Ms Bolanle Onawumi, a partner at one of the “Big 4” accounting firms, has urged greater adherence to international accounting standards and local regulations by public and private sector entities in their financial statements even as she cautioned against misconceptions of audits.
She added that governments and private sector organisations must engage independent external auditors to inspire confidence in their financial statements.
Ms Onawumi stated, “The need for companies’ financial statements to be audited by an independent external auditor has been a cornerstone of confidence in the world’s financial systems. This is because an audit helps assure users of the financial statements whether or not the financial statements as presented are free from material misstatements and reflects a ‘true and fair’ view of an entity’s financial performance, financial position and cash flows.”
Ms Onawumi spoke as a lead facilitator at the fourth Audit Reporting Workshop of FrontFoot Media Initiative held at GulfView Hotel, Ikeja GRA, Lagos.
While underlining the significance of auditing, Ms Onawumi also clarified some misconceptions about an audit. “The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, in all material respects, by an applicable financial reporting framework.”
She identified three core misconceptions, or what the audit is not. According to her, auditors are not detectives, anti-fraud experts, or a clearing house.
In her words, “The auditor is not primarily responsible for detecting and preventing fraud; this is the responsibility of the Management of the Company, although the auditor may detect fraud while performing audit procedures. Auditors are not expected to be preparers of the financial statements as presumed by many.”
She added, “The audit opinion in the auditor’s report does not amount to a ‘certificate’ that the financial statements for a period are sufficient for all decision-making purposes, including decisions about takeovers.”
She asked users of audit reports to pay attention and understand the import and differences of the audit opinion. “The outcome of the statutory audit is an opinion on the truth and fairness of the financial statements. The word ‘opinion’ implies that the auditor has applied his professional judgment in reaching his conclusion”.
Auditors’ opinions can be either unqualified or clean, or modified. The modified opinion is subdivided into three. She explained that the unqualified or clean opinion is “when the financial statements present fairly in all material respects the financial position, financial performance, and cash flows in line with the applicable financial reporting framework.”
The modified opinion applies “When the Auditor concludes that, based on the audit evidence obtained, the financial statements as a whole are not free from material misstatement in line with the regulatory framework or standards applied; or is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement”.
Modified statements can be in three forms- adverse opinion, disclaimer of opinion, or qualified opinion, depending on the circumstances surrounding the audit.
The Assurance Partner stressed the criticality of conducting audits according to agreed frameworks. “One important thing to note is that before an audit is conducted, the financial statements must have been prepared in line with an acceptable accounting framework, which could vary by jurisdiction. However, the commonly accepted set of standards for the preparation of financial statements is the International Financial Reporting Standards (IFRS)”.
She explained: “The IFRS are a principle-based set of standards which provides guidance on preparing financial statements that present a true and fair view of an entity’s financial performance, financial position and cash flows. This framework for financial statements preparation is designed to ensure consistency, accuracy and transparency in reporting, making it easier for stakeholders to make informed decisions based on the financial information presented”.
Emeka Izeze, director and partner, said the Audit Reporting Training: X-Raying State Government Audit Reports is a flagship capacity development programme of FrontFoot Media Initiative. “It is a targeted training of journalists which we are undertaking under the auspices of the Wole Soyinka Center for Investigative Journalism and the sponsorship of the MacArthur Foundation,” Izeze affirmed. “Participants learn how and where to locate the relevant reports, interpret the material, and write engaging news stories and features that will enlighten, stimulate and empower the electorate, and discourage impunity”.
FrontFoot Media Initiative has held the Audit Reporting Training in Benin, Awka, Abuja FCT and Lagos.
