By Michael Eboh
Shareholders have decried lack of basic accounting knowledge of some members of audit committee of companies and banks, saying criteria for people seeking position as audit committee member should beÂ entrenched in the Companies and Allied Matters Act (CAMA).
Shareholders observed that lack of accounting knowledge by some shareholders in the audit committee has led to the increase in financial recklessness and failure of companies and banks to abide by corporate governance principles.
Some of the shareholders who spoke to Vanguard, noted that majority of the audit committee members are not aware of their role as a factor in the maintenance of financial integrity in companies and in ensuring financial sanity in companies.
Mr. Olufemi Timothy, President, Renaissance Shareholders Association, disclosed that audit committee members are not able to discharge their duties effectively because their election and allowances are determined and controlled by management of the company.
He further stated that majority of the members lack the basic financial accounting knowledge and are incapable of challenging companies when issues of inconsistency arises in theÂ financial statements of the companies.
He called on the authorities in the capital market to put in place appropriate laws that will ensure that management of companies have no influence in the elections and in determining the allowances of audit committee members.
He said, â€œAudit committee members have not been able to perform to expectation because their election and allowances is at the whims and caprices of the management. Majority of the members lack knowledge of accounting issues â€” most of them are financial accounting illiterates.
â€œThey are also not bold enough to challenge the companies for fear of been removed in coming election. This is because no company will support a performing audit committee. .
â€œTo address this issue, I will advise the regulatory authorities in the capital market to ensure that election and allowances should be removedÂ from management control.â€
Speaking in the same vein, Mr. Taiwo Oderinde, National Coordinator, Proactive Shareholders Association of Nigeria (PROSAN) called for regular training for shareholders, especially those in audit committees of companies, enlightening them on their functions and roles as members of audit committees.
â€œCompanies audit committeesâ€, he said, â€œHave not been doing their duties well, because many of them do not understand their basic function of maintainingÂ financial integrity of our companies. This is true, even with the chartered accountants among them.
â€œThis has brought to the fore, the need for regular training of these people, to ensure that they carry out their functions effectively.
Boniface Okezie: National Coordinator, Progressive Shareholders Association of Nigeria, said, â€œShareholders ion audit committee is not a do or die affair. People should not be seen to be bribing people to be in the committee. Audit committees are supposed to be focused, not to be distracted and should be seen to put companies on their toes.
â€œWhen a member of an audit committee is seen to be focused, strict â€”Â refusing to give his or her consent to questionable decisions, efforts would be made to remove that individual.
â€œPeople in audit committee should be able to speak out, know the truth, collaborate with external auditors and find out the true state of affairs.
â€œThe job of the audit committee is to get clues from the external auditorsâ€™ report, finding out where there are faults, problems. This will be then be used by audit committees to confront the companyâ€™s Board and management.
Also speaking, Mr. Amaeze Olisaemeka, a financial analysts, said, â€œAudit committees are supposed to cross-check what the Board of Directors have been doing, especially in the verification of the companiesâ€™ accounts, to exercise an independent opinion as to the integrity of the accounts and allied statements, so that shareholders can now be aware that they have been an independent review of the accounts and place much trust on it.
â€œHowever, you will find out that in reality, most of the audit committee members will be appointed by the directors instead from the body of the shareholders, making them a mere rubber stamp of the accounts presented by the directors through the auditors.
â€œAudit committees are expected to exercise independent opinion and cross-check what the directors are doing, and whenever the opportunity arise to write an adverse report, they should not hesitate to do so.
â€œYou find out that, in reality, you hardly find an adverse report by an audit committee on the financial statement of a company, telling the shareholders the true position of things. Rather, they are mere endorsement of the accounts that have already been presented.
Also, in many cases, it is possible to compromise members of audit committees, because of the tough economic situation in the country.
â€œI am suggesting that majority of the audit committee members should come from the shareholders rather than from the directors. In most companies, you will find equal representation â€” from both the directors and shareholders, as members of audit committees. They are supposed to come more from shareholders and shareholders have the right to insist that this is enforced.
â€œHow can they be an independent review of the accounts, if majority of the members are from the directors. Will the directors review themselves adversely. So, I will advise that shareholders insist that majority of the members come from them.â€