The Nation Newspaper

Tag: FRC

  • Court restrains FRC from imposing sanctions on KPMG, partner

    Court restrains FRC from imposing sanctions on KPMG, partner

    The Federal High Court in Lagos has restrained the Financial Reporting Council of Nigeria (FRC) from imposing any sanction on KPMG Professional Services until the firm’s suit is determined.

    Justice Ibrahim Buba also barred FRC’s Executive Secretary, Mr. Jim Obazee from sanctioning a partner in the firm, Mr. Ayodele Othihiwa.

    The interim injunction was granted on Friday, following an application by the plaintiff’s lawyer, Chuka Ikwuazo of the firm of Aluko and Oyebode.

    The applicants also prayed the court for an accelerated hearing of the suit, which will come up on Thursday.

    KPMG and Othihiwa prayed the court to enforce their rights.

    FRC, in an October 30 letter, conveyed its ‘regulatory decision’ to the applicants, following their role in the financial statements of Stanbic IBTC Holdings Plc for 2013 and 2014.

    The council said it had suspended Othihiwa “until the investigation as to the extent of the negligence of KPMG Professional Services is ascertained.”

    KPMG and Othihiwa contended that the FRC decision was published and issued without informing or notifying them of the nature of the allegations made against them, nor were they invited to respond to the allegations.

    They claimed the FRC decision not only violated their right to fair hearing, but flouted Section 62(2) of the FRC Act, which spelt out the procedure to be adopted in investigating a professional body for any ‘complaint or dishonest practice, negligence, professional misconduct or malpractice’.

    The section states that FRC “shall notify the professional, whose conduct, act or omission is under investigation of the nature of the complaint and it shall summon or hear the professional.”

    The applicants argued that FRC and Obazee did not only breach the provision, but they also violated Section 15(2) b of the FRC Act, which states that a Technical and Oversight Committee shall review “sanctions to be meted out to any professional accountant, professional or public interest entity.”

    KPMG and Othihiwa claimed that even where the Technical and Oversight Committee had ratified the decision of the FRC, the council failed to exhaust the provisions of its own law.

    The plaintiff’s motion for interlocutory injunction will be heard on Thursday.

     

     

     

     

    .

     

  • Stanbic IBTC: Court declines to grant order against FRC

    Stanbic IBTC: Court declines to grant order against FRC

    A Federal High Court, presided over by Justice Okon Abang yesterday in Lagos refused to grant an order  compelling the  Financial Reporting Council (FRC) of Nigeria Chief Executive Officer Jim Obazee to appear in court to explain why he should not be held for contempt. The court also refused to make an order suspending the decisions by the FRC  against Stanbic IBTC.

    The orders were sought by the shareholders of Stanbic IBTC Holdings Plc. They brought the application through the Shareholders Association of Nigeria (SAN), but it could not be heard because a lawyer who represented FRC said he had just been briefed.

    Mr Justice Abang held that the court could not shut out the defendants. He said they must be allowed to file their processes before the court could hear the contempt application.

    Another judge, Mr Justice Ibrahim Buba, had on Wednesday restrained FRC from obstructing the operations of Stanbic IBTC Holdings Plc.

    Stanbic IBTC Holdings Plc shareholders are urgung the Federal High Court in Lagos to compel Obazee to appear in court to explain why he should not be held for contempt.

    Its former lawyer, Fabian Ajogwu (SAN), was said to have withdrawn.

    The shareholders want the FRC chief sanctioned for enforcing the FRC Guidelines/Regulations for Inspection and Monitoring of Reporting entities despite their pending suit.

    The shareholders said FRC was aware of the suit challenging the financial regulations that formed the basis of which Stanbic IBTC Holdings directors were sanctioned.

    The suit, which was filed by 10 members of SAN led by its chairman Timothy Adesiyan is also challenging the implementation of the FRC Regulations. The other members of SAN are Sulaiman Adenrele, Sunday Ogunnowo, Frederick Oduyemi, Robert Igwe, Bello Owonikoko, Lazarus Onwuka, Tajudeen Adeshina, Peter Okoh and John Ogundipe.

    The plaintiffs in the suit filed in February, are praying the court to determine whether theMinister of Industry, Trade, and Investment can, in the exercise of the powers conferred on him by Section 73 of the FRN Act, 2011 make regulations, proceed to “create new offences and impose sanctions and or penalties and or otherwise expand the scope of the principal Act itself, or lay down entirely new regulations which are not ancillary to the provisions of the Act”.

