board after ascertaining that the applicant has fulfilled the criteria listed under sub article 2 ofthis article shall issue certificate of registration upon submission of criterias listed under sub article 3 of Article 4 A person who has acquired certificate of registration shall submit to the Board professional indeminity insurance an amount of | million Birr (one million) and thecriteria set out under article 4(4) (b), (c) and (d) within two months of the issuance of the certificate; before the commencement of delivering services: A person who has acquired a certificate of registration fails to perform in accordance with sub article 4 of this article the certificate shall be cancelled considering that he is not interested in providing auditing services. CHAPTER TWO RENEWAL OF CERTIFICATIOF REGISTRATION 6. Renewal of Certificate of Registration TPage The Certificate of Registration issued by the Board shall be renewed every year. Irrespetcive of the date it is issued the Certificate of Registration shall only be valid upto Tir 30 every year (February 7). Application for renewal of certificate of registration may be submitted | (one) month before the end of the validity period Application for renewal of certificate of registration submitted after the validity period shall only be entertained upon payment of penalty in accordance with Article 8 of this Directive. Notwithstanding sub article 3 of this Article a certificate of registration not renewed within | (one) year for any reason shall be cancelled. Notwithstanding sub article 4 of this Article if application for renewal was not submitted due to force majeure, an application may be submitted within six months from the cancellation of the certificate of registration together with supporting evidences. If an application submitted in accordance with sub article 5 of this Article is found to be acceptable to the Director General, the certificate of registration may be renewed upon payment ofreneweal fee and penalty.8 Page 7. Criteria for Renewal of Certicate of Registration Any accounting or auditing firm which has obtained certificate of registration issued by the Board may renew the certificate upon fulfilling the following criteria: 1. Renewal application and a receipt for payment of service fee: 2. A confirmation that the applicant is member in good standing of a Professional accountancy body, which is a member of International Federation of Accountants; or accredited or recognized by the Board. However, if the applicant is authorized accountant or authorized auditor shall submit confirmation from the association in which he is a member that he has fulfilled his obligations; If the applicant is certified auditor submit valid Practicing Certificate; 4. According to Continuous Professional Development (CPD) policy of the Board, he shall take at least 40 (forty) hours/units of CPD which has not lapsed a year, out of which 20 (twenty) hours/unit must be supported by evidence 5. Evidence of valid professional indemnity insurance coverage: 6. If the applicant is rendering accounting or auditing services as an individual, that he has continuity agreement; 7. Documents containing the list of customers in the last fiscal year, the name of the partner and signatory, and other information required in accordance with the form prepared by the Board; 8 Annual financial statement of the firm; 9. If it is an audit firm, a confirmation that it has carried out a system of audit quality assurance procedures in accordance with international standards on auditing and quality control 10. If the applicant owns his office building the title deed, if the office is rented a valid lease agreement notarised by the public notary and ifthe lessor is a government agency a lease agreement signed with the appropriate government agency; and 11. valid business license.8& Renewal Application Submitted after the Expiry Date . Page An application submitted after the validation date of the certificate of registration may be renewed upon payment of fine as follows: 1. if he is engaged in providing accounting services as an individual shall pay Birr 100 (one hundred Birr) for each day of delay; 2. iffit is a partnership engaged in providing accounting services shall pay Birr 200 (two hundred birr) for each day of delay; 3. if he is engaged in providing auditing services as an individual Birr 200 (two hundred birr) for each day of delay: 4, If itis apartnership engaged in providing auditing services Birr 300 (three hundred birr) for each day of delay. CHAPTER THREE PROHIBITED ACTS AND ADMINISTRATIVE MEASURES PROIDBIED ACTS Any accounting and auditing professional or firm, in addition to what is provided in the Proclamation and Regulation, is prohibited from committing the following acts: I Not to cooperate in responding to questions raised by the staff of the Board in connection with his work; failure to properly maintain the records of his customers; failure to properly maintain the records of his employees and notify the Board: failure to notify changes in its address, name ofthe firm and on other information within 14 (fourteen) days; violate the code of ethics; register, attempt to register, renew or attempt to renew by fraud or misrepresent A7. provide incorrect information to the tax authority and any other relevant goverment organ; 8, create an obstacle or provide false information to the questions raised by the employee ofthe Board related to his work; provide accounting and auditing services using suspended or cancelled certificate of registration; 10. Provide accounting and auditing service without obtaining business license using only the certificate of registration; 11, serve as an employee without returning the certificate of registration- 12. engage in professional services other than those permitted under the certificate of registration; 13. providing accou jout having a written contract with the 12 or auditing services customer; 14 sign or put his seal on a financial statement or audit report which he has not prepared; 15. transfer the cert ‘ate of registration for use by another person or carry out his professional duties by delegating it to others; 16. carry out its activities using a license not renewed; 17, after obtaining certificate of registration providing accounting or auditing services without submitting professional indemnity insurance, business license, office rental agreement and if it is a partnership memorandum of association and article of association; 18. providing accounting or auditing services as an individual while the professional is a partner in an accounting or auding firm; 19, Failure to comply obligations of accounting and auditing professionals provided under other laws; 10. Administratic Measures 1, The Board may take one or more administrative measures when it establishes that the Proclamation, Regulation, this Directive and the Code of Ethics are violated by an accountant, auditor or a firm. 10 pageA firm or professional shall retum to the Board the certificate of registration within 10 (ten) days from the date it was served with notification about the suspension or cancellation of the license. ‘The Board shall notify the responsible body for the issuance and regulation of business licence, the Ministry of Revenue, the Addis Ababa City Administration Revenue Authority and other concemed organs when it suspends or cancels a certificate in accordance with this