The audit competence and integrity of the Jim Obazee-led Financial Reporting Council (FRC) of Nigeria became a subject of public discourse following yesterday’s four-page response by Sanusi Lamido Sanusi, suspended governor of the Central Bank of Nigeria (CBN), to allegations relating to his suspension.
President Goodluck Jonathan had about four weeks ago suspended Sanusi as CBN governor over allegations of “various acts of financial recklessness and misconduct” by the FRC.
Amid the FRC’s claims and Sanusi’s public counterclaims, sources close to BusinessDay at the Financial Reporting Council said the embattled CBN governor’s response has created a row at the council which before now paraded itself as one whose activities brought utmost confidence to investors.
It was further learnt that after their meetings yesterday following Sanusi’s response, some loyalists to the FRC boss expressed worry over his approach to such a critical national issue which is now a subject of international discourse, maintaining that the ousted governor’s response remains a matter of grave concern.
BusinessDay learnt that Obazee who is said to parade himself as a perfecta of entities’ corporate governance structure has since 2010 been operating “a one-man management of FRC. Go to our website. It is there,” our source said.
We also gathered that based on Sanusi’s response, Obazee has initiated moves to amend some of the concerns earlier raised by Sanusi in his response, claiming that he has the powers that be behind him.
It was also learnt that the said audit report on CBN was not submitted to the technical and oversight committee of the board of the FRC in line with section 15 of the FRC act.
As the market expects the FRC to publicly confront Sanusi over his response, a renowned financial analyst who prefers anonymity told BusinessDay that “Sanusi’s response to the FRC’s allegations is a good starting point”, noting that it has provided a good resource which independent persons could use to determine the validity of the case against him and the CBN.
“However, in reality, I will take it as just a normal reaction by anybody who is accused of wrongdoing and is looking for a way to prove his innocence. It would have carried more weight if this response is from an independent third party who is authorised to investigate and report on it,” the analyst said.
“Moreover, it is a usual practice for auditors to prepare a management letter of the weaknesses observed during any audit exercise which may also be based on their opinion or what they consider as best practice, based on the prevailing situations,” he said.
He also told BusinessDay that until a competent body of examiners declares the allegations as untrue, there is no negative impact on the competence of the FRC’s audit.
The FRC’s main objectives, as defined in the FRC Act, are to protect investors and other stakeholders’ interest; give guidance on issues relating to financial reporting and corporate governance to professional, institutional and regulatory bodies in Nigeria; and ensure good corporate governance practices in the public and private sectors of the Nigerian economy.
Also, the FRC is supposed to ensure accuracy and reliability of financial reports and corporate disclosures, pursuant to the various laws and regulations currently in existence in Nigeria; harmonise activities of relevant professional and regulatory bodies as relating to corporate governance and financial reporting; and promote the highest standards among auditors and other professionals engaged in the financial reporting process.
It also sets out to enhance the credibility of financial reporting and improve the quality of accountancy and audit services, actuarial, valuation and corporate governance standards.
According to the financial analyst, Sanusi’s claim that he was seeing the FRC report for the first time is contrary to the tone of the FRC report which refers to responses from the CBN as inadequate or constituting gross incompetence, which implies that there was a response from the CBN.
“So, what Sanusi Lamido Sanusi is saying is that either the CBN responded without his knowledge or the FRC is lying about obtaining a response from the CBN. It will be good for the FRC or the FGN to also publish the supposed response from the CBN to back this up,” he added.
Another analyst who wishes not to be identified said the whole saga raises a big issue – the incompetence of the FRC which is clearly manifest.
“The FRC leadership consists of individuals who ‘lobbied’ to pass a law from which they were the biggest beneficiaries. That is an anomaly in itself. It is also essential that we note that this same Sanusi created the FRC indirectly when he began the advocacy for the adoption of International Financial Reporting Standards (IFRS),” the analyst said.
“The monster called FRC as is being run is feeding the power thirst of a few individuals who have never practiced accounting and therefore are ill-qualified to lead a body saddled with enforcement of accounting standards,” he said.
Our source further said that “it is unfortunate some of us were born to witness the incompetence of a few who are solely motivated and propelled by the love of their belly and personal comfort. We truly need help as a nation”.