The Chief Executive Officer,
There have been so many issues surrounding public sector accounting in recent times. As a regulator, what is the FRC doing to sanitise the system?
As part of our law, Section 26 actually gave room for
What is the level of implementation of the International Financial Reporting Standards (IFRS) roadmap in the country and to what extent have the challenges faced by the insurance companies being addressed?
As you are well aware, the national roadmap became effective
The second phase
Listed companies are the once that are quoted on the
For instance, you know that there are some banks that are not quoted on the NSE, but they file their reports to the Central Bank of
To be sure that we are on top of the matter, we carried out what is called IFRS Readiness test. We did that last year for those that were in the 2012 group and out of the 197 companies that were listed on the NSE as at that time, only 72 actually submitted for the readiness test, for the significant public interest companies, only 38 submitted and just three government business entities submitted.
Now in 2013, other public interest companies including charity and government entities were supposed to submit. We just finished the request. But sadly, only 345 submitted of which 10 were government entities. It showed a lot of things.
For the first group, yes, we saw that they were highly responsive, but for this second group, we don't believe they are responsive and we are taking steps to ensure that thing change, especially government entities.
The insurance companies fall within the first group which is phase one. They have a primary regulator -the
That was what resulted to the late filings by the insurance companies to the NSE. But a number of them have woken up now. NAICOM is not giving them break and is insisting that they must comply and we are watching them very closely, in cooperation with NAICOM.
You have also requested that not-for-profit organisations are also registered. What is the level of compliance in that area and considering the huge number of not-for-profit organisations, do you have the capacity to regulate them?
Not-for-profit organisations are within the second phase. Now, we have asked them to register because that is the first point of call. You have to register with the FRC, then you submit your financial statements and then we start following up on your compliance with IFRS and other accounting rules.
A number of them have registered with us. Don't forget that we just closed the door to the submission of IFRS readiness by the end of January. Now, currently we are still in February and it is too early to judge the level of compliance of not-for-profit organisations. On the capacity of the FRC to deal with this issue, it is not just capacity from the FRC. Don't forget that the FRC capacity is not limited to FRC staffing.
Each organisation is supposed to have its own accounting function and then they are supposed to have their own external auditors. Ours is to monitor compliance. So dealing with compliance, there is already a pool of resources that is supposed to ensure that there is compliance. If you hired top-rated accounting firms to look at your books, they definitely will not want to the FRC to be upon them for not allowing you to prepare your financials correctly.
But we are also expanding; we are also recruiting because we need to populate the seven directorates that we have.
But what do you think is responsible for the difficulty in complying with IFRS?
First, a number of them did not take financial reporting seriously in the past. Secondly, the IFRS procedure is such that you are either complying or you are not complying. There is no middle ground and so you have to do it right. Thirdly, is the fact that we have the FRC that is implementing the law and also implementing the enforcement of the standards.
So, they know that if you don't comply with our rules, we are not going to allow them to finalise their accounts in line with our Act. They also discovered that we are registering professionals and accounting firms. Since we have registration, no practicing accountant would want his FRC registration number withdrawn because of fraudulent practices.
So that has been their major challenge. The board of some of these companies just woke up and discovered that they have to do it and do it correctly and they were not doing that before. In the past, they were presenting things that nobody could look at and again they have discovered that government is serious to enforce compliance with IFRS rules and the FRC requirements.
You described single practice by accounting firms as a huge avenue for fraud, how are you tackling this?
What I mean by single practice is where you have a single person who is a chartered accountant and who is licenced to practice opening up a shop. He may not have skill for valuation, skill for actuarial, and may not have relevant skills for even accounting, as such he may not be able to produce a financial statement that is reliable.
So we have said they should not licence individuals to practice, they need to licence the firms. For instance, you licence
When will the proposed national of code of corporate governance for the country be ready?
Yes, like I said the other time, once the national code comes out, all the other codes that we have in the country would be extinguished because it is only that national code that is being produced by the FRC that has legal backing. The rest are moral suasion, they don't have laws backing them. So, we have said that by the end of the first quarter, we would have it ready. By the beginning of March, we would have public discussion on it to showcase the documents. We are almost through with it because it is in three books - code of corporate governance for private sector, code of corporate governance for public sector and code of corporate governance for not-for-profit organisations.
The FRC is largely described as a 'super regulator,' but who supervises the FRC?
Yes, it is a super regulator, but the law is well put together because even the United Kingdom FRC, had to draw strength from the FRC Act of
To what extend does the FRC activities support the federal government's drive for foreign direct investment?
You see, for the fact that
Secondly, our work is supporting employment generation because the whole value chain in financial reporting, so long as there is a regulator that is overseeing them, it is now being driven in such a way that professionals are now getting into it.
Thirdly, for the fact that we are asking for registration and we don't register you if you are not a professional, it means that positions that were hitherto held by foreigners and Nigerians were not trained to take them, either that the foreigners become members of the professional bodies in
Then of course the issue of corporate governance is driving a clean up in the entire system. Of course if you don't have proper corporate governance, you will have issues. If they are not caged within rules and regulations, people would walk away with other peoples' money.
How do you feel, when you look at some banks in
Good corporate governance does not take that because what it means is that you are the one that determines strategy, you are the one that determines tactical and the one that determines operations.
If you now liken it to businesses other than the central bank, if you take it to the church, you also see general overseer as the chairman board of trustees. So he is the one that determines his salary, he is the one that determines who replaces him and audits himself. These are very weak corporate governance and we are going to strengthen it.
Bio: Obazee is Chief Executive Officer at the
Prior to joining the defunct
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