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FHC rules Financial Reports signed in the name of Audit Firm incompetent, null and void

Category: Frauds & Scandals


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FHC rules Financial Reports signed in the name of Audit Firm incompetent, null and void

 

November 29, 2010

Zik OBI alerts lawyers, auditors and regulatory authorities to a judgment delivered by the Federal High Court and says the effect could be far reaching.
 
By an Originating Summons taken out in Suit No. FHC/L/CS/373/2010: MAZI OKECHUKWU UNEGBU v KPMG PROFESSIONAL SERVICES & GUINNESS NIGERIA PLC taken out on behalf of the plaintiff by Zik Obi Esq. on March 23, 2010, the plaintiff submitted the following questions/Issues to the Federal High Court, Lagos for determination:-
 
Whether the 1st defendant, the accounting firm of KPMG Professional Services is a person enrolled or entitled to be enrolled as a chartered accountant as required by Section 8 of the Institute of Chartered Accountants Act, Cap 185, Laws of the Federation 1990 (hereinafter called the “ICAN Act”).
 
Whether the said 1st defendant, qualifies to practice and sign an Auditor’s Report or Financial Statements or document as an auditor within the meaning of Section 8 of the ICAN Act.
 
Whether the said 1st defendant is an auditor within the meaning of Sections 63 and 315 of the Investments and Securities Act No. 27 of 2007 (hereinafter called “ISA”) qualified to sign the Auditor’s Report of the 2nd defendant, a public company, as required by the said Act.
 
Whether the said 1st defendant not being a person enrolled or entitled to be enrolled as a chartered accountant under the ICAN Act is qualified or competent to sign any Audited or Auditor’s Report, Financial Statement or accounting document required to be signed by an auditor and in particular the 2nd defendant’s 2009 Financial Statement and Auditor’s Report or that of any other year in the name of the firm “KPMG”.
 
Whether the 2009 Auditor’s Report and Financial Statements of the 2nd defendant prepared by the 1st defendant firm should not have been signed by a named person duly enrolled as a chartered accountant, accountant or auditor pursuant to Section 8 of the ICAN Act
 
Whether the “Independent Auditor’s Report” dated 03 September 2009 purportedly signed by the 1st defendant firm as “KPMG” and included in the 2nd defendant’s “2009 Annual Report & Financial Statements” is not incompetent, null and void not having been signed by a named auditor or a person enrolled or entitled to be enrolled as a chartered accountant and to practice accountancy under the ICAN Act.
 
Whether the 2nd defendant received from the 1st defendant and distributed to its shareholders and the regulatory authorities a competent and valid Financial Statement and Auditor’s Report for presentation to and consideration by the 59th Annual General Meeting of the 2nd defendant held on 3rd November 2009 pursuant to Sections 213 and 214 if the Companies and Allied Matters Act, Cap 59, Laws of the Federation 1990 (hereinafter called “CAMA”).
 
The plaintiff asked for the following reliefs having regard to the need to uphold and preserve the rule of law and ensure compliance with the various laws and judgments of the courts on this subject matter.
 
1. A declaration that the 1st defendant, the accounting firm of KPMG Professional Services or any other accounting firm is not a person enrolled or entitled to be enrolled as a chartered accountant or an auditor within the meaning of Section 8 the ICAN Act.
 
2. A declaration that the said 1st defendant or any other accounting firm not being a person enrolled or entitled to be enrolled as a chartered accountant under the ICAN Act is not competent to sign any Audited or Auditor’s Report, Financial Statement or accounting document required to be signed by an auditor.
 
3. A declaration that the “Independent Auditor’s Report” of the 2nd defendant signed by the 1st defendant as “KPMG” and included in the 2nd defendant’s, Guinness Nigeria Plc “2009 Annual Report & Financial Statements” circulated to the shareholders and the regulatory authorities by the 2nd defendant is incompetent, null and void not having been signed by a person enrolled to practice accountancy pursuant to Section 8 of the ICAN Act.
 
