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SEC indicts audit committees for ignorance of roles

By Peter Egwuatu
Securities and Exchange Commission (SEC) and financial experts last week, indicted audit committees of quoted companies for their ineffectiveness in discharging their roles and functions as empowered by the Companies and Allied Matters Act (CAMA) 1990.

This is coming after several criticisms of the external auditors and inspectors from the Central Bank of Nigeria (CBN) over their inability to detect and report anomalies in the financial results of the troubled banks whose managing directors and executive directors were sacked by the apex bank for eroding corporate governance and misuse of shareholders and depositors’ funds.

The troubled banks are : Union Bank of Nigeria Plc, Afribank Nigeria Plc, Intercontinental Bank Plc, Fin Bank Plc, Oceanic Bank International Plc.
Others include : Bank PHB Plc, Spring Bank Plc, Eguitorial Trust Bank Limited, Wema Bank Plc and Unity Bank Plc.

The Commission stated that for confidence to return to the capital market audit committee must be knowledgeable to exercise their statutory roles and responsibilities.
Speaking at a workshop on  “ Increasing the effectiveness of audit committee of quoted companies organised jointly by Financial Standard Newspaper and Eminent Consulting Limited , Director General of the Commission, Ms Arunma Oteh said, “ There is element of ineffectiveness in the execution of the roles and responsibilities of the audit committee. The audit committee is a statutory requirement of CAMA 1990 SEC. 359(S) 3, 4 and 6 which mandate all public companies to establish an audit committee to whom the external audit shall make a report.”

Continuing, the Director General of SEC who was represented by a Director of the Commission, Mr. Obhielo A.O at the workshop said, “ While the auditor’s  report shall be examined by the audit committee and recommendations made subsequently to the Annual General Meeting (AGM) of shareholders.”

Other note worthy functions and powers of the audit committee, the SEC DG mentioned include :

Ascertainment of whether the accounting and reporting policies of the company are in accordance with the legal requirement and ethical practices; Authorisation of the internal auditors to carry out investigation into any activities of the company which may be of interest to the audit committee; Reviewing the scope and planning of audit requirement and recommending to the Board, the appointment, removal and remuneration of external auditors.

She further stressed that for the audit committee to achieve the desired public policy objectives of the quoted companies, the members must be technically and professionally competent.

Similarly, Ms. Sade Ogundare, Managing Partner, Legal Partnership Consult Limited, blamed audit committee for not exercising the powers as contained by CAMA.

According to her, “ Audit committee should not be under influence of any dominat personality on the Board of Directors, neither should the committee get in the way of obstruct executive management and should be very independent.

Mr. Kenneth Segun Odusanya, Consultant, Eminent Consulting Limited said audit committee has enormous responsibility to ensure that companies follow good corporate governance.

According to him, “ The accounting scandals that rocked the financial system in the 1990s and the recent bubble in the banking sector have forced many to consider the extent to which positions on Boards and various Board committees may destroy both personal wealth and reputation.

The problems in the financial services sector under the weight of accounting fraud generated a surge of corporate investigation in recent time and hence elevated the discourse off corporate governance and reliability of  current corporate practices and structure.”


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