Doubts over PwC, KPMG audit of NNPC, CBN, NCC others

When last October 1st, Nigeria marked her 55th Independence anniversary, the entire nation stayed glued to their tubes or radio stations, watching and listening to President Muhammadu Buhari’s Independence anniversary speech.
The president, no doubt, knew the expectations of Nigerians; they needed reassurances of better days to come. Reassurances of new orientation where corruption will be a thing of the past, while recreating the nation to one where the judiciary would be upright and also one with a vibrant economy.
Buhari sure addressed these issues and especially, the menace of the insurgents which has left many dead and homeless. Boko Haram’s activities have brought Nigeria to the spot where the global community sees her as one that is insecure.
Such an attribute scares foreign direct investments that are urgently required to rebuild the nation’s dying and dilapidated infrastructure. In the main, it kills the economy if not tackled headlong.
Aside the Boko Haram scourge, another major aspect of the speech that has kept Nigerians talking is the planned audit of government agencies such as the Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS), Nigeria Customs Service (NCS) and the Nigeria Communication Commission, (NCC).
“In addition to NNPC, I have ordered for a complete audit of our other revenue generating agencies mainly – CBN, FIRS, Customs, NCC, for better service delivery to the nation. Prudent housekeeping is needed now more than ever in view of the sharp decline in world market oil prices. It is a challenge we have to face squarely. But what counts is not so much what accrues but how we manage our resources that is important,” declared President Buhari.
It would be recalled that the Buhari administration had started its reform agenda with the Nigerian National Petroleum Corporation (NNPC) following  the announcement by the National Economic Council (NEC’s ) Ad-hoc committee on the management of the Excess Crude Account (ECA) of the appointment of PricewaterhouseCoopers (PwC) and Klynveld Peat Marwick Goerdeler (KPMG), saddled with the task of auditing the corporation’s books.
Others agencies whose books were also scheduled to be loked into, but which had yet to begin, were those of the CBN, FIRS, NCS, that of the Department of Petroleum Resources (DPR) and the book of the Nigerian Maritime Administration and Safety Agency (NIMASA).
The list also include the Securities and Exchange Commission (SEC), Revenue and Mobilisation Allocation Federation Commission (RMAFC), Federal Ministry of Finance, Nigerian Ports Authority (NPA), Office of the Accountant General of the Federation, Nigerian Extractive Industry Transparency Initiative (NEITI) among others.
Buhari should pay attention to issues highlighted below.   
Following in his stead, not a few Nigerians have applauded the president’s move and guts to look into these ‘sacred books’, however, they suggest that a careful approach is required to guide against the pitfalls of the past administrations.
Among others, several nation builders, analysts, financial experts and other stakeholders who spoke with InsideBusiness noted that, “It is instructive to note that nothing concrete may come out of the audit of these agencies if the President is relying on these so-called audit giants.
The two firms named by the NEC’s ad-hoc committee had in the past, each claimed to have conducted forensic audits of the NNPC, as such, analysts are wondering what new facts they are likely to bring to the fore in this new assignment.”
KPMG during the tenure of Olusegun Aganga as the finance minister did a forensic audit on NNPC and the PwC in 2014 when Ngozi Okonjo-Iweala held sway. The two exercises held during the administration of former President Goodluck Jonathan. The reports by the two firms were trailed by criticisms.

PricewaterhouseCoopers in its introductory letter addressed to Nigeria’s Auditor General, said findings in its 199-page report were limited to available information and did not constitute a review in accordance with generally accepted standards.

The report said “The procedures we performed did not constitute an examination or a review in accordance with generally accepted auditing standards or attestation standards.

“Accordingly, we provide no opinion, attestation or other form of assurance with respect to our work or the information upon which our work was based”. PWC said that the report “was solely for the Office of the Auditor-General for the Federation, for their internal use and benefit and not intended to, nor be relied upon, by any other third party.”