    The shareholders also want the court to determine whether regulations which set out new offences and sanctions other than those contained in the principal Act, are not ultra vires (beyond) the minister’s powers.

    They sued the Minister of Trade and Investment, FRC, the Attorney-General of the Federation, and the Steering Committee on the National Code of Corporate Governance.

    Yesterday, the defendants’ lawyer Emmanuel Akpudugu prayed the court for more time to respond. He said he had just been briefed on the case and would require a short adjournment.

    The plaintiffs’ lawyer Kemi Pinheiro (SAN), however, urged the court to make a temporary order suspending all the decisions made by FRC while the case was pending.

    According to Pinheiro, the court must make the order because FRC’s decisions were seriously affecting his clients, who are shareholders of Stanbic IBTC.

    He said the Council acted in disregard of the court’s authority, therefore, it should not be allowed to get away with it.

    But Akpudugu stated that the court must hear FRC first before making any order in the interest of justice and fair hearing.

    Justice Abang held that the court cannot shut out the defendants. He said they must be allowed to file their processes before the court can hear the contempt application.

    Justice Buba had granted an order of interlocutory injunction restraining FRC or its officers “from interfering with, or otherwise impeding, obstructing, molesting or hindering” the plaintiffs’s operations.

    FRC had last week sanctioned Stanbic IBTC over its audited accounts for 2013 and 2014.

    It suspended the Financial Reporting Numbers of the bank’s chairman, Mr. Atedo Peterside, and its Chief Executive, Mrs. Sola David-Borha, and others.

    It also barred them from vouching for the integrity of any financial statements in Nigeria, and imposed N1billion fine on the bank.

    FRC said they were suspended for attesting to “misleading” financial statements, and would remain suspended till investigations were concluded.

    It pointed out several inconsistencies in the bank’s reporting, including its alleged failure to disclose what exactly millions of naira grouped under “donations” and “others” were used for.

    The Council instructed Stanbic IBTC directors to withdraw the Financial Statements and restate them in accordance with the provisions of the law.

    But the Central Bank of Nigeria (CBN) had accused FRC of not following due process before imposing sanctions on the bank.

    “Without prejudice to the foregoing financial issues, the CBN is concerned about the apparent failure of the FRC to follow due process as laid down by its own FRC Act and Regulations in arriving at the regulatory decision,” CBN governor Godwin Emefiele had said.

    Justice Abang adjourned to November 20 for hearing

  • Court restrains FRC from obstructing Stanbic IBTC’s operations

    Court restrains FRC from obstructing Stanbic IBTC’s operations

    The Federal High Court in Lagos yesterday restrained the Financial Reporting Council (FRC) of Nigeria  from obstructing the operations of Stanbic IBTC Holdings Plc.

    Justice Ibrahim Buba granted an order of interlocutory injunction restraining it or its officers “from interfering with, or otherwise impeding, obstructing, molesting or hindering” the plaintiffs’s operations.

    The judge barred FRC from preventing the plaintiff or its subsidiaries “from carrying on their lawful businesses.”

    Justice Buba also restrained the Council from inviting the entire Stanbic IBTC Holdings’ board of directors to any meeting in connection with the defendant’s statutory investigation of the plaintiff’s statements.

    The orders, the judge said, will subsist “until the hearing and determination of these proceedings.”

    Justice Buba ruled on an motion on notice for orders of injunction against FRCN and the National Office for Technology Acquisition and Promotion (NOTAP).

    The plaintiff said FRC, since August 3, has been investigating its audited accounts for the year ended December 2014.

    The investigations concern liabilities accrued in the plaintiff’s 2014 accounts in respect of franchise fees owed to Standard Bank of South Africa, the registration of which it said has been pending before NOTAP since 2011.

    The plaintiff said FRC labelled the franchise agreement as illegal, and invited IBTC Holdings’ Chief Executive Officers to appear before it.

    Following a meeting on October 16, the Council informed the plaintiff that it committed criminal offences and that it would be reported to the the Economic and Financial Crimes Commission (EFCC), the Central Bank of Nigeria (CBN) and the Securies and Exechage Commission (SEC).

