Fraud has become a recurring virus in Nigeria’s social and corporate life. From government offices to boardrooms, homes, and schools, the culture of deception has corroded the nation’s moral and financial integrity. Yet, nowhere are its consequences more damaging than in the corporate sector, where fraudulent financial reporting undermines investor confidence, destroys jobs, and distorts the credibility of markets.
Understanding the many faces of fraud
Fraud is defined as a deliberate deception intended for personal or financial gain. It generally manifests in two forms: fraudulent financial reporting and misappropriation of assets.
Fraudulent financial reporting involves manipulating accounting records or omitting crucial information to deceive users of financial statements. It includes falsifying accounts, misrepresenting transactions, or deliberately misapplying accounting standards to inflate profits.
Misappropriation of assets, on the other hand, involves stealing or diverting company resources—embezzling cash, paying for goods not received, creating “ghost workers”, issuing false invoices, or over-invoicing suppliers. Both practices distort financial statements and compromise the integrity of management and auditors alike.
Lessons from global and local scandals
The early 2000s revealed how fraudulent reporting could destroy even the most admired corporations. The collapse of Enron Corporation and its auditor, Arthur Andersen, exposed the scale of manipulation that can hide beneath glossy annual reports. The fallout led to billions in losses and the dissolution of one of the world’s most reputable accounting firms.
Other scandals soon followed: WorldCom, Tyco, Lehman Brothers, Satyam, and Parmalat, each driven by falsified accounts and weak internal controls. Nigeria has not been spared either. From the 1990s to the 2020s, several domestic corporations have been implicated in accounting falsifications, insider abuses, and misappropriations, leading to the erosion of shareholder wealth and public trust.
The warning signs are familiar—mounting debts, repeated losses, inflated revenues, weak oversight, and abuse of office.
When “Creative Accounting” becomes criminal
Often disguised as “creative accounting” or “window dressing”, fraudulent financial reporting seeks to project an illusion of financial health. Motivations range from attracting investors and reducing tax liabilities to inflating share prices or covering up internal mismanagement.
But these practices have devastating long-term consequences: they mislead investors, distort capital markets, and, in many cases, precipitate corporate collapse.
The case for stronger internal controls
Combating fraud requires robust internal control systems and a culture of accountability. This includes effective financial management, strict compliance with codes of ethics, independent oversight by boards, and transparent audit processes.
However, even strong systems need an overarching framework that integrates governance, risk, and reporting. That framework is Internal Control over Financial Reporting (ICFR)—a tool designed to ensure accuracy, reliability, and compliance in financial reporting.
The evolution and purpose of ICFR
The global response to early-2000s scandals was the Sarbanes–Oxley Act (SOX) of 2002 in the United States, which enforced strict accountability on executives and auditors. In Nigeria, similar reforms followed through the Investment and Securities Act (ISA) 2007 (as amended) and the Financial Reporting Council of Nigeria (FRCN) Guidelines of 2022.
Sections 60–63 of the ISA mandate all public companies to establish and report on internal controls over financial reporting. The FRCN Amendment Act (2023) extended compliance to Public Interest Entities (PIEs) — including listed firms, concession entities, and government-linked companies with an annual turnover above ₦30 billion.
Why ICFR matters
ICFR is more than a compliance requirement; it is a safeguard for organisational integrity. By integrating people, processes, and technology, it ensures that financial information is reliable, transparent, and free from material misstatement.
When properly implemented, ICFR:
Strengthens investor confidence and governance transparency.
Reduces the risk of fraud and reporting errors.
Aligns entities with global best practices such as the COSO framework.
Improves decision-making through credible financial data.
Minimises audit costs and reinforces public trust.
Ultimately, ICFR is about building systems that prevent manipulation rather than reacting after scandals erupt.
The accountant’s role
Accountants play a critical role in advancing ICFR implementation. They must go beyond record-keeping to act as ethical gatekeepers — advocating for full adoption of the framework, raising public awareness, and ensuring compliance in both public and private institutions.
Their professional responsibility extends to promoting transparency, safeguarding public interest, and detecting hidden irregularities. Upholding ICFR principles is not only a technical duty but a moral one — a duty to protect the integrity of Nigeria’s corporate environment.
A call to action
Nigeria’s battle against corporate fraud cannot be won through legislation alone. It demands leadership commitment, institutional discipline, and professional integrity. Every accountant, auditor, regulator, and corporate leader must embrace ICFR as an essential tool for restoring confidence in financial reporting.
Fraud may not be completely eradicated, but with a robust ICFR culture, its occurrence can be drastically curtailed. Transparency is not a slogan; it is a system that must be built, tested, and lived daily.
If Nigeria is to rebuild investor trust and ensure financial stability, then internal control over financial reporting must move from policy to practice. It is time to replace creative accounting with credible accountability.
Dr Kingsley Ndubueze Ayozie, FCTI, FCA, is a Chartered Accountant and Public Affairs Analyst. He writes from Lagos.
