Accounting and Auditing

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The Role of Microfinance in Financial Inclusion in Addis Ababa City
(AAU, 0024-02-19) Meron Jemal; Alem Hagos
Determining the role of microfinance institutions in financial inclusion in Addis Ababa was the study's goal. Apart from utilizing simple random and purposeful sample techniques, the study employed both explanatory and descriptive research methodologies. The study's primary data were gathered through questionnaires and interviews. Secondary data was also gathered from desk reviews of selected microfinance institutions in Addis Ababa, and both descriptive and inferential statistics were utilized to analyze it. Out of the 384 survey questionnaires that were obtained from randomly selected microfinance institutions customers, only 312 were completely filled out, sent back, and utilized in the study. The Consultative Group to Assist the Poor produced the most extensively used performance metrics, which were used to evaluate the microfinance institutions' performances. The study's conclusions showed that the microfinance institutions in Addis Ababa had been in operation for more than eight years, were categorized as mature, and had a sizable gross loan portfolio that exceeded 50 million Ethiopian Birr—but a limited number of active borrowers. The study's regression analysis revealed that group lending, saving mobilization, and small business lending all had a positive and significant impact on financial inclusion. The majority of microfinance institutions in Addis Ababa offer group loans, it would be beneficial for them to keep up this practice in order to attract more clients and lower operating costs per borrower.
Auditors Professional Responsibilities and Legal Liability with Regard to Private Auditors in Ethiopia
(A.A.U, 2007-07) Beyene Muluneh; Kinfu Johannes
This study was conducted on the Ethiopian private auditor's professional responsibilities and Jegal liability, in comparison with those developed countries auditing principles and , standards. The paper tested the esponsibilities of the management and the auditors with regard to reparation of the financial statements and subsequent discovery to misstatements to the audited financial statements in Ethiopia . The paper qualitatively estimated to what extent private auditors exercise their professional and legal esponsibilities. The paper also tested the legal consequences on auditors as a result of those violated professional and legal responsibilities . Besides it tested that to which auditors are liable for the violation of contractual and statutory responsibilities . Further the study tried to explore the constraints related to private auditors in exercising their responsibilities. Finally, not the l east the paper explored some cases related to Ethiopia private auditors' practices.
Fund Management and its Utiliation in Tigray HAPCO
(Addis Ababa University, 2008-01) Hailu Belay; LaxmIkantham P.
Loan Provision, Degree of Collectability and Reason for Default: A Case Study in WISE Saving and Credit Cooperatives Union for Women.
(A.A.U, 2008-01) Mekuriaw Meron; Yitayew Abebe
This paper entitled "Loan Provision, Degree of Collect ability and Reason for Defaulter in case of WISE Saving and Credit Cooperatives Union for Women" examined the loan Provision, collection procedures as well as the default rate of this SAC. Today a number of saving and Credit Cooperatives (Sacs) are established to give a Saving and loan service to clients and much emphasis is given for those women who . WISE's major clients are women who would have an impact on Changing their own life as well as their females. The study attempted to identify and Assess the loan provision criteria '.I', collection procedures, the reason f or defaulter, the Impact of interest on the cooperatives and clients, and last but not the least the benefits and challenges of the SAC under WISE.
Pre Shipment Loan Utilization in Exporting Agricultural Products in Ethiopia
(A.A.U, 2008-01) Negash Mekbib; Yitayew Abebe
International trade continues to grow every year as nations expand their global sales and new nations join in. Today, over 225 nations are active in trade resulting in over $9 Trillion dollars in global business every year. Ethiopi a, though existing PaJt is small in amount, is one of those nations that incessantly increase thei r contribution in thi s global business. However, in Ethiopia, as in some other African countries, the export business is dominated by agricultural products accounting roughly for 70-80 per cent of export earnings One of the common complaints, from Ethiopian agricultural product Exporters, is that they receive minimal support from their banks for export trade transactions. After spending signifi caJlt time and resources to develop export sales, they often can not secure the funds they need to complete the orders. Thus a key finance service specifically required by these exporters is a shOit term working capital loan that is used to fulfill international sales orders. Consequently, the main purpose of this study was asseSSl11g the util ization of preshipment loan by agricultural product exporters in Ethiopia; focusing on those products whi ch hold the highest fraction in the export business. The result of the study in general suggests that the provision of pre shipment working capital credit is characterized by a continuous increasing trend with aJUlual average growth rate of 147% for three consecutive years from 2004- 2006.Although the provision of pre shipment working capital loan increases more than 100% armuall y, it still consti tute small percentage of the total 10aJ] provided by the banks. And also the amount of pre shipment export credit in the study period is found to be very low relative to the total export value in the same period. For this reason the researcher suggests that, in order to satisfy needs of exporters in the country and benefit from the opportunities in the international market by expanding the export business, the di sbursement of pre shipment credit should be increased more than what actuall y exists. This can be achieved through encouraging and supporting commercial banks to provide the loan to small and medium emerging exporters who have little experience and knowledge about the foreign trade; easing the requirements of both the commercial banks and government guarantee schemes; facilitating other export financing mechanisms; enhancing the capacity and experience of emerging agricultural product expOliers about the international business; and strengthening and increasing the capability of those sectors which are organized with the aim of expanding the export sector in Ethiopia like Ethiopian export promotion agency.