The question now is, will the two audit firms now indict themselves by exposing new facts that were not unearthed before?
Another question, thrown up by experts; is what new findings they will be looking at, at the NNPC, for instance?
There is no denying the fact that NNPC has no audited accounts. The only one that the Corporation parades is a questionable account done since 2010 which the new Group Managing Director, Ibe Kachukwu cannot even boast of, otherwise he should showcase it on the Corporation’s website.
KPMG was also brought in to audit the Police Pension Office during the outbreak of the alarming scam that rocked the public service. Despite the huge fees collected, it was all excuses, as the audit firm findings were not as detailed as expected. The firm claimed that some people including Abdulrasheed Maina did not respond to enquiries.
PwC and Ernst & Young were the auditors of the CBN who collected huge fees but could not detect the massive infractions in the apex bank’s accounts until the Financial Reporting Council of Nigeria (FRC) took over and unearthed huge frauds that have played out in the CBN over the years. Regrettably, this matter seems to have been swept under the carpet because of a litigation that is also questionable. The briefing note from the FRC to former President Goodluck
Jonathan on the apex bank’s 2012 account highlighted the infractions.
Worse still, both PwC and Ernst & Young intimidating credentials could not get the CBN to adopt and apply the International Financial Reporting Standards, (IFRS) which is now the globally accepted new accounting standards regime.
Today, the implication is that, the apex bank is lagging in the adoption of IFRS? The CBN for instance, had no valid audited account, at least throughout the tenure of Sanusi Lamido Sanusi, the current Emir of Kano. Its accounts for 2010, 2011, and 2012, could not qualify for regulatory approval as they were the subject matter of the briefing note that was sent to the former President Jonathan while in office.
In a similar manner, Nigerians are still awaiting the approval of the FRC on the 2013 and 2014 accounts which the current CBN governor, Godwin Emefiele smuggled into the public space on May 29, a public holiday and the day the current and new administration commences. One therefore wonders whether the accounts were approved by the outgone President Jonathan or President Buhari who incidentally was sworn-in that day. We challenge the apex bank to brandish such approval for all to see.
Aside the above, not a few Nigerians have equally urged President Buhari to be mindful of the regulatory and operational structures of these agencies and what the Nigerian constitution says about them. This is to prevent the recurrence of the dilemma of the PwC on last year audit of the NNPC.
The audit firm could not decipher whether the Corporation’s Act allows it to spend at will without recourse to appropriate authorities. Its opinion is that the practice of withholding money and then spending as it deems fit is highly dubious as such, the NNPC act needs a legal opinion to determine whether it has the right to do this.
Following this gaffe on the part of the audit firm, the question experts have continued to ask, is, if indeed, the auditors were up to their game, what stopped them (auditors) from checking the Act and interpreting its stipulation on this?
An audit is better performed when the auditor looks through the management account which is seen as the summary of assets, liabilities and operations of a going concern. In the case of these agencies lined up for audit however, one thing that was common to all was that they were parading audited accounts largely audited by these so called big four firms but which could not stand a review by the FRC. The ball is now in their court to come forward and flaunt the FRC approval if anyone is in doubt.
More still, owing to lack of attention by past administrations to issues of accountability and transparency which they only paid lip service to, government agencies were run like household stores where no proper accounts of items are kept. It is therefore disheartening to note that these agencies have been operating like one-man businesses in local villages.
Buhari in his independence speech harped on the revenue side but not much on expenditure. Previous forensic audits had been limited in scope and this has made it impossible for a wholistic review of NNPC’s operation.
If the Buhari administration were to domicile the audit of these agencies, including the NNPC on the table of the FRC, the Federal Government will be shocked to see mind-boggling revelations of their entire operations including several fraudulent practices woven with the collusion between several industry groups and officials of the agencies in inflation of contracts fees paid over the years.
The question for President Buhari and his advisers in all of these is, ‘WHAT ROLE WILL THE FRC PLAY IN THIS?’
The President of the Association of National Accountants of Nigeria,  Anthony Nzom, spoke the minds of many by saying earlier that the Financial Reporting Council of Nigeria should be assigned the responsibility of engaging experts in forensic accounting to look into these government agencies.
Today, the council’s powers are enshrined in section 8 (1e) and section 11 b, c, d of the FRC Act of 2011.
Section 8 (1E) ‘advises the Federal Government on matters relating to accounting and financial reporting standards’
Section 11( b) ‘gives guidance on issues relating to financial reporting and corporate governance to bodies listed in sections 2 (2) (b), (c) and (d) of this Act’
Section 11 (c)’ ensures good corporate governance practices in the public and private sectors of the Nigerian economy’
Section 11(d) ‘ensures accuracy and reliability of financial reports and corporate disclosures, pursuant to the various laws and regulations currently in existences’
These sections altogether makes FRC the prime auditor in the country that is empowered to deal with issues on codes of corporate governance and financial reporting of public entities the private sector.
Instances of accounts audited by audit firms in the country but which still could not stand the review of the FRC include Alliance and General Insurance Ltd and its sister company, A & G Life insurance Ltd. The issue was dispensed with on August 3, 2012.
In the course of the review of the 2010 audited accounts submitted to National Insurance Commission (NAICOM) by the above named companies were replete with errors, just as several gaps and lapses were observed and communicated accordingly to the companies by NAICOM. Rather than deal with the issues raised in the accounts, the companies provided entirely different sets of accounts, incorporating items that were not originally included in the accounts under review. Curiously, the different sets of accounts were signed by the same firm of chartered accountants (External Auditors).
Analysts have thus continued to wonder where the big audit firms were when AP concealed over N22 billion debt in the early 2000s?
It is also on record that the FRC as a government agency has been lauded for its thorough knowledge of the audit works and its review of the CBN 2012 account as exemplified in the findings that led to the suspension of Sanusi Lamido from the CBN.
Its suspension in May 2012 of the Annual General Meeting (AGM) of Institute of Chartered Accountant of Nigerian ICAN on issues of corporate governance and financial reporting is also instructive.
It is also worthy of mentioning, the on-going investigation on Stanbic/IBTC holdings Plc which by the time FRC finishes, may reduce accounting abuses and frauds.
Nigeria has witnessed cases of accounting failures owing to the failure of the field auditors to do the following. First is gathering sufficient audit evidence for controversial accounting issues. Second, the usage, mainly of enquiry or conversational auditing, as a form of evidence. Third, not recognising or disclosing key related parties during the audit practice and over reliance on internal audit among others.
Outcome of auditors’ failure were the publication in the past, of fictitious financial reports that not only killed the confidence of local investors but sent wrong signals to the international investing community.
Instances include – Lever Brothers Plc (Now Unilever), which overvalued its stocks in 1998; the case of African Petroleum (AP) Plc in which the company’s board concealed indebtedness in its year 2000 offer- for-sale and the one about Cadbury Nigeria Plc’s over bloated statement of account.
Except that the planned audit of these agencies is to be carried out by the FRC, one should not expect much if they are to be done by the so called big audit firms.
Author: InsideBUSINESS

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