The Institute of Chartered Secretaries and Administration of Nigeria (ICSAN) will next month provide chief executive officers and managers of quoted companies an opportunity to engage the Financial Reporting Council on the Audit Regulations 2020.
This would help provide clarity on grey areas of the act and how it will be applied.
Since the release of the Audit Regulation 2020 which was issued in January 2021, it has generated controversies among stakeholders as some of the provisions appear to be at crossroads with other laws such as the Companies and Allied Matter Act, (CAMA).
However, ICSAN, charged with good governance and set up to assist government agencies and stakeholders to achieve the desired corporate objectives in terms of moving the economy forward has reached an agreement with FRC for interaction with stakeholders on their concerns in respect to the Audit Regulations.
The president of ICSAN, Bode Ayeku told BusinessDay recently that at the interactive session scheduled for April 14, stakeholders would have the opportunity to draw the attention of the FRC to their concerns and why some of those provisions particularly part 6 of the Audit Regulations might not be practicable.
The Audit Regulations 2020 in its part 6 provides that members of the Audit Committee of quoted companies must be registered with the Financial Reporting Council.
According to him, the problem with this provision is that “for you to be registered with FRC, you must be a professional, not just a member of a professional body; you must be a member of a professional institute established by an act of parliament in Nigeria”.
He further said that the implications of the regulation by FRC are that if shareholders should elect a representative of the Audit Committee at the Annual General Meeting who is not a professional, then such a shareholder will not be able to register with FRC. If he is not able to register with FRC, they would be deemed to have contravened the regulations.
The confusion according to Ayeku is that the law regulating composition, qualification of Audit Committee members is CAMA 2020 and not FRC Act but he said the regulation is now making a provision for something that the law does not provide.
Presently, ICSAN President said all public quoted companies are required by section 404 of CAMA to constitute an audit committee.” Currently, the Audit Committee of each public quoted company is made of up three representatives of shareholders and two representatives of directors. This used to be three representatives of shareholders and three representatives of directors up till the new CAMA of 2020.
“The requirement under the CAMA which regulates the appointment, regulation of audit committee members is that they must be a member of that particular company, nominated by a member of that particular company, the nominations must be sent to the company at least 21 days before the meeting.
“There are no other qualifications as to whether these particular nominees or shareholders or directors must be a professional or must have registered with any professional body established by an act of parliament in Nigeria”.
He said at AGM, there is no way a company can make a decision to stop a shareholder who is not a professional from election into the Audit Committee as it is not within the remit of a company. CAMA law does not authorize a company to do that as long the nominee is a shareholder.
Therefore this regulation needs to be discussed to look at the practicability and implications as “there are competing issues and ICSAN do not want companies to be made scapegoats for what they do not have influence over”, he said.