4. A declaration that the 2nd defendant, Guinness Nigeria Plc did not have a valid and competent Financial Statements and Auditor’s Report for the year ended 30 June 2009 and that the said Financial Statements and Report of the Auditors not signed by a person enrolled to practice accountancy pursuant to Section 8 of the ICAN Act and presented to the shareholders for consideration at the 2nd defendant’s 59th Annual General Meeting held on Tuesday, 3rd November 2009 at the Civic Centre, Victoria Island, Lagos pursuant to Sections 213 and 214 of CAMA are incompetent, null and void.
 
5. A declaration that the 2nd defendant’s 2009 Auditor’s Report and Financial Statements “signed” as “KPMG” by the 1st defendant not having been signed by a person enrolled to practice accountancy pursuant to Section 8 of the ICAN Act is not in compliance with the requirements and the provisions of the Section 359 (1) of CAMA and Sections 63 and 315 of the Investments and Securities Act 2007 requiring the documents to be signed by an auditor.
 
6. A declaration that the 1st defendant or any other accounting firm is not competent or authorised in law to sign any audited account, Auditor’s Report or financial statements of the 2nd defendant, Guinness Nigeria Plc or any other company in the firm’s name or “KPMG”.
 
7. A declaration that only a named person duly qualified and enrolled as an accountant or auditor pursuant to Section 8 of ICAN Act is competent to sign any document required to be signed by an auditor pursuant to any law.
 
8. A declaration that the regulatory authorities, i.e. the Corporate Affairs Commission, the Securities and Exchange Commission and the Nigerian Stock Exchange cannot and should not  accept as competent and valid and in compliance with the requirements of the CAMA and the ISA any audited account, Auditor’s Report or Financial Statements of the 2nd defendant signed by or in the 1st defendant firm’s name or not signed by a named person duly qualified and enrolled as an accountant or auditor pursuant to Section 8 of the ICAN Act.
 
9. An order of perpetual injunction restraining the 1st defendant from purportedly “signing” or continuing to sign in the firm’s name of “KPMG” the 2nd defendant’s, Auditor’s Report & Financial Statements or any other financial document.                                                
 
10. An order of perpetual injunction restraining the 2nd defendant from accepting from the 1st defendant and distributing to its shareholders and the regulatory authorities any Auditor’s Report & Financial Statements or any other document signed by the 1st defendant in the firm’s name of “KPMG” or not signed by a named person who is duly qualified and enrolled as an accountant or auditor pursuant to the ICAN Act.
 
The Hon. Justice Okon Abang of the Federal High Court, Lagos in a judgment delivered on Friday, November 19, 2010 and applying the Supreme Court decision in EMMANUEL OKAFOR & 2 ORS v AUGUSTINE NWEKE & 4 ORS [2007] 10 NWLR (PT. 1043) 521 determined/resolved the questions/Issues Nos. 1-6 above in favour of the plaintiff and granted all the reliefs 1-10 above asked for by the plaintiff. The court also awarded costs of N40, 000:00 in favour of the plaintiff.
 
In my article published by THISDAY LAWYER of Tuesday, August 14 2007 on this matter of firms signing documents, I had said in conclusion thus: “In view of this latest decision of the Supreme Court in EMMANUEL OKAFOR v AUGUSTINE NWEKE (supra), it is expected that the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE) and the Corporate  Affairs Commission (CAC) will take immediate and urgent steps to compel all professional firms particularly the Accountants/Auditors to immediately stop the practice of signing their reports and other documents in their partnership or firm’s name and to ensure that all documents submitted to them are signed by named persons who are members of the partnership or firm handling the matter.
 
These regulatory authorities must be proactive and should not wait until someone goes to court to seek and obtain an order of nullification of a completed capital market or other transaction simply because the auditors’ reports and/or other documents used in the transaction were not appropriately signed by named accountants/auditors or other professionals whose names appear on the roll of members of the professional body before they take necessary action” but the illegal practice continued and now the court has now declared that the 2009 Auditor’s Report & Financial Statements “signed” by “KPMG” and presented to the shareholders for consideration at the Guinness Nigeria Plc’s 59th Annual General Meeting held on Tuesday, November 3, 2009 at the Civic Centre, Victoria Island, Lagos pursuant to Sections 213 and 214 of CAMA are incompetent, null and void.     
 
•OBI writes from Lagos
Source: ThisDay
 


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