A reasonable percentage of professional fees that should accrue to external auditing firms is lost through a corruption embedded cankerworm called ‘fee sharing’.
The anomaly, said to be worse in most government parastatals, results from a ‘behind the scene agreement’ entered by most auditing firms with directors and management of enterprises before clinching the jobs, hascontinued to affect the quest for a new Nigeria.
As most external auditors arms are twisted through sharing of their professional fees, it has only resulted to negatively affecting their objectives of accuracy and integrity, which is the motto of the Institute of Chartered Accountants of Nigeria (ICAN).
BusinessDay learnt that in scrutinising the books of most known public and private enterprises, their auditors carry out the biding of the payer, without a consideration of the need to balance auditors’ fiduciary responsibility to the public.
This is driven by deep-rooted corruption in many government businesses which has now a spillover effect on private businesses.
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“Corporate Nigeria and the quest for a New Nigeria cannot effectively take-off if those expected to exhibit the highest standards of integrity are propelled by their bellies”, a senior partner in a firm of auditors told BusinessDay.
He said, “It is common practice that auditors of most government businesses and parastatals are forced to split their professional fees with the management of the enterprises they were appointed to audit”.
Corroborating this revelation, another source who owns an auditing firm simply said, “This practice is possible. It is connivance between the directors of finance, and some directors that help the auditor get the engagement.
“This unfortunate situation can mislead the general public and investors as the financial statement may not give a true and fair view of the financial position of the enterprise,” he said.
Our source said, “Where one is sharing money with management, it is a serious integrity deficit because the auditor cannot write a potent management report that will indict the individuals who appointed the auditor and partakes in the auditors fee sharing.
This anomaly is not restricted to the public sector. For instance, an auditor (name withheld) was fired by the management of a company (name also withheld) because they insisted on addressing their management letters to the owners of the company.
Management letter is part of the statutory audit process which documents the weaknesses of the overall financial control environment and how this can be strengthened.
In practice, an auditor is supposed to be the eye of the public (investors and other stakeholders) in ascertaining that a company’s books have been properly kept and represent a true and fair view of the financial records for a period.
“Don’t also forget that in addition to fee sharing, we are also in business and as such need to protect our sources of revenue. This much can be observed in the many instances where auditors of businesses are appointed on the basis of their friendship with management.
“ Whereas the law requires that auditors be appointed by shareholders, in practice, management determines who is appointed and shareholders only ratify this”, he said.
“For government owned businesses, this is even worse. Management directly appoints their auditors. In the case of government’s biggest businesses, the auditors have routinely been appointed by the management. The Boards of these companies who are expected to represent the interest of Nigerians, are often political appointees who are happy to go along with the management decisions in exchange for a share of the spoils”, our source insisted.
IHEANYI NWACHUKWU & BALA AUGIE
