•Firm writes Buhari, Osinbajo, NASS, Oshiomhole Committee
Price Waterhouse Coopers (PwC) is up for knocks for being among the firms to scrutinise government books despite its unsatisfactory audit of the Nigerian National Petroleum Corporation (NNPC), which critics lampoon as a hatchet job.
Edo State Governor, Adams Oshiomhole, a hardened critic always quick to point out all the palaver caused by former President Goodluck Jonathan and his ministers, supports the inclusion of PwC.
But other critics take exception. They allege the firm cooked its audit of the account of the NNPC to put a gloss on the failings of Jonathan, who was at the time fighting to remain in the Villa amid widespread public discontent.
The National Economic Council (NEC) ad hoc Committee on the management of Excess Crude Account (ECA) proceeds and accruals into the Federation Account hired both KPMG and PwC to audit the accounts of all government revenue earning agencies.
The committee is chaired by Oshiomhole. Other members include Governors Ibrahim Dankwambo (Gombe), Nasir el-Rufai (Kaduna), and Udom Emmanuel (Akwa Ibom).
Oshiomhole announced on Thursday August 21, that KPMG and PwC will audit the ECA and Federation Account from January 2010 to June 30, 2015.
He said the aim is to get a comprehensive report on the operations of the account.
Agencies to be audited include the Nigerian National Petroleum Corporation (NNPC), Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), Nigerian Maritime Administration and Safety Agency (NIMASA), Department of Petroleum Resources (DPR), and Federal Inland Revenue Service (FIRS).
They also include the Nigeria Customs Service (NCS), Nigerian Petroleum Development Company (NPDC), Revenue Mobilisation Allocation and Fiscal Commission (RMFAC), Nigeria Extractive Industry Transparency Initiative (NEITI), Federal Ministry of Finance, and office of the federal accountant general.
Petition against PwC
Eben Fareed, Country Partner of Stransact, an international assurance and tax services firm, has petitioned Vice President Yemi Osinbajo, National Economic Council (NEC) Chairman, over the inclusion of PwC in the probe panel.
A copy of the petition was sent to President Muhammadu Buhari and the National Assembly (NASS).
The firm insisted that PwC, by its previous conduct in the handling of NNPC’s forensic audit between 2014 and 2015, has not demonstrated independence to command confidence that it is qualified to issue an independent opinion on the accounts of any government revenue generating agency.
“All extant accounting and auditing standards generally agree that independence is the true cornerstone of the auditing profession. Auditors must be independent, not only in fact but in appearance as well,” Stransact said.
“Independence in fact is demonstrated when the auditor is able to maintain an unbiased attitude throughout the engagement.
“It is generally accepted that independence is proved when it is clearly manifest that an auditor has not subordinated his judgment to others and his actions/inactions are free from any extraneous influences.”
Back to NNPC’s missing $20b
The petition recalled that in April 2014, following allegations by former CBN Governor, Lamido Sanusi, that about $20 billion oil revenue was not remitted to the treasury by the NNPC, the government handpicked PwC to conduct an audit for between 12 and 16 weeks.
Stransact alleged that PwC played into the hands of the government which wanted to use the report to score political points.
“In February 2015, PwC proceeded to submit its report to [former President Goodluck Jonathan] several months behind the original schedule without any explanation to the Nigerian public on the reasons for the delay.
“The report was submitted in a televised event at a time of serious and tenuous electioneering in a move that appeared designed to sway public opinion in favour of the government at the time.
“The report never categorically confirmed the exact amount of funds missing from the Federation Account but rather curiously in its executive summary declared that ‘excess remittance of $0.74 billion was funded from proceeds of PMS sales for which the suppliers of the PMS are yet to be paid in cash or crude oil.’
Adeola’s demand for sanction
“In May 2015, the Senator representing Lagos West Senatorial District and former Chairman of the House of Representatives Committee on Public Accounts, Solomon Adeola, called on the incoming federal government and relevant financial and auditing regulatory bodies to appropriately sanction [PwC].
“He surmised that from the disclosures by PwC on its work, there is no audit report on the missing money much less a ‘forensic’ audit report.”
Stransact also said: “PwC conveniently left out publicly available information that could embarrass the previous government in its report thus demonstrating beyond reasonable doubt that it lacked the requisite independence and strength of character needed to audit any of our revenue generating agencies.”
