ABSTRACT

In 2010, the Federal High Court, Lagos, delivered a landmark judgment which shook the very foundation of the Accountancy profession in Nigeria.[1] In that judgment, the Court held that a firm of auditors cannot validly sign an Audit Report of a company, because the firm is not an accountant within the meaning of the Institute of Chartered Accountants of Nigeria (ICAN) Act. In reaching the decision, the Federal High Court relied on the decision of the Supreme Court in Okafor v. Nweke[2] to hold that, an audit firm, not being an accountant, cannot sign an Audit Report in its name. Two years later, in 2012, the Ondo State High Court, sitting in Akure, was faced with a similar issue of the legality or otherwise of an Audit Report signed in the name of the audit firm whose members prepared the report and the court held differently that such signature of the audit firm was valid, and that a firm of chartered accountants can legally sign an Audit Report. This decision led to an appeal by the judgment debtor.[3] The Court of Appeal affirmed the decision of the Ondo State High Court, but the judgment debtor, still not being satisfied, appealed to the Supreme Court. Although the Court of Appeal affirmed the position of the Ondo State High Court, as early as 2014[4], to the effect that an Audit Report signed in the name of an audit firm is valid and in accordance with the law, many Audit Reports, after the Court of Appeal decision, continued to abide by the 2010 decision of the Federal High Court. The Supreme Court, in 2025,[5] however, affirmed the decisions of the Ondo State High Court and the Court of Appeal, to the contrary of the Federal High Court decision of 2010.

In this article, the writer presents a critique of this extant position of the law. How ideal is the extant position of the law as upheld by the Supreme Court? To what extent are the relevant provisions of the Institute of Chartered Accountant of Nigeria (ICAN) Act and the Companies and Allied Matters Act, (CAMA) instrumental in shaping the extant practice of the Accountancy profession in Nigeria. Are there relevant provisions of the Legal Practitioners Act worthy of emulation by the professional bodies, particularly the Accountancy profession? Even though the Supreme Court has settled the issue of the legality of the audit firm’s signature on Audit Reports, this author continues to wonder what mischief the draftsman sought to prevent by making such provisions, authorizing audit firms to sign Audit Reports in their own name, rather than in the name of the person of the individual accountant/auditor.

INTRODUCTION

It is the law that every company incorporated in Nigeria shall, at each Annual General Meeting, appoint an auditor or auditors to audit the financial statements of the company and to hold office from the conclusion of that meeting until the conclusion of the next Annual General Meeting.[6] This requirement of the law is rooted in the catalogue of responsibilities placed on the directors of the company in order to ensure transparency in the financial and other dealings of the company and to assure the shareholders of the safety of their investments[7]. Another purpose of Audit Report is for management of the Companies Income Tax regime under the Companies Income Tax Act (CITA). The Company is required to file, at least once every year, a return of the audited accounts of the Company with the Corporate Affairs Commission (CAC)[8]

The form and content of the anticipated financial statement forming the Audit Report of the company, which must be presented to the shareholders at the Annual General Meeting of the company, are all stated in the CAMA.[9]  Any default in complying with the provisions of the Act, as it relates to the form and content of the audit report, attracts severe penalties on the directors, as determined by the CAC[10]; individual shareholders of the company reserve the right to seek the intervention of the court, to ensure that any default is remedied. So, the quality of an Audit Report presented to shareholders and other stakeholders by a company is of material importance and must be seen to meet the highest global standard, since it is the bedrock of most financial decisions involving the government, the company, its shareholders and even prospective investors in the outfit.

It is in the light of the foregoing that the decision of the Federal High Court in 2010, invalidating an Auditor’s Report, because it was not signed by the person of a named chartered accountant, but by the audit firm in its name, was of material importance, as that decision did upturn the status quo. Certainly, the jurisprudence behind the decision of the Federal High Court, as claimed by the plaintiff, is that the responsibility for the accuracy and reliability of such document must be placed on the shoulders of the individual professional who signed it, rather than on the corporate entity which comprises of a team of professionals. Such position will ensure a more thorough product, as the professional will be mindful of his professional integrity and therefore exhibit the maximum caution required in producing the report and avoid any disciplinary measures. The position in India, is that auditing is done by individual chartered accountants, who are duly licensed to practice accountancy. This is what obtains in the legal profession, also. Little wonder, therefore, that the Federal High Court found it attractive to rely on the position obtainable in the legal profession, as entrenched in the Supreme Court’s decision of Okafor v. Nweke (supra).