Role and Potential of 'Iqqub' in Ethiopia
(A.A.U, 2008-01) Teshome Temesgen; Yitayew Abebe
This paper examined the role of 'Iqqub ' with in the community. The findings show that people participate in ' Iqqub' for more than economic reasons. With in the paper two types of ' Iqqub' are identified, the Traditional small scale and simple ' Iqqub's and Emerging large scale complex' Iqqub's. The perations, number of members they incorporate, the cycle period and their fund allotment mechanisms of these two ' Iqqub's differed widely. ' Iqqub' plays a dominant role in serving the financial needs of households that are excluded from the formal sector due to bureaucratic working processes and high collateral requirements. The paper also examined features of emerging ' Iqqub' s, including safety, return, Liquidity, divisibility. The default rate as observed in surveyed 'Iqqub's is very low, implying good collateral management and loan screening in these informal financial sectors. The paper also examined the potential of 'Iqqub ' to be further enhanced to provide more services and accordingly, two potential areas were identified, based on other country's experience: Linking 'lqqub' with the formal sector and transforming it into village bank. This potential of 'Iqqub', if utilized effectively, can solve the existing problem of ' Iqqub' and makes it more attractive, however further research in this areas must be made
Impact of Loan Assessment on Non-Performing Loans: A Case of Construction and Business Bank (CBB)
(A.A.U, 2008-02) Shenku Muluken; Yitayew Abebe
The study endeavors to examine the impact or loan assessment on non performing loans at construction and Business Bank (CBB) from the view point of both Accounting- and economic aspects the Accumulation of non-performing loans is attributable to lots or causes. Among these, the major one is inadequate loans is assessment. This, in turn aggravates non-performing loans, delays the economic recovery, creates liquidity, problem, hampers the development or Bank's operational activists as well reduces profit.Survey method was used to collect date from 18 employees of CBB" who are working- in the area of loan activity witch the help or purpose (non-probability) sampling- technique. The collected data was analyzed using descriptive statistics. Moreover semi-structured and Structured interview was also used to gather information that can be as cases studies from CBB's loan oi1icers. In addition , questionnaires "'e re prepared 10 CBB city branch managers and credit department employees The result or the study revealed that there are many factors contributing for the accumulation of non-performing loans in CBB, Among which, inadequate reedit assessment is the major factor followed by real estate speculators and long- term maturity of the loan.
The Soundness of Financial Management and Reporting Practices in Selected Consumer Cooperatives of Addis Ababa Sub-city
(A.A.U, 2008-04) Bekele Fikru; Yitayew Abebe
This paper analyzes the Financial Management and Reporting Practice of consumer cooperatives It briefly reviews cooperatives structure in relation to financial management and reporting practice. The reporting format shown in this paper will be used for those cooperatives that have limited book keeping or accounting experience. In many cooperatives, trained accountants will take care of the financial reports.However . most management members should understand the reporting function and be able to interpret financial reports. By understanding components of financial management cooperative leaders will make prudent business decision
Evaluation of the Implementation of Lean Six Sigma: The Case of Shama PLC
(A.A.U, 2008-04) AbduljeIiI Neima; Emrie Asmare
The prevailing assumption is that most private businesses in Ethiopia are being run with the use of few, if any, measurement and assessment tools. Therefore, it is almost impossible for any business to measure its effectiveness, since there are no benchmarks for comparison. Creating mechanisms for measurements and analysis is becoming necessary to improve the performance of an organization . The objective of this project is to evaluate the impact of the application of Lean Six Sigma principles to Shamanic, thereby proving that Six Sigma is actually applicable and, indeed, necessary for the growth of private businesses in Ethiopia. The paper evaluated the implementation of Lean six sigma (LSS) with regard to the company's processes by analyzing the company's activities using DMAIC ( Define, Measure, Analyze, improve and Control) tools of Lean Six Sigma . It mainly focused on the processes related to products and customers. The questionnaire responses and the documents of the company were analyzed to see the impacts of LSS application . Questionnaires, Data analysis tools like figures, tables, Ratios and percentages have been used to arrive at the standardized sigma level of the company. Analysis of the results show that Shame’s Sigma level is "2" Six Sigma with a yield of 70% performance level. The result of the report suggests that there is room for Shame to improve and reach "3" or "4" Six Sigma Level, which is the level of most of internationally standardized companies. If Shama undertakes market research to asses its market share & segments of customers, and brings books as per the specification of customer demand it can increase its Sigma Level since not knowing its market Share and target market is one of the drawbacks of the company. To increase its performance Shama should also have proper follow up of its policies and procedures, which were used in the application of LSS. Employee related issues has not yet been addressed properly which has also resulted in the low level of Six Sigma .
