The global corporate scandals that occurred in 2001 were linked to weaknesses in financial reporting and accounting practices. In response, several jurisdictions enacted legislations to enhance transparency and uphold the integrity of financial markets. As part of the efforts to reform corporate financial reporting in Nigeria, the Federal Government of Nigeria passed the amended Investments and Securities Act (ISA), 2007 which provides as follows:
An industry-wide Committee made up of regulators in the financial system, professional accounting bodies, audit firms and other stakeholders was constituted to develop the Framework for the implementation. The Framework provides guidelines that are necessary for directors who will implement relevant Internal Controls over Financial Reporting (ICFR) and Auditors who will review same and issue a statement on its existence, adequacy and effectiveness or otherwise. This is to ensure that directors have common procedures for the evaluation of ICFR, such that any other reasonably knowledgeable person can re-perform the same procedures and arrive at the same conclusion.
The management of the Commission has reviewed the report of the Committee and incorporated relevant comments obtained from its exposure to relevant stakeholders and the general public.
The Framework covers;
1. Personalised Certification
Chief executive officers and the chief financial officers or officers or persons performing similar functions in public companies filing periodic or annual reports would each sign a personalized certification containing the information provided in the Act.
2. Duty of Directors on Internal Control
A public company shall establish a system of internal controls over its financial reporting and security of its assets and it shall be the responsibility of the board of directors to ensure the integrity of the company's financial controls and reporting.
3. Management's Annual Assessment of, and Report on, the Company's Internal Control over Financial Reporting
The board of directors of a public company shall report on the effectiveness of the company's internal control system in its annual report. The annual report shall contain a statement of the management's responsibility for establishing and maintaining adequate ICFR for the company and a statement identifying the control framework used by management to conduct the required evaluation of the effectiveness of the company's internal control over financial reporting.
4. Duty of External Auditors to report on internal controls of public companies
The external auditor of a public company shall issue a statement as to the existence, adequacy and effectiveness or otherwise of the internal control system of the public company and the report shall be close to the corresponding attestation report (opinion page) issued by the company's external auditor as a result of the normal audit, or in a portion of the document immediately preceding the company's financial statement.
The Securities and Exchange Commission hereby issues the Framework on the implementation of Sections 60 - 63 of the Investments and Securities Acts. The Framework can be found on the Commission's website.
The Framework becomes effective immediately. However, public companies shall report on compliance in annual reports from December 2021 financial year end.