    FRC then asked the entire Stanbic IBTC board to meet with it “to know the extent of your board involvement” in the matter.

    But the plaintiff contended that the council has no statutory or other powers to summon the plaintiff’s entire board of directors to a meeting in order to determine their complicity or otherwise in any alleged criminal offence.

    Arguing the plaintiff’s application, Prof Fidelis Oditah (SAN) said FRC has been acting beyond its powers.

    For instance, he said SEC issued a public notice suspending the plaintiff’s N18billion right issue that the commission had previously approved, citing a letter received from FRC.

    “On September 15, SEC put on hold the plaintiff’s application to pay scrip dividends out of its 2014 profits, citing a letter received from FRCN,” Oditah said.

    According to him, the Council “is not a prosecutor or a court,” adding that it engaged in a campaign of calumny against the plaintiff.

    The consequence, Oditah said, is that Stanbic IBTC’s share price fell from N23 to less than N19 within a week.

    But FRC’s lawyer, Chief Olusina Sofola (SAN) urged the court not to grant the application because the invitation had been overtaken by events.

    “The day of the meeting has come and gone and they (plaintiff) did not attend. The heavens did not fall. They have not said they are being invited to another meeting. The meeting did not hold, so what is this court being asked to stop?

    “As we speak now, they’re carrying out their business. The letter does not run foul of the law. If they feel we acted outside our powers, they should bring an application to challenge our powers. I urge my lord to dismiss their application,” he said.

    Ruling, Justice Buba held that the application has merit. “There is a strong case for the maintainance of status quo. There is a case made for the grant of the interlocutory injunction,” he said.

    According to the judge, FRC is aware of the suit, therefore, the best thing was for all parties not to take steps that could “undermine” the case in court.

    “The whole essence of having a court of law in any civilised society is to ensure everything is done according to law and not otherwise.

    “No court is will stop a statutory authority from performing its statutory duties.

    “However, the court must emphatically add that where it is alleged that a statutory authority is acting ultra vires its statutory powers, the courts have powers and are imbued with jurisdiction to enquire into whether it true of false,” the judge said.

    He held that “the application has merit and is hereby granted.”

    In its suit, the plaintiff is asking the court to determine among others, whether FRC has the power to impose a fine of N1 billion on it.

    FRCN had last week sanctioned Stanbic IBTC over its audited accounts for 2013 and 2014.

    It suspended the Financial Reporting Numbers of the bank’s chairman, Mr. Atedo Peterside, and its chief executive, Mrs. Sola David-Borha.

    It also barred them from vouching for the integrity of any financial statements in Nigeria.

    FRCN also suspended two other directors – Mr. Arthur Oginga and Dr. Daru Owei – for attesting to what it termed the “misleading” 2013 and 2014 financial accounts of the bank, as well as Ayodele Othihiwa of KPMG Professional Services for his firm’s alleged complicity in the infractions highlighted in the financial reports for the two-year period.

    It based its sanctions on issues raised by the bank’s minority shareholders led by the Mahtani brothers who own the Churchgate conglomerate, to some other regulatory agencies such as NOTAP, SEC and CBN) among others.

    The bank also wants the court to determine whether or not the FRCN has the power to license directors and other office holders of public interest entities and if it can suspend the said licence by suspending a director or other office holder of a public interest entity.

    Justice Buba adjourned to Friday for hearing of a motion to join a shareholder to the suit.

  • FRC axes Stanbic’s Peterside, others

    FRC axes Stanbic’s Peterside, others

    •Bank rejects sanction

    Were there “material irregularities” in Stanbic IBTC financial statements between 2011 and 2014?

    There were, says the Financial Reporting Council of Nigeria (FRC), which is pushing for the bank’s probe by the Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS) and Economic and Financial Crimes Commission (EFCC).

    In its Regulatory Decision on Stanbic IBTC, FRC appealed to CBN, FIRS and EFCC to help  bring Stanbic IBTC to book.

    CBN, it said, was “requested to assist in this effort by taking regulatory disciplinary actions against those whom the CBN expects to guarantee the integrity of the financial statements in order to safeguard the interest of stakeholders of Stanbic IBTC. We are convinced that once the monies are properly accounted for and used to shore up their Tier 1 capital, the institution shall become stronger.”

    It urged FIRS “to ensure that the related taxes are paid and the government is not unduly shortchanged.”

