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 (PhD)
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 (Professor)
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 responsibilities of the management and the auditors with regard to preparation 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 responsibilities. 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.
Role and Potential of 'Iqqub' in Ethiopia
(A.A.U, 2008-01) Teshome, Temesgen; Yitayew, Abebe (Professor)
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 operations, 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
Pre Shipment Loan Utilization in Exporting Agricultural Products in Ethiopia
(A.A.U, 2008-01) Negash, Mekbib; Yitayew, Abebe (Professor)
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.
Fund Management and its Utiliation in Tigray HAPCO
(Addis Ababa University, 2008-01) Hailu, Belay; LaxmIkantham, P. (PhD)
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 (Asst. Professor)
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.
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 (Professor)
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 (Assistant Professor )
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
The Performance of Micro Finance Institutions in Ethiopia: A Case of Six Microfinance Institutions
(A.A.U, 2008-04) Yirsaw, Alemayehu; Yitayew, Abebe ((Asst Pro.)
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.
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 .
Assignment of VAT Revenue and Decentralization of its Administration: The Case of Ethiopia
(Addis Ababa University, 2009-06) Emiru, Alazar; Abehodie, Wollela (PhD)
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.
Finance as Success or Failure Factor for Micro and Small Enterprises in Addis Ababa: The Case of Arada Sub-city
(A.A.U, 2011-06) Tadesse, Brhane; Duressa, Degefe(Dr.)
The role of micro and small enterprises (MSEs) in employment and income generation is increasingly recognized and has become a major playing field for policy makers with the purpose of enhancing growth and alleviating poverty. This study investigates about finance as success or failure factor for micro and small enterprises. The study has conducted based on a survey covering 49 randomly selected MSEs in Addis Ababa Arada Sub-City. Interviews and questionnaires have used as a tool to gather the information. The main objective of this study is to examine whether firms have continued access to finance or not. Moreover, the study emphasized about loan size, interest rate, terms of loans and timely disbursement of the loans. From the study, the most problems identified are lack access to finance and inappropriate delivery of the loans. Moreover, MSEs are facing difficulties to bring collateral. disbursement of loans on time, interest rate, loan size and other availability of financial instruments. These problems are hampering MSEs in their expansion, diversification, promotion and growth in some extent. The success of MSEs is measured in terms of their capital, number of employees, revenue. expansion and diversification of the work. From the analysis and discussions. i/ was possible to identify that finance was the major problem of MSEs. On top of this. the relationship between lack of access to finance and success of MSEs was negative. This was consistent with the theories; and it implies that finance is determinant to MSEs. Most of MSEs stated that lack of access to finance constrains their growth. expansion, diversification, promotion and competitiveness. Indeed. financial sector policies often work against the ability of financial institutions to serve MSEs, though often unintentionally Lack of competition in financial institutions limits MSEs to access finance. High risk and high transaction costs (real or perceived) associated with bank lending to MSEs likewise constrain access to finance.
Advanced Management Accounting Techniques in Manufacturing Firms in Ethiopia
(A.A.U, 2011-06) Bogale, Ermias; Duressa, Degefe
In order to survwe and remam competitive the manufacturing firms are under increasing pressure to become more efficient in managing and controlling their costs. This paper examines the level of advanced management accounting practices in manufacturing firms of Ethiopia and it examines the relationship of some theoretical factors that influencing the usage AMATs. The usage or its level of advanced management accounting techniques increased in the last five years and this implies that the manufacturing has awareness about this techniques. To examine the relationship of theoretical factors that might affect the usage of AMATs the paper used Pearson correlation and cross tabulation. As the Pearson correlation coefficient indicates usage of AMATs and usage of advanced manufacturing technology has strong relationship. In the regards of the Traditional Management Accounting Techniques, it uses widely and increased in the last five years. To keep pace with the world changing management accounting environment, Ethiopian manufacturing firms should use the newly developed techniques.
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 (Dr)
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 rate this study assessed the overall quality of the financial reports of those companies. And found that the companies 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.
Impact of Working Capital Management on Profitability of Small and Medium Scale Enterprises (SMEs) in Addis Ababa (The Case of Nifas-silk-Lafto and Kirkos Sub Cities
(A.A.U, 2011-06) Woldu, Ephrem; Ponnala, Venkati (Dr.)
Small and medium enterprises occupy a prominent position in the development agenda of many developing countries like Ethiopia. The number of SMEs in Ethiopia is steadily growing. But, much more important than their number is their current status, stage and pace of development. Despite the tremendous increase in number of SMEs, little research exists that examines working capital management of small and medium enterprises (SMEs) in developing countries, especially in Ethiopia. The purpose of the study is to identify the impact of working capital management on the pelformance of the SMEs in Nifas silk and Kirkos sub cities and to give recommendations based on the problems. In doing so both Primary and secondmy data was collected from 30 SMEs in those Sub cities of the capital city; Addis Ababa. The primary data was collected through the use of questionnaires and secondary data was gathered from the financial statements of the enterprises. The population of the study includes all SME's operating within organization for women in self employment (WISE). Data analysis was done using descriptive statistics and quantitative methods (correlation and regression). The findings of the paper suggest that working capital is negatively affected by the time period required by the enterprises to receive their debts, pay their bills and collect cash. Beside that the financial leverage, size and current ratio of those SME's under study have impact on the availability of adequate working capital requirements.