Contrast this with the position where the Audit Report is signed by the audit firm in its own name. The firm may bear responsibility for any substandard report, but the individual auditor responsible could be shielded from liability, thereby compromising professional standards by not ensuring that disciplinary measures are taken against the accountant/auditor who breaches his/her professional ethics. But this latter position remains the position of the law in our jurisprudence. From the decision of the Supreme Court, audit firms can sign Audit Reports in the firm’s name.

THE DISCOURSE

Brief History of Audit Profession In Nigeria

The word “audit” is rooted in the Latin word “audire” which means “to hear” [11]An audit is an independent scrutiny of the financial information of a corporate person, whether or not profit-driven. It involves obtaining raw evidence, assessment and evaluation of propositions presented by the entity and documentation of the outcome of such exercise in a report.  The audit practice has been in existence since the ancient civilization, dating back to ancient Mesopotamia, aimed at safeguarding the integrity of corporate financial records. In the medieval ages, bookkeeping, comprised of writings, counting and money, was done manually and read out to auditors in Britain who strived to ensure that the officers of the concerned organization were not negligent or fraudulent. Auditing was prevalent in ancient Iran and Egypt[12]

In Nigeria, Chief Akintola Williams and F. C. O. Coker pioneered the formation of the Association of Accountants of Nigeria (AAN) in 1960, with F. C. O. Coker emerging as the inaugural President[13]. By the Act of Parliament No. 15 of 1st September, 1965, the AAN and the existing accounting and auditing organizations merged to form the Institute of Chartered Accountants of Nigeria, fashioned after the British chartered accountancy institutes and substantially adopting the international accounting standards. The Companies Act of 1968 provided that audit of a limited liability company must be done by only a duly recognized auditor. As lately as 1993, only ICAN members with practising certificates, were allowed to audit company financial records[14].  

The emergence of Association of National Accountants of Nigeria (ANAN), also a body of chartered accountants, in August, 1993 brought a huge challenge to ICAN, as there was serious controversy over the control of accountancy profession in Nigeria[15]. There were several law suits targeted at each other. ICAN was also confronted by challenges from the emergent Chartered Institute of Management Accountants of Nigeria (CIMA), Institute of Chartered Public Accountants (CPA), Chartered Institute of Management and Cost Accountants (CIMCA) and Chartered Institute of Taxation of Nigeria (CITN). Of all the bodies mentioned above, only ANAN and CITN successfully passed through the National Assembly and enacted into law. Attempts by ICAN to set up auditing standards in 2009 was resisted by ANAN, which argued that, that is the responsibility of the Nigerian Accounting Standards Board under the Nigerian Accounting Standards Board Act of 2003. Eventually, a body, devoid of any influence from both ANAN and ICAN was set up by the Nigerian Accounting Standards Board to standardize the practice of accounting in Nigeria.  

The Audit Profession v the Legal Profession

As seen from the history of ICAN in Nigeria, auditing and accounting organizations were collapsed into one body known as the Institute of Chartered Accountants of Nigeria (ICAN) in the 1960s.  Basically, audit involves receiving data on the financial health and workings of a company or business, as well as compliance with relevant statutory requirements. The end product is the Audit Report which serves to provide an insight into the viability or otherwise of the corporate entity, for the sake of prospective investment in such an entity, as well as revenue for the government. Accounting, interchangeably referred to as financial reporting, means the art of recording and processing data concerning economic entities like businesses and corporations with a view to making available, relevant parameters for stakeholders’ decision-making about the concerned entity.  Hence, an “accountant” includes an auditor, but, as we shall see later, an auditor may not be an accountant.