    FRC wants EFCC “to assist in this effort by questioning those involved in the concealment and sale of the banking application software that was developed in Nigeria which, other than the financial implication, has also robbed Nigerians of national pride.”

    Reacting, Stanbic IBTC claimed that “FRCN’s allegations are inaccurate and unfortunate, and the manner in which it has chosen to make them is procedurally defective.”

    A statement signed by its Chief Executive Officer, Mrs Sola David-Borha,  and Company Secretary, Chidi Okezie  said: “Whilst FRCN takes refuge in Regulation 21 of the Directorate of Inspection and Monitoring Guidelines Regulations 2014 for the wide publicity that it has given to its regulatory decision, Regulation 21 only applies ‘where the panel and the entity agree that accounts are to be rectified by way of revision or restatement”.

    The bank went on: That is not the case here, because Stanbic IBTC does not agree that its accounts are defective or require rectification.  Moreover, Regulation 27 makes clear that where a reporting entity does not accept FRCN’s position, FRCN ‘shall institute a legal action against the entity’. FRCN has ignored this laid down process in preference for self-help and media publicity.”

    Yesterday, FRC said its attention was drawn to Stanbic IBTC’s “material irregularities” on its financial statements between 2011 and 2014 by some minority shareholders.

    A controversial issue in Stanbic IBTC financial statements, it alleged, was the disclosure that auditors earned “fees for other services” in addition to the audit fee as follows.

    2014: N7,000,000; 2013 –N5,000,000; 2012: N 37,000,000; 2011: N13,000,000. The Council said it was interested in knowing the nature of these non-audit services, the fees actually earned and the possible impact on auditor independence and objectivity.

    The Council took exception to the posting under “others”, saying it has always made it known to reporting entities and their external auditors that descriptions in the financial statements such as “others”, “sundries” and “miscellaneous”, especially when these were substantial and material, were poor disclosure and should be avoided at all cost.

    The Council said it “observed that Stanbic IBTC regularly flouts CBN regulations. In 2014 for instance, a total penalty of N28,000,000 was imposed on the group. Among the contraventions was improper disclosure of public sector deposits in 2014. Stanbic IBTC seems to have a penchant for poor disclosures which further corroborates the findings in this report.

    “The Directors of Stanbic IBTC were then directed to withdraw the Financial Statements of Stanbic IBTC Holdings Plc for years ended 31st December 2013 and 2014 and restate them in accordance with the provisions of Section 64 (2) of the Financial Reporting Council of Nigeria Act No. 6, 2011 and Regulation 21 of the Financial Reporting Council of Nigeria – Guidelines/ Regulations for Inspection and Monitoring of Entities, 2014.

    “The FRC numbers of the following persons who attested to the misleading statements of financial position of Stanbic IBTC Holdings Plc for years ended 31st December 2013 and 2014 have been suspended until the investigation as to the extent of their negligence in the concealment, accounting irregularities and poor disclosures in the said financial statements is completed in accordance with Section 62 of the Financial Reporting Council of Nigeria Act No. 6, 2011.

    “Accordingly, they are not allowed to vouch for the integrity of any financial statements issued in Nigeria. The persons are: Atedo N. A. Peterside FRC/2013/CIBN/00000001069; Sola David-Borha FRC/2013/CIBN/00000001070; Arthur Oginga FRC/2013/IODN/00000003181; and Dr. Daru Owei  FRC/2014/NIM/00000006666.

    Stanbic IBTC said “the matters that FRC alleges to be wrong are not wrong in any material respect and many are in any event not matters of financial reporting at all, but matters of business decision and judgment for Stanbic IBTC and its board of directors.”

    “Our books have been fully disclosed and provide a true and fair view of our assets and liabilities, profits and losses, and our overall financial position.

    Its directors, it said “have not been ousted. The directors, who are from Nigeria and elsewhere, are reputable individuals who uphold the best corporate governance practices and whose credibility, integrity and proven track record are impeccable.”

     

  • Commission advises Buhari to set borrowing limit for govt

    Commission advises Buhari to set borrowing limit for govt

    The Fiscal Responsibility Commission [FRC] has advised President Muhammadu Buhari to set borrowing limits for the three tiers of government. It said the move will check indiscriminate borrowing by the three tiers of government in the country.