Dodgy partnerships
Stransact alleged that the information includes dodgy strategic partnership agreements between NNPC’s subsidiary, NPDC, and Seven Energy as well as Atlantic Energy on five fields divested by Shell.
It alleged that the companies were apparently incorporated solely for the partnership.
“Seven Energy’s contract entitled it to 10 per cent of the profits from the three fields while Atlantic Energy was entitled to 30 per cent of profits in its two fields.
“The NPDC continued to fund the cash call obligations to the JV (joint venture) partners who bought Shell’s interest.
“Thus the agreements with these companies were pointless and they were just collecting money – that should have accrued to Nigeria – for doing nothing.”
Stransact alleged that PwC also turned a blind eye to NNPC’s swap deals on crude for refined products and many other fraudulent activities.
Admission by PwC
It noted that PwC admitted to the Oshiomhole committee that “the audit it carried out on the NNPC, under the administration of … Jonathan was done under a political environment that was not favourable.
“This is a direct admission by the firm that it could not exercise the necessary independence to issue an unbiased report, thus failing the most important test for a public auditor.
“Under the same conditions, a firm that understood the meaning of independence – KPMG – confirmed to the committee that it declined to carry out the exercise under Jonathan because of the political environment at that time.
“The meaning of this is that the firm refused to be a rubber stamp, unlike PwC.”
Stransact alleged too many instances of PwC refusing to exercise its independence in the interest of the public.
“For example, the firm had consistently certified the books of the defunct Bank PHB, Oceanic Bank, and Intercontinental Bank, as true and fair until the [CBN] audit in 2009 revealed that the banks had eroded their shareholders funds to the extent that they could no longer carry out business.
“Clearly, the firm was unable to assert its independence in the face of senior bank executives at the time.”
Look what happened to Akintola Williams
Stransact wondered why in 2012, the Ministry of Finance and a House of Representatives committee announced a public ban on the accounting and auditing firms of Akintola Williams & Co and Adekanola & Co.
It recalled that the firms were banned for failing to exercise due care in the audit of fuel subsidy claims they performed on behalf of government in the management of the Petroleum Support Fund (PSF), whereas the offence is a child’s play compared to what PwC has done in its review.
Oshiomhole defends inclusion of PwC
But Oshiomhole’s spokesman, Kassim Afegbua, explained that the circumstances under which PwC worked in the last probe are different now.
His words: “If an auditing firm can tell its client that hired it and come out with a report that says we were not availed all the necessary documents to carry out this audit, what is more objective than that?
“Whoever is writing that letter must understand the previous engagement of PwC to the effect that they were able to speak out that they were not availed documents to work with.”
On the probe of Bank PHB, Oceanic Bank which Stransact cited, Afegbua said “it is a matter of opinion, because the more you look, the less you see these issues that have to do with bank recapitalisation and all that. That is not the issue here.”
Afegbua also dismissed the refusal by KPMG to take the probe job because it was not confident of the political environment.
“It is a matter of opinion. If you give another person to look at the audit report, they will still pick holes. One person can behave differently under two leaderships if the terms of engagements are right.
“If there is a government that respects the rule of law, auditing firms will comply. If it is a government that misbehaves, of course they will misbehave.
“For PwC, I am not their spokesperson; this question should even be referred to them. I am talking to you as a friend.
“If PwC is being contracted now, and earlier on they stated that they were not availed the necessary documents to do a thorough job, that this cannot score as an audit or forensic audit, I don’t think there is any truth further than that.
“That is bold, that is courageous.
“Now, if that company wants to raise the issue of credibility, it is left to it, but I know that we have a different government.
“Under a different arrangement, the same individuals who are operating Warri Refinery are the same persons who are there now and saying that Warri Refinery is working. But some four, five years ago, there was nothing like Warri Refinery.
“The same persons who are operators of Port Harcourt Refinery are the same persons who are saying that Port Harcourt Refinery is working now.
“What has changed? What has Buhari done? He didn’t do anything, but suddenly we found out that Warri Refinery is working. So, the template is different.
“Whether anybody likes it or not, it is the wisdom of the committee members to contract PwC and KPMG to audit the books. An auditor is good to the extent that you open your books.”
But TheNiche was told by another tested audit firm boss that the Oshiomhole Committee would have advertised the job if they are interested in transparency.
“If they are preaching change it should be with sincerity,” he said.