The Performance of Micro Finance Institutions in Ethiopia: A Case of Six Microfinance Institutions
(A.A.U, 2008-04) Yirsaw Alemayehu; Yitayew Abebe
Currently micro financing is one of the most powerful tools for combating poverty primarily by providing loan to the poor section of the society. The number of micro financing Institutions serving the poor in Ethiopia has grown to over 27with in short period of time . The steady growth in the sector has created a competition for scarce finding among Institutions. Hence, recent years have seen a growing push to measure performance of micro Financing institutions in order to be able to compete and achieve their objectives. In light of this, the paper attempted to look at the performance of MFIs by taking six institutions as a Case from Profitability and Sustainability; Asset and Liability management; and Efficiency and productivity perspectives Data for the study was from secondary sources and various ratios and indicators were used to measure the performance of the MFIs .Five years data from 2002 to 2006 were used to see the trend in performance The majority of MFIs passed both operational and financial self sufficiency and fewer still requires support to survive and sustain in the industry. Most MFIs are strong performers on return on asset .in connection with liquidity, most MFIs lack strong position to effect immediate obligations. large MFIs are more efficient and productive than small and medium ones. But small MFIs seem to reach the poorest section of the society. Finally ,the trend in performance of micro finance institutions during those years of operation was encouraging.
Assignment of VAT Revenue and Decentralization of its Administration: The Case of Ethiopia
(Addis Ababa University, 2009-06) Emiru Alazar; Abehodie Wollela
This project tries to look at decentralization of VAT revenue and administration to sub national governments in Ethiopia in light of the international practices. It used individual in-depth interview to collect primary data from Ethiopian revenue and custom Authority (ERCA), Addis Ababa regional city administration tax office and ministry of finance and economic development (MOFED). The methods used for analysis were both qualitative and quantitative. The project discusses the problems in connection with decentralization of VAT administration and assignment of VAT revenue. The project suggests that decentralization of VAT administration needs capable and autonomous regional government and strong central government that could monitor and evaluate decentralization; and the assignment of VAT revenue also needs the central governments’ follow up to minimize the distortions and should be applied in consistent with the constitution.
Determinants of Commercial Banks Profitability: An Empirical Study on Ethiopian Commercial Banks
(Addis Ababa University, 2011-06) Hailegeorgis, Belayneh; Gebrehiwot, Gebremedhin
The aim of this study is to examine the impact of bank-specific, industry- specific and macroeconomic determinants of Ethiopian commercial banks profitability. The study applied the balanced panel data of seven Ethiopian commercial banks that covers the period 2001- 2010. The paper used Ordinary Least Square (OLS) technique to investigate the impact of capital, size, loan, deposits, noninterest income, noninterest expense credit risk, market concentration, economic growth, inflation and saving interest rate on major profitability indicator i.e., return on asset (ROA). The estimation results show that all bank-specific determinants, with the exception of saving deposit, significantly affect commercial banks profitability in Ethiopia. Market concentration is also a significant determining factor of profitability. Finally, with regard to macroeconomic variables, only economic growth exhibits a significant relationship with banks’ profitability. The results of the study are of value to both academics and policy makers
Income Tax Fairness and its Perceived Influence on the Compliance Behavior of Individual Income Taxpayers
(A.A.U, 2011-06) Dea, Demessie
The purpose of the Study was to see The effect of income tax fairness on compliance behavior 0f individual tax payers and to see if the tax fairness dimensions determined by Gerbing (1988) and later tested by Richardson (2006) in Asian jurisdiction can be found in Ethiopian settings. The result found certain different dimensions than either of the above authors found The factor analysis showed thee different dimensions stated as component one, component two and component three. Testing education as demo graphical variable also yielded a different result than other studies. While the others like age is determined to have no significant influence on compliance behavior of individuals.