    Its Acting Chairman, Mr. Victor Muruako said such limits would enable the Commission raise the alarm  when any tier of government borrows or is about to borrow beyond the threshold set down.

    Muruako spoke yesterday in Abuja while delivering the keynote address at a two-day awareness workshop on Fiscal Responsibility Act, 2007.

    According to him, “where fiscal responsibility is practised, limits are imposed on deficits, debts and expenditure while time limits for performing certain duties and obligations are further spelt out.”

    He warned that debts could get out of control without proper checks and limits.

    He urged Buhari to visit those who have bypassed established laws for selfish reasons with appropriate sanctions. He said: “The problem has remained that over the years, successive governments have been selective on which programmes to follow thereby allowing their personal interests to overshadow the natural collective will to progress in line with other countries.”

    He also disclosed that the commission had ensured that agencies of government remitted over N366 billion operating surplus into the consolidated revenue fund (CRF) since it came into operation.

    As a first step, the FRC has embarked on massive education and sensitisation of government and public stakeholders in the financial sector to drum up support for the need for setting up of a “proper standard” in fixing limits for borrowing by the three tiers of governments.

    The Commission expressed concerns over reckless borrowings which it said is responsible for several debts over-hang in the polity. This development, he  argued is detrimental to fiscal prudence, transparency and accountability in governance, adding that it also ran foul of the FRA Act, 2007.

    Muruako noted that the  the FRA 2007 “is characterised by fiscal rules and procedures formalising the budget process, fixing the levels of budget deficit expenditure and revenue limits as well as limits to the debts of the federal, states and local governments, time limits are imposed for the performance of obligations of the stakeholders and budget process authorities and managers.”

    He lamented that the Act setting up the commission “provides for offences, it does not stipulate the matching punishments, it denies the commission the power to prosecute or punish the offenders under the Act, by implication, the FRC can only name and shame the offenders, this amounts to mere reputational punishment as it does not deter people from contravening the provisions of the Act with impunity.

    ”This Commission has been a been a victim of this due to the fact that by the letters of FRA 2007 we are only to investigate and forward reports to other authorities without the necessary powers to prosecute. We are still battling to have these aspects of the law amended to enable the Commission have the necessary bite against the violators of the act.”

    Muruako challenged state governors, particularly the newly elected ones to put in place fiscal regimes in their respective states to show  transparency in the handling of public resources. He noted that only 12 states have so far subscribed to the Act, stressing that most state governors were not interested in replicating the FRA in their states.

    He said the economy has recorded significant growth and stability over the years in spite of the challenges holding back the commission.

  • FRC, multinationals fight over corporate governance code

    Multinational companies have picked holes  with the Financial Reporting Council of Nigeria (FRCN) over certain sections of the proposed National Code of Corporate Governance (NCCG) under review.

    The Managing Director, FRC, Jim Obazee, said the firms are kicking against some sections of the proposed code, especially the provision of joint auditors proposal by the Council. The Council has inserted a proviso that where one auditor is a foreigner, there must be a Nigerian auditor working alongside with him.

    The draft code also stipulates that if your turnover is not less than N10 billion, or your market capitalisation is not less than N5 billion, you should have joint auditors.

    But from what we received so far, some interest group that have written, especially the multinational firms, are asking: Why do you want joint audit?

    “For the auditors, if one of them is an international firm, where one is an alien, the other firm must be a Nigerian company. And, we said, and we said the Nigerian firm must not have a partner that is an alien. Our agenda is not only to generate employment for Nigerians, but to also ensure that Nigerians are also trained. Every government agency must pursue an agenda that says that Nigerians are training and gainfully employed. They should have technical support,” Obazee said.

    Obazee said the NCCG is also stipulating a five-year mandatory rotation for external auditors posted to oversee companies’ accounts.

    He said the new rule on auditors, which is contained in the NCCG document, is meant to ensure that the auditors do not become used to the company.

    “The NCCG code contains a five-year mandatory rotation for external auditors. This is because we discovered that after five years as an external auditor to a company, many of the auditors become part of the company and may not achieve the desired result,” he said.

    Obazee said Nigeria boasts of six different persuasive codes issued by six different regulators to meet the need of the entities they regulate.