Directive. The penalty imposed by the Board shall be recorded inthe file of the professional or the firm. 11, Suspension of Certificate U1 Page 1 & Inany case the suspension of the certificate of registration shall not exceed 180 (one hundred and eighty) days. A professional or firm whose certificate of registration has been supended by the Board shall submit an application for restitution to work within 10 (ten) working days after the end of the suspension period. The Board may reinstitute the applicant to work after receiving the application and fully satisfied that the reasons for the suspension have been appropriately remedied. If no application is submitted for restitution to work in accordance with sub-article 2 of this Article or the reasons for the suspension of the certificate were not remedied to the satisfaction of the Board the certificate shall be cancelled, If the application is not submitted within the period specified in sub-article 2 of this Article due to force majeure, an application for restitution to work may be filed within 6 (six) months. If the application submitted in accordance with sub article 5 of this article is acceptable to the Director General and the reasons for the suspension have been remedied the cancelation may be lifted.12, Restitution to Work L A professional or a firm whose certificate of registration is cancelled, to restitute to work shall submit a new application in accordance with the provisions ofarticle 4 and 5 ofthis directive. Without prejudice to sub article | of this Article, a person whose license is cancelled due to reasons specified under Article 6(4) of this Directive shall not apply for new registration within one year from the date the license/certificate is cancelled or if the registration is cancelled by the decision of Hearing Examiner within 3 (three) years from the date the decision was rendered. PART THREE Accreditation and Recognition of Professional Accountancy Body 13. Acereditating Professional Accountancy Body Established Locally 12 | Page The Board may issue certificate of accreditation to locally established professional accountancy body and its branch as a professional accountancy body upon fulfiling the criteria laid down by the Board. In addition 10 what is provided under Article 26 and 27 of the Proclamation a professional accountancy body or its branch may be granted with accreditation up on submitting the following: a) Evidence that it is a member of the International Federation of Accountants or has developed a program to become a member and is performing accordingly; b) before submitting an application to the Board for accreditation of the branch, evidence that the council of the professional accountaney body passed a resolution to set-up a branch; ©) Evidence that it is financially and operationally sustainable or has a program that ensure its sustainability and is presumed to continue in the future; d) Evidence that proofs it has an office; ¢) constitutional documents or memorandum of association;14, Recogni i f) article of association; 2) short and tong term viability strategic plan and performance capacity documents; h) profit and loss as well as asset and liability statements; i) information on number and gender of its members: j) organizational structure approved by the General Assembly; k) information about the number of members of the management or leadership; and |) information of the number of employees hired on permanent basis. 1g Professional Accountancy Body Established Outside Ethiopia ‘The Board may issue certificate of recognition to professional accountancy body established outside Ethiopia and its branch as a professional accountancy body upon fulfiling the criteria laid down by the Board. In addition to what is provided under Article 26(2) of the Proclamation and letters (4) to (h) of Article 13(2) of this Directive, a professional accountancy body or its branch may be granted recognition up on submitting the following: a) Evidence that it is a member in good standing of the International Federation of Accountants; b) before submitting an application to the Board for recognition of the branch, evidence that the council of the professional accountancy body passed a resolution to set-up a branch; ©) Evidence that it is financially and operationally sustainable and is presumed to continue in the future; 15. Application for Accreditation or Recognition lL 13IPage A professional accountancy body and its branch established locally or outside Ethiopia wishes to obtain accreditation or recognition from the Board as a professional accountancy body shall submit duly filled application form prepared by the Board. An application submitted in accordance with sub-article 1 off st be accompanied by the appropriate registration fee.16. Retainisg Accreditation or Recognition 1. Any Professional Accountancy Body wishing to retain the accreditation or recognition obtained shall in addition to the provisions of Article 27 of the Proclamtion fulfill the following: a) submit duly filled application form prepared by the Board accompanied with the service fee; b) shall fulfill the criteria listed under Article 13(2) and 14(2) of this Directive respectively. An application for retaining accreditation or recognition shall be submitted within two months after the end of the professional accountancy body s fiscal year. 3. where the board has not delt with an application for the retaintion of accreditiation and recognition, the accreditiation and recognition shall continue to be valid until the application for retaintion is delt with and ifthe application is accepted the accreditiation and recognition shall be considered to be valid from the date the service period has expired. 4, Any professional accountancy body's accreditation or recognition shall be cancelled if it does not obtain a permit to retain accreditation or recognition by fulfilling the provisions ofsub-articles | and 2 of this Article, 17. Service Fee The service fee paid for services rendered in accordance with this directive shall not be refunded to the applicant irrespective of whether the application is accepted or rejected. 14P agePART FOUR Miscellaneous Provisions 18. Transitory Provision 1. A person who has obtained individual professional competency certificate, before the issuance of this Directive, by fulfiling the criteria listed under sub article 3 and 4 of Article 4, sub article 2 (f) 3 and 4 of Article 5, as appropriate shall obtain certificate of registration which enables to provide accounting and auditing service and return the previous certificate within 6 (six) months from the date of issuance of this Directive. 2. A person who failed to obtain certificate of registration which enables to provide accounting and auditing service within the time prescribed under sub article | of this, Article, is considered to have no interest in rendering services and his individual professional competency certificate shall be cancelled 19. Inapplicable Laws Any Directive or working procedure which is not consistent with this Directive shall not be applicable on matters provided by this Directive. 20. Effective Date This Directive shall take effect upon being approved by Board of Directors of the Accounting and Auditing Board of Fthiania Done at Addis Ababa, July 15, 2021". «. Eyob Tekalign (PhD) Chairperson ofthe Board of Directors of the Accounting and Auditing Board of Ethiopia 481 Page