The Financial Reporting Council of Nigeria (FRC) has signed a Memorandum of Understanding (MoU) with the Institute of Chartered Accountants of Nigeria (ICAN), which grants ICAN the instrument of delegation to supervise and monitor licensed auditing firms in Nigeria.
The MoU was signed during the courtesy visit of 59th President of ICAN, Dr. Innocent Iweka Okwuosa, to the Executive Secretary/Chief Executive Officer of FRC, Ambassador Shuaibu Adamu Ahmed.
Both bodies said the signing of the instrument of delegation would bring into effect audit regulation and improve investors’ confidence on financial statements of business entities in Nigeria.
Ahmed also assured ICAN that the FRC would intervene in the current proliferation of accounting professional bodies in Nigeria to stem the balkanisation and prevent watering down of the prestige of accounting profession.
Ahmed said: “We signed the instrument of delegation, which has been a sticking point for the past three years, to enable the audit regulation to take effect. The audit regulation was enacted three years ago by the federal government to improve on the quality of audit work being done in Nigeria. It provides that the FRC will monitor and supervise the quality of audit work being done in the country.
“But you know that there are thousands of audit firms in this country and the FRC with its meagre staff cannot supervise thousands of these audit firms. So, with this instrument of delegation, we are now enabling ICAN to help us assist with the supervision of some of these firms”.
“And we expect that we are going to sign similar instrument of delegation with other professional body organisations like the Association of National Accountants of Nigeria (ANAN).”
Commenting on the balkanisation of accounting professional bodies, the executive secretary of FRC told Okwuosa that, the council has taken note of the issue that you have raised on the balkanisation of the profession. It must be addressed because it is a serious matter that is watering down the prestige of the accountancy profession.
He added that the FRC would help to facilitate the passage of ICAN Amendment Bill in the National Assembly.
Okwuosa, in his address to the management of the FRC, expressed ICAN’s concern about the effect of unhealthy rivalry among professional accountancy organisations (PAOs), and asked the council to intervene.
He said: “We observe that the first cause of this is the balkanisation and proliferation of accountancy bodies in the country. We are of the view that the FRC, being a regulator of accountancy profession, has an important role to play to checkmate this balkanisation and proliferation.
“For example, the FRC can make a representation to the lawmakers, advising them against enacting laws that create a duplication of an already existing accountancy profession.
“We equally want to draw the attention of FRC to yet another danger in the proliferation of accountancy bodies in the country. This danger stems from a clause usually inserted in the laws setting up the new accountancy bodies which requires all existing practitioners to join the new body, failing which they will be criminalised for engaging in a practice they were already licenced to engage in.
“Meanwhile the new body do not usually follow a rigorous certification route expected of professionals, as membership certificates are extended to some influential persons in the society. This is the root of the emergence of quacks, low quality work, under-pricing of services, etc.”
The president of ICAN also expressed satisfaction that the institute and the FRC were able to sign the MoU on the delegation of the authority to monitor auditing firms to ensure that they are observing laid down rules and procedures.
He said: “The importance of the MOU is that if you practice audit, you have to get registered with the FRC. But it is not just the registering is the issue because you also need to monitor what they are doing.
“So today’s agreement makes it possible for the FRC to delegate this monitoring and review of audit firms. With that we will be able to check quacks, and be able to make sure that if you hold the license to practice, you will be doing it in line with established rules.
“Because if they review your firm and find out that you are not following the laid guidelines, you can be sanctioned. And that marks a very new beginning in accountancy and audit practice in the country.”
Okwuosa noted that economic benefit of this is that practitioners are now going to be more serious and work according to the rules.
“They are not going to take risk that will result into big financial loss. Think of the case where an audit firms gives opinion that a financial statement presents a true and fair view and on that basis an investor invests in the company only for the company to go under the next day. That is an issue in the investment world and the capital market.
“This agreement has, therefore, sent out a warning that we are watching those audit opinion that you are giving in the financial statements. It is going to improve the confidence of investors in the audit opinion and increase the flow of capital into the country because there is investors’ confidence.”
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