    He said the codes were being applied by the Central Bank of Nigeria, Nigeria Deposit Insurance Corporation, he National Insurance Commission (NAICOM), The National Pension Commission (PenCom), Securities and Exchange Commission (SEC), Corporate Affairs Commission and Nigerian Communication Commission.

    He however said modern society believes that the era of very weak and persuasive corporate governance codes was long gone due to stiff competing environment for foreign direct investment; of which binding regulation is a major factor being considered by investors and stakeholders, hence the need for new code.

    He said provisions had been made for the development and enforcement of a National Code of Corporate Governance in the Financial Reporting Council of Nigeria Act No. 6, 2011.

    He said Section 50 of the FRC Act, 2011 provides that the objectives of the Directorate of Corporate Governance shall be to develop principles and practices of corporate governance ; promote the highest standards of corporate governance; promote public awareness about corporate governance principles and practices; on behalf of Council, act as the national coordinating body responsible for all matters pertaining to corporate governance  and promote sound financial reporting and accountability based on true and fair financial statements duly audited by competent independent Auditors.

    Obazee said the Council shall enforce and approve enforcement of compliance with accounting, auditing, corporate governance and financial reporting standards in Nigeria”.

    He said the code will also address socio-economic issues including corruption and lack of corporate independence.

    “It is also an opportunity to raise the bar in the public and private sectors so that directors are personally accountable for their actions and inactions. The committee completed this assignment in the last quarters of 2014. This was the reason the annual Financial Reporting Summit, organised by our Council in December 2014, concentrated on issues of corporate governance,” he said.

    “We are delighted to inform you  that the NCCG has been finalised and has been exposed for comments from stakeholders for 30 days effective from April 15, 2015. The deadline for receiving comments on the Draft NCCG is 14th May, 2015. A public hearing shall hold on the subject on 19th May, 2015,” he said.

    He said the NCCG is in three parts, namely, Private Sector, Public Sector and Not-for-Profit.

  • Why bank owners like to stay put, by FRC

    Why bank owners like to stay put, by FRC

    Financial Reporting Council of Nigeria (FRC), the watchdog of banks and other financial institutions, has revealed why bank owners do not like to hands off their outfits.

    The owners, especially Chairmen and Chief Executive Officers (CEO), are reluctant to quit after the expiration of their tenure because of “the mistrust in the industry”, FRC Chief Executive Officer Jim Obazee, has said.

    Speaking at the ongoing review of the National Code of Corporate Governance (NCCG), he attributed the attitude of such owners to weak regulation in the financial sector.

    He said the NCCG is expected to correct such anomaly.

    Obazee noted that many of the owners have as little as 15 per cent equity in their banks and still control what happens in the organisation while the shareholders with over 85 per cent are left in the dark in decision taking.

    He said: “It is an ethical weakness for a bank chairman to stay too close to the bank. When you see a bank CEO or Chairman coming back years after his tenure elapsed, know that corporate governance is weak.”

    He faulted the practice where few individuals appoint external auditors, only to end up controlling them. To check this practice, Obazee said no external auditor should spend more than five years in a company to avoid over familiarity.

    “The NCCG code contains a five-year mandatory rotation for external auditors. This is because we discovered that after five years as an external auditor to a company, many of the auditors become part of the company and may not achieve the desired result,” he said.

    Obazee said Nigeria boasts of six persuasive codes issued by six regulators to meet the needs of the entities they regulate.

    The codes were issued and are being applied by the Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), the National Insurance Commission (NAICOM), National Pension Commission (PenCom), Securities and Exchange Commission (SEC), Corporate Affairs Commission (CAC) and Nigerian Communication Commission (NCC).

    Modern society, he said, believes that the era of weak and persuasive corporate governance codes is gone because of the stiff competition for foreign direct investment.

    Provisions, Obazee said, have been made for the development and enforcement of a NCCG in the Financial Reporting Council of Nigeria Act No. 6, 2011.

    He said Section 50 of the law provides that the objectives of the Directorate of Corporate Governance shall be to develop principles and practices of corporate governance; promote the highest standards of corporate governance; promote public awareness about corporate governance principles and practices; on behalf of Council, act as the national coordinating body responsible for all matters pertaining to corporate governance and promote sound financial reporting and accountability based on true and fair financial statements duly audited by competent independent auditors.

    Head of the Steering Committee on NCCG, Victor Odiase, said the NCCG was developed on January 17, 2013, adding that the Federal Government is aware that the issuance of a national Code of Corporate Governance is a very important deliverable that can be used to enhance national competitiveness.

