KPMG Professional Services has advised shareholders and audit committee members of public companies to attend relevant training on the International Financial Reporting Standards (IFRS) so as to gather sufficient knowledge on the recently introduced accounting system.
This, according to KPMG, would enable shareholders and audit committee members to properly scrutinise financial statements of companies.
Partner, Audit Services, KPMG, Mr. Femi Awotoye said this while speaking at a seminar for members of the Nigeria Shareholders’ Solidarity Association (NSSA), organised by KPMG in Lagos at the weekend. According to Awotoye, under the IFRS, companies are required to present their results and tell the full story behind the results.
He described manipulated estimates as the biggest financial fraud that can be recorded in an IFRS financial statement.
“Audit committee members should ensure that they understand all significant estimates; how have estimates historically matched up with actual and the extent of the use of models.
“Audit committee members should find out if some estimates are recorded as audit adjustments or not even recorded and should seek to understand how minor change in assumption can change the results,” Awotoye advised.
He further stated that under IFRS, missing disclosures would be easy to detect.
Awotoye urged shareholders and audit committee members to ensure internal coherence between the different components that make up the annual report, evaluate processes used to obtain information and also to ensure that sufficient disclosures are made.
He advised audit committee members on the need to evaluate the impact of IFRS adoption on key performance indicators and drive management to manage expectations where significant changes occur and also evaluate the extent to which incentives may encourage fraudulent financial reporting.
He said: “Audit committee members should receive relevant training on IFRS to ensure sufficient level of knowledge for discharging duties and keep knowledge current.
“Having a profound knowledge of the business is a key element of understanding and interpreting IFRS financial statements. Understand the story behind the financial performance your companies are reporting.
“IFRS involves judgement. Audit committees should understand areas involving estimates and their effect on reporting results.
“Audit committee members must ask probing questions and have frank discussions with management and auditors.”