Impact of Internal Control Over Accounting Frauds in Public Enterprises in Addis Ababa
(A.A.U, 2011-06) Negash Tekalign; Laxmikantham
This study was conducted on impacts of internal control over accounting frauds in public enterprises in Addis Ababa. In general the paper uses sequential mixed methodology. Data arecollected by using a self-administered survey which has both open ended and closed ended question. The questionnaire was given 10 both auditors and accountant who are found al different level. After feeding(inserting) the collected dale in to SPss for analyzing purpose; the researcher found that some of the company's internal controls are strong enough so that the possibility of accounting frauds which expected 10 happen is very low as compared to those surveyed public enterprises which are characterized by weak internal control. in general the reasons, which plays a greater role in motivating and pushing peoples to commit accounting frauds includes personal finance al losses. living beyond once means, Lack of internal controls that prevent or detect fraud, ignorance and incapacity, and lack of an audit trial. The types of accounting frauds that is compiled in the public enterprises are depend on the nature of the activity key undertakes and includes violating principles manipulating of sales manipulating of stocks (inventories), and manipulating revenues and expenses. Finally respondents agree that even if internal control is the best weapon 10 overcome accounting fraud regaled problems; it has to be supplemented by other issues like selling a code of conduct, training employees and consult about the ethical issues. Key word s: Accounting frauds, Fraud triangle, internal control
Financial Reporting Quality in Privately Owned Companies: The Impact of Private Ownership on Quality of Accounting Reports (Addis Ababa- Ethiopia)
(A.A.U, 2011-06) Aboneh Mekonnen; Veaganalmon S.
The main aim of this study is to assess the overall quality of the financial reports the privately owned companies in Addis Ababa. With the sample size of60 private companies and 93.3 percent response ratethis study assessed the overall quality of the financial reports of those companies. And found that thecompanies do not all in all comply with the qualitative characteristics of the financial reports. Some fulfil the entire requirement and some do not. Therefore, the study shows that the overall financial quality of those companies is poor.
The Impact of Electronic Tax Register on Value Added Tax: On the Case of Addis Ababa City.
(A.A.U, 2011-06) Taye Yalemtesfa; S. Ulanganathan
This study aimed to assess the effect evenness of Electronic Tax Registers (ETRs) in the processing of Value Added income. The study sought to determine the effect Electronic Tax register effect on administration cost and compliance cost, the extent of tax evasion while using ETRs and audit follow up effects. The study sought to establish if the Electronic Tax Registers had increased the speed at which taxpayers processed their VAT returns and if there were any associated costs in the processing of VA T. The population understudy encompass of 3000VA T registered, I I ETRs experts and ultimate tax payers with no limited number of people in Addis Ababa City. The main in strumpet of collecting primary data was the questionnaires while secondary data was obtained from the Ethiopia Revenue Customs Authority (ERCA). Analyst is of data was done using multiple regression and descriptive statistics. The findings of this research are ETRs has a positive effect on VAT returns and others independent variables has a significant effect on VAT income except compliance cost.
Perception Towards the Burden of Regulations on Small and Medium Enterprises in Gulele Sub-city: Addis Ababa
(A.A.U, 2011-06) Kenubeh Derbew; Abehodie Wollela
The study focuses on Perception towards the burden of regulations on small and medium enterprises in Gulele sub-city: Addis Ababa. The study adopts a mixed methods research approach to address the broad objective through answering research questions and testing the hypotheses developed from the literature review. Specifically, the study uses quantitative surveys of SMEs, in-depth interviews with a sample of SMEs owners, managers or employees. The study statistically analyzes the data elicited from surveys of SMEs. It also supports the result from survey questionnaire by triangulating the results with in-depth interviews and document studies The result of this mixed approach methodology explores that SMEs face challenges From different factors but, they perceived challenges from regulatory burden outweigh other factors. The result also identifies mechanisms mostly used by SMEs to mitigate problems from regulations and how much the regulators have smooth contact with them and to what extent the regulators made inspection, consultation and communication. Moreover. The result identifies the relation between regulations and SMEs performance and growth based on their view i.e. they have positively related each other. As a whole, the study suggests a series of measures which could be taken by the government policy makers/ regulators and for SMEs. This measure includes to adopt government impact assessment task force and review the existing regulations how much they enable and constrain businesses and at the same manner suggest for SMEs to incorporate different mechanisms to comply with regulation rather than rely more on specific mechanisms
An Assessment of Bank Fraud and its Management in Ethiopia Commercial Banks
(A.A.U, 2011-06) Aragie Muhammed; S. Laxmikantham
Organizations in Elhiopia. particularly banking corporations to day are more susceplible to Fraud crime than ever before. This study aims at finding practical means of minimizing the Incidence of fraud in Erhiopia, both private and governmentowned commercialercial banks. During the course of the investigation efforts were made to identifY various causes result bank staffs to commit fraud,the characteristics shared by most Fraud acts in the sector, means employed in defrauding banks and at the same time determine the adequacy and effectiveness of Fraud detection and prevention systems employed by banking corporation. Questionnaire survey techinique was employed to seek the respondents' (mallagers, accountants, and customer service officers at sample branch banks) perceptions on the all encompassing issues of fraud and its management in banking sector. Findings in the first place revealed that so many factors contributed to incidence of Falld in the banks amongst which are poor management of policies and procedures; inadequate working conditions; bank's staff staying longer on a particlliar job, and staff feeling Fustrated as a result of poor remunerations. Next to this, Faud prevention and detection systems adopted by banks are not effective and adequate to make effective management on Frauds committed through creating forged checks, opening new account, money transfer. employment application, etc. Finally, the study offered suggestions as to how the problems so identified could be mitigated.