    He said the code will also address socio-economic, including corruption and lack of corporate independence.

     

  • FRC audits banks’ accounts

    FRC audits banks’ accounts

    Banks are facing a test of integrity, with  the Financial Reporting Council of Nigeria (FRC) examing their 2014 financial statements.

    Speaking yesterday at a media briefing in Lagos, FRC Chief Executive Officer Jim Obazee said the Council was examining whether the financial statements show the true state of the banks— in accordance with provisions of the International Financial Reporting Standards (IFRS), the Companies and Allied Matters Act, the Bank and Other Financial Institutions Act and the FRC Nigeria Act.

    The FRC, he said will look at the accuracy and reliability of the reports based on these Acts.

    Zenith Bank, United Bank for Africa (UBA), Guaranty Trust Bank and Union Bank have already submitted their accounts for review.

    The penalty for each violation ranges from N5 million to N100 million. A bank will be sanctioned based on the number of infractions committed, including a jail term for offenders.

    “We are looking at how reliable, and how accurate the financial accounts are because they must be exact. Offenders will have their FRC registration number withdrawn, based on Section 41 of the FRC Act. That means you will not be able to work again in Nigeria,” he said.

    Obazee said banks that fail to classify expenses, such as staff costs, auditors’ remuneration, interest on loans, depreciation directors’ remuneration will be sanctioned. “Failure to classify financial instruments into appropriate categories like Fair Value through Profit and Loss, Held to Maturity, Loans and Receivables, Available for Sale and Amortisation cost will attract penalties,” he said.

    He said some of the institutions will have to pay fines where they violate the FRC code, or their operations will be suspended. Obazee said that aside institutions, the body will also be dealing with the external auditors in persons.

    “We will not only be dealing with corporate responsibilities, we will be dealing with individual responsibility. For instance, the Company Secretary must be a lawyer. Such persons must also have cognate experience,” he said.

    Obazee said the FRC gave the banks one year cool-off period which ended December 2013 to learn the ropes because IFRS is a new principle in Nigeria. “We said if you are adopting the IFRS for the first year, we will give you a cool-ff period of year. Those that adopted IFRS in 2012; they had 2013 as a cool-off period. Within the cool-off period, what we do is consulting. When you come, we guide you on what to do or look out for,” he said.

    The cool-off of one year is to ensure that “banks do not say that government ambushed them”.

    The FRC will be looking at the banks’ financial reporting infrastructure; revenue recognition, income classification, disclosures and measurements.”

    Obazee said the body is implementing Section 11 D of the FRC Act, which is to ensure accuracy and reliability of financial report and corporate disclosure in line with Nigerian laws.

    “As a bank, we would be looking at how you comply with the regulations of the Central Bank of Nigeria and Nigeria Deposit Insurance Corporation on how you, for instance, recognise Non-Performing Loans because such could affect your bottom line.”

  • FRC to begin audit quality inspection of banks

    FRC to begin audit quality inspection of banks

    The Financial Reporting Council of Nigeria (FRCN) will in the first quarter of next year, begins audit quality  of banks, its Chief Executive Officer, Jim Obazee, has said.

    Obazee, who spoke at the weekend during a three-day media retreat in Lagos, said the time had come to hold auditors more accountable for their works.

    He said the Council would pay more attention to the quality of work done by audit firms and their executives for quoted and non-quoted companies, particularly those considered as being of national importance.

    Speaking on the theme: ‘Financial reporting regulation: Issues and challenges,’ Obazee said auditing standards are high-profile issues in the light of recent events globally, and national surprises.

    “Auditing standards are a high-profile issue in the light of recent events globally and obvious national surprises. Auditors play a crucial role in ensuring that financial statements can be relied upon by users.

    “Given current international trends and the critical role that auditors have, it seems desirable to embrace some degree of changes being considered internationally, might be required in the Nigerian space,” he said.

    The FRC helmsman, said he wants professionals to be more careful while doing their jobs, as they risk personal liability for misbehavior.

    He explained that in line with the FRC enabling Act, where an audit firm qualifies a report, it must be accompanied “with detailed explanations for such qualifications within 30 days from the date of such qualification. Such reports shall not be announced to the public until all accounting issues relating to the reports are resolved by the Council”.

