Financial Statement Audits and Annual Returns

Flashcards based on lecture notes about financial statement audits and annual returns.

Is the keeping of accounting records mandatory or discretionary?

Mandatory under CAMA; every company has a duty to keep accounts as per Section 374(1).

What must accounting records show?

To show and explain the transactions of the company, to disclose with reasonable accuracy the financial position, and to enable directors to ensure financial statement compliance with CAMA requirements.

What is the essence of accounting records?

Accounting records form the basis of relevant information used to prepare financial statements and audited accounts.

What must accounting records contain?

Entries of all sums of money received and expended, details of receipts and expenditures, and a record of assets and liabilities.

What do accounting records of a company dealing in goods contain?

Statements of stock held at year-end, statements from which annual stock statements are prepared, and statements of all goods sold and purchased other than by retail trade.

Where should the accounting records of a company be kept?

At its registered office or another place in Nigeria as the directors see fit; it must be open for inspection by company officers.

How long must accounting records be preserved?

Accounting records must be preserved for 6 years from the date they were made.

Is there room for electronic storage of accounting records?

Yes, by S.375(3). Companies may keep electronic copies or registers, ensuring the quality of hardware/software, security, and anti-virus protection.

What dictates the form and content of financial statements?

Ss 374, 375, 376, 377 & 378 CAMA and statements of accounting standards issued by the Nigerian Accounting Standard Board.

What is the position on group financial statements where a holding company has subsidiaries?

Directors must prepare individual accounts and a group financial statement dealing with the affairs and profit/loss of the company and its subsidiaries.

Who are the persons entitled to receive financial statements?

All members of the company, debenture holders, and other persons entitled.

When is the financial statement to be sent to entitled persons?

Not less than 21 days before the date of the meeting where they are to be laid.

What are the implications of failure to deliver a copy of the financial statement to those entitled?

The company is obliged to give a copy within 7 days of demand; otherwise, the company and every officer in default is guilty of an offense.

Who has the duty to deliver financial statements at the AGM?

The directors must lay copies of the financial statements before the company in general meeting not later than 18 months after incorporation and subsequently at least once every year.

What constitutes the publication of financial statements?

The full individual or group financial statements required to be laid before the company in the general meeting and delivered to the Commission, including the directors’ report.

What are shareholders' rights to obtain copies of financial statements?

Any member or debenture holder is entitled to be furnished on demand and without charge with a copy of the company’s last financial statements; failure incurs a penalty if not complied with within seven days.

What does an audit deal with?

Examination of the books of accounts by external experts to ascertain compliance with accounting policy and standards.

What is the process to ensure compliance with the law?

Ensuring a company's accounting records, financial statements, and practices comply with the law and show the financial status of the company.

What are the requirements for the appointment of auditors?

Every company must appoint an auditor at each AGM to audit the financial statements, holding office until the conclusion of the next AGM.

Who appoints the first auditors?

The Board of Directors before the company commences business, holding office until the conclusion of the next AGM. They can be removed by members at a general meeting.

What happens where the directors fail to appoint first auditors?

Members may appoint first auditors in a General Meeting, terminating the powers of the BOD to appoint an auditor.

Who is qualified to be an auditor?

Auditors are qualified accountants, and any audit must be in accordance with the provisions of ICAN.

Who is prohibited from acting as an auditor?

An officer or servant of the company, a partner or employee of an officer/servant, and a body corporate.

What are an auditor's rights to attend company meetings?

Auditors have the right to attend company meetings, even if removed, to receive notices and communications.

How can auditors resign?

By depositing a written notice at the company's registered office, effective on the date of deposit or a specified later date. A copy of the notice must also be submitted to CAC within 14 days.

Is an auditor entitled to remuneration?

According to Article or terms of Contract; they can be fixed by the directors or by the company in a general meeting.

What is an auditor's report or what are the liabilities of an auditor?

The auditor must make a report to the members on the accounts examined, balance sheet, profit/loss account, and group financial statements, with copies laid before the company at the GM.

On Liability of Auditors, what does Section 415 CAMA provides?

Auditors must exercise reasonable care and skill; they are liable for negligence causing damage or loss to the company.

Who can sue an auditor for negligence?

The director may institute action for negligence against him. S.415 (2). If they fail, any member may do so after 30 days' notice.

What is an audit committee?

Every public company should have one, formally constituted with written terms of reference.

What is the membership of an audit committee?

Five members, with three members and two non-executive directors; members are not entitled to remuneration and are subject to annual election.

What are the objectives and functions of the Audit Committee?

To examine the auditor’s report, ensure accounting policies comply with legal requirements, review the scope and planning of audits, review management findings, recommend the appointment/removal of auditors, and authorize internal investigations.

What are the provisions of the Codes of Corporate Governance in Nigeria on the Audit Committee?

Meet at least three times a year, specify a quorum, have a non-executive chairman, and have the Company Secretary as secretary of the committee.

How should Audit committee be comprised?

Nigerian companies must have an Audit Committee to raise the standard of corporate governance. It should not act as a barrier or obstruct executive management, and there should be no influence of dominant personalities.

What is Annual Returns?

Every company deliver annual returns once every year. CAC form 19 is used for annual returns, and CAC Form 22 is for the annual report of exempted companies.

What are the Contents of A/R of a Company having Share Capital other than Small Company?

Name and certificate number, address of registered office, location of member/debenture holder registers, summary of share capital/debentures, particulars of indebtedness, list of members, and details of directors/secretary.

What Documents to be annexed to Annual Returns

A written copy of every balance sheet and profit/loss account, a copy of the auditor’s report and the directors’ report.

What accompanies the Annual Returns in a private company?

A certificate by a director and the secretary that the company has not issued any invitation to the public to subscribe for shares or debentures.

What is the obligation to file annual returns?

To start after incorporation and be completed, signed, and filed at CAC within 42 days after the AGM.

What are the Consequences of Failure to File Annual Returns

The Court may order the company and officer to make good the default within the specified time after a 14-day notice.