The Financial Reporting Council of Nigeria (FRCN) has observed that one reason for the efficient operation of equity and credit markets is the public availability of creditable financial statements to stakeholders and the confidence in these statements by those using them as a basis for their investment and credit decisions.
To this end, the council on Monday held a stakeholder’s dialogue with representatives of various shareholders associations in Nigeria.
The Deputy Director/Head, Directorate of Accounting Standards, Public Sector, FRC, Dr. Iheanyi Anyahara, in a keynote address recalled that in the past decades, events posing potential serious threat to the efficient functioning of capital markets have been the growing incidence of fraudulent financial reporting, of which the investing public roundly blame the accounting and auditing profession.
According to him, the event is one of the series of engagements the council is having with relevant stakeholders for effective implementation of audit regulations 2020.
He stressed that the document was signed by the minister of Industry trade and investments, and the dialogue is geared towards getting stakeholders buy-in into the regulation so that financial reporting in Nigeria will be credible and of globally acceptable standard.
Specifically, he said that analysis of the parties involved in the financial reporting supply chain will reveal the significant and critical role the Audit Committee members play.
Although while kicking against the regulation, shareholders claimed that the Council is not well-advised on its powers, authority and limitations, adding that there is the need to expunge all the sections relating to audit committee position from the draft regulation, Ifeanyi said there will be proper clarifications to there concerns which at the end may not impact significantly to the regulation.
“But if after proper analysis, we discover that some of their recommendations will have impact, we will go back to the minister with our own recommendations and explanations to that effect.”
The Companies and Allied Matters Act 2020 in section 404 (2) requires that “auditors shall in the case of public company, make a report to audit committee which shall be established by the public company”.
Also, Section 404(4), CAMA 2020 states “the audit committee shall examine the auditor’s report and make recommendation thereon to the annual general meeting as it may deem fit”.
Anyahara, said, “As you are aware, one of the objects of the Council, as stipulated in Section 11 (a) of the Financial Reporting Council Act, 2011, is to ‘protect investors and other stakeholders’ interest’ which is at the heart of Shareholders’ Association activities. Therefore, I make bold to say that we are partners in progress and therefore should work closely to see that the Audit Regulations 2020 are effectively implemented. “
He further explained that a member of the committee must be financially literate, and at least one member shall be a member of a professional accounting body in Nigeria established by an Act of the National Assembly.
“You will all agree with me that regulation of financial reporting in Nigeria was on self-regulation or at most regulation at the professional organizational level which has been on persuasive approach. This approach is no more acceptable globally hence the advent of Financial Reporting Council or its equivalent globally to provide independent oversight over financial reporting.
“Generally, strong independent public oversight is required because it helps to create and maintain trust in the work of auditors by providing safeguards for companies and investors. This, among other things, account for the enactment of the Financial Reporting Council Act, 2011,” Anyahara emphasized.
He said the engagement with members of Shareholders Association is strategic as the council decided to use the exercise, to personally and specially request that “your associations devote considerable time to consider the Audit Regulation for a meaningful and quality contribution towards effective implementation of the Audit Regulation.
The Audit Regulation is very strategic in the quest to Nigeria joining the league of global community that have effectively set up Independent Audit Regulators he assured.
One of the critical concerns on the implementation of the Audit Regulations is the capacity. “We are currently discussing with development partners in this regard. I am pleased to inform you that the Council has received positive assurances from some bodies internationally and locally to deploy resources to assist and such will be extended to your association. This is an area your associations need to partner with the Council to build the required capacity,” he stated.
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