    Obazee said the FRC’s bid to undertake audit of  banks was in line with the desire of the body to become a member of the International Forum of Independent Audit Regulators (IFIAR), explaining that this will be a booster to the capacity of the Council to monitor audit quality.

    He said: “The first phase of the adoption of International Financial Reporting Standards in Nigeria, has started producing enhanced perception for Nigeria, adding that the FRC is currently carrying out IFRS readiness test for entities in the second phase- (Other Public Interest entities including Not-for-Profit Organisations)”.

    Obazee explained that part of FRC’s role in this year, would be to carry out audit quality inspection in banks and other publicly quoted companies, stressing that there is urgent need to check what the internal auditors are doing at all times.

    “We are to look at who is checking the checker (internal auditors). This will be done through the external auditors, but there are international audit control rules that will be followed,” he said.

    He explained that the FRC is a unified independent regulatory body for accounting, auditing, actuarial, valuation and corporate governance practices in both the public and private sectors of the Nigerian economy.

    He said the body will address institutional weaknesses in regulation, compliance and enforcement of standards, as well as the development of robust arrangements for monitoring and enforcing compliance with financial reporting standards in the country.

    He said the implementation of the FRC Act was expected to lead to increased management credibility, more long-term investments, lower cost of capital, improved access to new capital and higher share values.

    “For investors and lenders, better disclosure provides more relevant information for making sound investment decisions and risk assessment respectively. This is especially so because merchants do not have a country,” he said.

    He said the National Code of Corporate Governance will be operational in the first quarter of 2015, adding that this will  strengthen the compliance with Section 44 (3) of the FRC Act, and enhance the inflow of Foreign Direct Investment and arouse greater interest from local investors.

    He said the required platform for the implementation of internal systems/Information systems control with independent attestation, in accordance with Section 7 of the FRC Act, shall also be laid.

    “We are also confident that the much awaited IFRS Academy shall at the last commence its operation. The implementation of the International Public Sector Accounting Standards (IPSAS) by Governmental Funds shall be a priority,” he said.

  • FRC to probe Skye, Heritage accounts

    The Financial Reporting Council (FRC) of Nigeria will probe this year’s annual accounts of lenders involved in the purchase of Mainstreet Bank Limited and Enterprise Bank Limited, the Council’s Chief Executive Officer, Jim Obazee has said.

    The FRC boss, who spoke a three-day press retreat in Lagos, said the investigation is to determine the transaction trend and how they were accounted for in the new owners’ books.

    “We will wait for them to bring their financial statements for 2014. The financial statement should be able to show what happened in the course of those transactions. We want to examine the books of the banks involved in the recent acquisition of bridge banks. We want to know if it was the case of a weaker bank buying a stronger bank or a reversed acquisition. We want to determine whether it was a reversed acquisition and see how they accounted for it in their books,” he said.

    Skye Bank Plc paid about N120 billion to acquire Mainstreet Bank while HBCL Investment Services Limited (HISL), sponsored by Heritage Banking Company Limited, paid about N56.1 billion for Enterprise Bank Limited.

    The FRC boss said the onus was on the buyers to report the transactions correctly in their books, else, their financial statements will be withdrawn, until they report correctly.  He also said the Council has a ‘whole lots of action’ it can take on them.

    Obazee who spoke on the theme: ‘Financial Reporting Regulation: Issues and Challenges’ said it was the duty of regulators to be more responsive and protect the interest of shareholders in the bridged banks. “I want regulators of the financial services sector to be more responsive and protect minority shareholders,” he said.

    Obazee said the FRC was created to address institutional weaknesses in regulation, compliance and enforcement of standards, and development of arrangements for monitoring and enforcing standards in the financial services sector.

    The implementation of FRC Act, he added, is expected to lead to increased management credibility, more long term investments and improved access to new capital. The Council, he said, was also created to protect investors and other stakeholders’ interests. He said the regulators of the financial services sector are expected to protect minority shareholders’ interests.

    The Asset Management Corporation of Nigeria (AMCON) had in 2011 acquired the Mainstreet Bank, Enterprise Bank and Keystone Bank after the intervention by the Nigeria Deposit Insurance Corporation (NDIC) and the Central Bank of Nigeria (CBN). Keystone Bank is expected to be sold by February to a new investor.