Internal Audit and Risk Assessment in Ethiopian Public Enterprises
(A.A.U, 2011-06) Seid Mohammeed; S. Ulaganathan
This research paper examined internal auditing and risk asses’ semen t in Ethiopian public nterprise context. 20 public enterprises were purposefully selected. Mixed research approach was used and the data were collected by using questionnaires and document review. Survey results showed that all public enterprises have internal audit function; operational audit requires most resources, with compliance audit second important audit type. The amount of audit resources devoted to risk assessment reveals the relative relevance of this kind of activity. Results also showed that many Ethiopian public enterprises were introduced formal risk assessment process in their internal audit function, and few enterprises were on the way to introduce formal risk assessment process. Hence, for inter/wi audit functions that were not incorporated control risk self assessment, it is better to incorporate for effective risk assessment. Thu s, this study will be beneficial in terms of the decision making of the board of directors, audit committee of the organiz ation and other regulatory bodies.
Analyzing Accounting and Financial Reporting Practice of Non-governmental, Not-for-profit Organizations in Addis Ababa.
(A.A.U, 2011-06) Mala Mesfin; S. Laxmikantham
The number of NGNFPOs in Ethiopia and their activities has multiplied in the past three to four decade but little information exists on how well these organizations report on their Performance to their constituents and the general public . The purpose of this study is to Examine and appraise exist in g accounting and fin uncial reporting practices of NGNFPOs, with a view to high light the complains and deviations from the statutory stipulations and accounting standards in trend. It also seeks to understand accounting processes and Financial reporting practices in NGNFPO s and the conditions that sustain or Improve those processes and practices. Furthermore, this stud y provides an insight into the accounting and financial reporting practices of NGNFPOs so as to provide the extent to which NGNFPO meet statutory stipulations, accounting standards, and other legal Requirements. This involved the examination of over 69 annual reports (both audit report s and annual activity reports) o f NGNFPOs and the administration of a survey instrument, documentary analysis and in -depth interview setting . This study employed pragmatic worldviews of research design, which applies to mixed Method research in that inquirers draw liberally from both quantitative and qualitative Assumptions when The number of NGNFPOs in Ethiopia and their activities has multiplied in the past there to four decade but little information exists on how well these organizations report on their performance to their constituents and the general public. The purpose of this study is to examine and appraise exist in g accounting and financial reporting practices of NGNFPOs, with a view to highlight the complains and d aviations’ from the stat story stipule lat ion s and accounting standards in trend. Ital so seeks to understand accounting processes and Financial reporting practices in NGNFPO s and the conditions that siesta in o r Improve those processes and practices. Furthermore, this study provides an insight into the account in g and financial reporting practices of NGNFPOs so as to provide the extent to which NGNFPOs meet statutory stipulations, accounting standards, and other legal requirement ~. This involved the examination of over 69 annual reports (both audit Report s and an nu al activity reports) of NUNFPOs and the administration of a survey instrument, do cu me ntaryanalys is and in -depth in tereview setting. This stud y employed pragmatic worldviews of research design, which applies to mixed method research in that inquirers draw libeberall from both quantitytative and qualitative assumptions when they engage in their research to address research problem. Mixed methods approach, which is believed to mitigate the biases of quantitative and qualitative approaches, is one in which a researcher tends to base knowledge claims on pragmatic grounds employing strategies of inquiry that involve collecting both quantitative and Qualitative data either concurrently, sequentially or transfonnativlly to best understand research problems (Creswell, 2009).

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