Financial Reporting Council: The Hope Of A Common Investor | Independent Newspapers Limited
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Financial Reporting Council: The Hope Of A Common Investor

Common Investor, FRC, Economy, MDAs
Posted: Aug 18, 2016 at 5:44 pm   /   by   /   comments (0)

  By  Seun Onatoye

Anytime there is a corporate scandal or collapse, the common investors are always at the receiving end. The company’s directors, auditors and sometimes the regulators are the stakeholders that gain from such collapse.

The Financial Reporting Council (FRC) was established at a time when investors were losing confidence in the financial reports prepared in Nigeria. Prior to the setting up of FRC, Companies have been engaged in high level financial manipulation, window dressing and creative accounting. Transfer pricing, complex group structures and location of intangible assets are some of the accounting technologies used to evade tax and deny the Nigerian Government billions of dollars that could have been used to facilitate developmental programmes.

Nigerian Accounting Standards Board (NASB), Act No 22, 2003, was repealed and Financial Reporting Council of Nigeria Act, 2011 Enacted.  The FRC is expected, therefore, to address the current institutional weaknesses in the regulation, compliance and enforcement of standards and development of robust arrangements for monitoring and enforcing compliance with financial reporting standards in Nigeria. The functions of the FRC are specified in section 8 of the Act and its functions include development of accounting and financial reporting standards, enforcement of accounting standards, advising the federal government on accounting and financial reporting standards, maintaining a register of professional accountants and other professionals engaged in the financial reporting process, monitoring compliance with the code of corporate governance, promotion of compliance with standards issued by the International Federation of Accountants and International Accounting Standards Board, conduct practice reviews on registered professionals, receiving qualified reports, specifying minimum disclosure requirements and performing such other functions that give effect to the Act.

Unlike the defunct NASB which was characterised with institutional weaknesses and lack of enforcement will, FRC has taken bold step to confront financial reporting irregularities head on. One thing investors must know is that many of their investments are only on paper because of the high rate of financial manipulation going on in companies where they have investments. A lot of court cases and negative media campaign has been lunched against FRC because of the organisation’s firm commitment to uphold the integrity of financial reporting in Nigeria.

Corruption has become an institution in Nigeria and Institution of corruption will always fight back when it is being challenged. There is a popular saying now that ‘’the fear of FRC is the beginning of wisdom’’. Among all the regulatory agencies we have in Nigerian, FRC is one of the most feared and I asked investors why? The only answer they gave was that FRC is different from other regulatory bodies in term of not compromising and independence in discharging its functions.

Some investors were skeptical when they saw the composition of the roadmap committee which included representatives from some audit firms. Their skepticism can be explained by the ‘’capture theory’’ which is a form of political corruption that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure; it creates an opening for firms to behave in ways injurious to the public.

It is a common knowledge that these audit firms are capitalist in their operations and use the claim that they are protecting public interest to cement their position and hide their anti-social practices. Many investors were pleased to see the way FRC dealt with the recent scandal involving a bank, an audit firm and another regulator.

Other concern raised by Investors is the succession plan of FRC, it was gathered that the tenure of the current CEO of the council will expire by 2018. Nigerians have witnessed some vibrant organization under the supervision of some individuals and such organization became weak in the tenure of others, EFCC and NAFDAC are good example. In this part of the world, the leader at the helms of affairs determine to a large extent how successful an organization will be, the personality of the leader to a large extent determines the corporate culture of the organisation. Therefore, the current CEO will be seen not successful if there is no succession plan.

Finally, FRC is no doubt one of the best performing regulatory bodies in Nigeria, constant evaluation of the operations and burning desire to surpass investors’ expectations are important to maintain the integrity of the organization.


  Onatoye, A chartered Accountant, writes from Lagos