Finance Audit Expert Identifies Safeguards for Tackling Incidence of Fraud
The responsibility of preventing fraudulent financial reporting cannot be left alone to those charged with organisational governance, if the mechanism for identification and monitoring of risks that threaten an organisation’s ability to provide value to its stakeholders must be maintained.
This was the position of the Guest Speaker and Finance/Stat and Tax Controller, Microsoft Nigeria, Aramide Oliyide, at a recent Town and Gown seminar of the Department of Accounting, Covenant University, where she delivered a paper titled, “Fraud Prevention and Risk Assessment in 21st Century Reporting Entities.”
According to Miss Oliyide, the impact of fraudulent financial reporting could be far reaching and impacting as much as the economy of a nation, potential and present investors, shareholders, employees, suppliers, vendors, amongst others.
She noted that there was a collective responsibility of preventing fraudulent financial reporting involving various stakeholders from organisation management, board of directors, audit committee, internal and external auditors to regulatory bodies.
Miss Oliyide stated that since the Securities and Exchange Commission reviewed the 2003 Code of Corporate Governance for public companies in Nigeria, in 2008, it was expected that corporate bodies, that were doing business with the money of investors or savings of bank users, ensured the highest standard of transparency, accountability and good corporate governance.
The code, according to her, prescribed the responsibilities of board of directors and their relationships with other stakeholders: Shareholders, Auditors, Audit Committee, etc, in ensuring a fraud-free business environment and safety of investors’ funds and bank loans.
Miss Oliyide, a 2007 First Class graduate of the Department of Accounting, Covenant, posited that directors of organisations were expected to issue statements of their responsibilities in the financial statements, which included but not limited to designing, implementing and maintaining an effective and sound system of internal controls throughout the company; maintaining adequate accounting records that were sufficient to show and explain the company’s transactions; and to disclose with reasonable accuracy at any time the financial position of the company.
In addition, they must attest to the financial statement’s compliance with relevant reporting standards, and all directors must sign the statement of responsibility and must carry out their assigned functions through the management who are responsible for the day to day running of the organisation.
Oliyide, who commenced her accounting and finance career at KPMG, where she worked for seven years, with the last of those two years at the California office of KPMG, primarily auditing companies in the consumer market, posited that the principal role of management was execution, while the directors were responsible for designing, establishing and maintaining an effective system of internal controls throughout the company.
She averred that management’s responsibility included ensuring that there was strict adherence to established control system in place, see to it that an ethical culture was established in the organisation, evidenced by their demonstration of strong commitment, e.g. by avoiding overrides of controls in place.
Furthermore, she noted that management must provide support and resources for strong fraud risk management programmes and internal controls.
The Guest Speaker emphasised that members of the audit committee are crucial to stemming incidence of fraud. She pointed out that the audit committee members must understand their roles of ensuring that the organisation has antifraud programmes and controls in place to help prevent fraud, and aid in its discovery if it did occur, to properly fulfil their fiduciary duties of monitoring the financial reporting process, ensuring the development of a comprehensive internal control framework for the company, overseeing the internal audit and independent public accounting functions.
Oliyide noted that reporting findings of the audit committee to the board of directors and creating the necessary forum for discussing annual audited financial statements and half yearly unaudited statements with management and auditors, will go a long way in curtailing the incidence of fraud.
She concluded by stating that the auditor was responsible for maintaining professional scepticism throughout the audit, considering the potential for management override of controls, identifying and assessing the risks of material misstatement due to fraud and consequently designing procedures to detect such misstatement.