The Impact of Computerized Accounting Information System on Audit Risk: The Case of External Auditors Engaged in Addis Ababa
(A.A.U, 2011-06) Telila, Keno; Duressa, Degefe (PhD)
The study has been carried out in Addis Ababa, Ethiopia. The influence of computerized accounting information system on audit functions and the major risk that are associated with auditing in such environment have been approved by the literature relating to both developed and other developing countries. However, the impact of IT-based accounting system on audit risk has not been assessed in Ethiopia, particularly, in Addis Ababa. So, th is research fills the existing gap by evaluating empirically the influence of the utilization of Computerized Accounting Information System on the level of audit risk in the study site. The overoll objective of the study is to evaluate the impact of Computerized Accounting Information Systems on the level of audit risk the case of external auditors engaged in Addis Ababa. It seeks to identify whether the level audit risk considerobly changed due to implementing this system by the audit firm clients in the targeted area. The study used both quantitative and qualitative (mixed) approach. The research finding tries to answer questions like whether audit risk was affected due to implementation of IT-based accounting system. Self-administered questionnaire has been corried out to meet the desired objective and to address the study problem. The major findings of this study are severol variables altered audit risk related to implementing the system. These are: lack of segregation of duties; lack of awareness of the issue, problems and risk associated to the system; disappearance of audit trial; unsuitable audit approach; lack of IT training for both client staffs and auditors in such environment; lack of back up data; complexity of the system; absence of adopting advanced audit software; weakness of client internal control system and audit firm financial cost concern.
Possibility of Syndicate Lending in Ethiopia Banking Industry
(A.A.U, 2011-06) Mekonnen, Tekalign; Ponalla, Venkati (Dr.)
There is a considerable expansion of the volume of syndicated loans in emerging markets in the recent years. While until recently large majority of loan transactions in Ethiopia historically have been bilateral transactions that are provided by single banks. This thesis empirically investigates factors that influence the possibility of syndicate lending in Ethiopia banking industry using the financial information of 8 banks for the period of 2005-20 10. The study investigate significant role of loan characteristics and of lending limit, liquidity, capital adequacy and concentration on the possibility of syndicate lending on Ethiopia banking industry. The result of the study indicates that lending limit and liquidity positively influences the possibility of syndicate lending in Ethiopia banking industry while capital adequacy and concentration negatively influences. This shows Banks does not join loan syndication when their capital levels are sufficient enough to support the extra risk taken. The results of the study also support the efforts of authorities to increase banking competition and efficiency, and to implement binding banking regulation on capital requirement to promote the possibility of syndicated loan. Po
Assessment of Performance of Micro Finance Institutions in Credit Risk Management: The Case of Five Micro Finance Institutions in Addis Ababa
(A.A.U, 2011-06) Goshim, Alebachew; S., Ulaganathan(Dr.)
Risk is the fundamental element that drives financial behaviour of micro finance institutions. Financial Institutions, therefore, shou ld manage the risk efficie ntly to survive in this highly un ce rtain wor ld. The future of mi cro finance in stitutions will undoubtedly rest on ri sk management dynamics. Onl y those micro finance institutions that have effic ient risk management system will survive in the market in the long run. The effective manage ment of credit risk is a critical component of comp rehen sive ri sk management essent ial for long-term success of a micro finance in sti tution that is why a micro finance's success lies in its ability to manage a risk. The st udy was tried to eva lu ate the performance sa mple mi cro finan ce in stitution s in credit ri sk managem e nt. To conduct this study the res ea rche r were employed mixed approach and used que st ionnaires, interview and document ana lys is as a so urce of data. The data obta in ed from diFferent so urce s were analyzed and presented the findings. In conc lu sion th e study were tries to seek to outline the components of an effective cred it ri sk management system and also were try to find the failure to effectively manage credit ri sk contributed to a greater exten t to the micro finance in stitutions crisis.
Impact of Internal Control Over Accounting Frauds in Public Enterprises in Addis Ababa
(A.A.U, 2011-06) Negash, Tekalign; Laxmikantham (PhD)
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 are collected 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
Prospects and Challenges to Implement Business Process Reengineering (BPR) in Ethiopian Public Universities
(A.A.U, 2011-06) Mekonnen, Naod; Laxmikantham, P (PhD)
Since educational institutions function similar to other types of business organization, they can use Business Process Reengineering (BPR) to enhance their performances in terms of reducing processes J cost and cycle time, increasing service quality, and increasing customers and employees satisfactions. Likewise, starting From 2008 and 2009, all Ethiopian public universities engaged in BPR project to enhance their performances dramatically. However, the implementation phase of BPR pointed as the most challenging one. Thus, this study intended to identify factors that deemed as challenging factors of BPR implementation. To address study's objectives, sequential explanatory strategy of mixed methods research design adopted. Specifically, in the first phase of the study, survey was conducted on four public universities. To identify various challenging factors of BPR implementation, forty BPR project redesign and implementation team members in the universities were subjects of the study. In the second phase, after results obtained in the first phase, interviews were held with three interviewees to batter understand the magnitudes of challenging factors. The study statistically analyzed the data obtained :n the first phase. Then, results obtained in the first phase elicited to get qualitative data and thematically analyzed the qualitative ciutu obtained in the second phase Results of this mixed method research design in the first phase shows that between I I to 40 percent of the redesigned processes implemented at universities and to implement the entire processes, the implementation phase believed to take more than three years. Results also identified universities' support processes (administrative) as challenging 10 implement compare 10 core processes (academic). Besides, out of the thirty challenging factors included in the survey instrument, more than 50 percent of respondents showed a higher degree of agreement to seventeen factors as the most challenging factors that impeded redesigned processes form being implemented. However, results in the second phase shows that, of the seventeen factors, the magnitudes of nine factors to delay the implementation phase were severe. These include problems originated from change-management factors, top management support factors, organizational factors, and country factors. Generally, this study suggests to take corrective measures by the universities ' management body and Ethiopian Ministry of Education before the project completely fail. Keywords: BPR implementation; Challenging factors; Ethiopian public Universities

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