A person who engages in an audit is considered to be practicing accountancy[16]. However, where a person practises accountancy as part of the terms of his employment by the government or any person, then such practitioner is deemed not to be practising accountancy.[17]

The legal profession, on the other hand is regulated by the Legal Practitioners Act, which allows a person to practise as a barrister and a solicitor “IF and ONLY IF” his name is on the roll, that is the register of lawyers called to the Nigerian Bar[18]. This provision does not compromise any other person, whose name is not on the roll to practise as barrister and solicitor in Nigeria. It is on this basis that the Supreme Court’s decision in Okafor v. Nweke and other similar decisions, emerged. In Okafor v. Nweke[19], a court process was signed in the name of the law firm handling the case and such practice was challenged, up to the Supreme Court. The Supreme Court held to the effect that the signature of the law firm on the court process amounted to practice as barrister and solicitor, while the name of the law firm is not on the roll. The process was therefore declared incompetent to sustain the suit.

Suffice it to say that the court would have held otherwise, if a firm of accountants was involved in Okafor v. Nweke. The simple reason is that the CAMA expressly permits a firm of accountants to be appointed auditor of a company[20]. The Nigerian Standard on Auditing[21], prepared by ICAN, also expressly demanded the signature of the audit firm on the Audit Report prepared by the audit firm.   

APPLICABLE STATUTES

Preambles have been held to form part of enactments[22]. From the preamble to the ICAN Act, it aims to regulate the profession of accountancy and matters connected to the practice of accountancy. Its duty is to establish the standard and skill which an accountant must possess. Registration of an accountant is dependent on his experience in the field of inspection and auditing of the affairs of a company for not less than 5 years[23]. An auditor is defined in the statute as a member of a body of accountants recognized by the Act[24]. A person is deemed to be practising accountancy if he engages in providing audit services[25]. However, a person is not considered to practise accountancy, if by his employment terms, such service of accountancy is demanded of him[26]. It is perhaps on this window opened by the provision, excusing and compromising the practice of accountancy by an employee of government or corporate body, that the Companies and Allied Matters Act (CAMA) authorized companies to appoint audit firms as auditors[27]

The ICAN Act authorizes the Council to make rules and regulations for the affairs of the accountancy practice and such rules and regulations must pass through the Minister of Finance, who has a duty to present them to the National Assembly before they become operational. There is also the requirement of presentation of the said rules and regulations on the following annual general meeting of the Institute or emergency general meeting of the Institute, which reserves the powers to either ratify or reject the rules and regulations.[28] 

Relying on the power to make rules provided by the Act, the Nigerian Standard on Auditing was issued by ICAN, as a member of International Federation of Accountants, with strong recommendation that its principles and essential procedures be applied and adopted in all audit of financial records. Thus, the doubt as to whether or not a firm of accountants can practise as an auditor is cleared, by, apart from the provisions of the CAMA cited above, also by the Nigerian Standard on Auditing (NSA), issued by ICAN[29] 

It is absolutely plausible that where an Act authorizes the performance of function by an individual, every other power associated with the performance of such function must be exercised by such individual.[30] If the law empowers an audit firm to be appointed an auditor, it follows that the audit firm can sign its name as signature on the Audit Report which it prepared. This is precisely what the CAMA and NSA sought to justify. CAMA conferred authority on companies to appoint firm of accountants as auditors, while NSA authorizes such firms to sign the reports of such audit. Hence, where the firm of accountants is appointed an auditor in its name, it follows that it be allowed to sign such audit report in its own name. This clearly resonates with the provision of the Interpretation Act[31]. Let it be emphasized that the Supreme Court, has, in 2025, upheld the statutory position stated above[32] and thereby set aside the aberration introduced by the Federal High Court in 2010[33].

AUDITING IN INDIA

The Institute of Chartered Accountants of India (ICAI) is the equivalent of the Institute of Chartered Accountants of Nigeria (ICAN). It is the 2nd largest body of accountants, globally, second only to the American Institute of Certified Public Accountants (AICPA).[34] It is under the control of the Ministry of Corporate Affairs and established under the Chartered Accountants Act of July 1,1949. Its duty is to promote, develop and regulate the practice of accountancy in India, thereby ensuring the maintenance of proper accounting, auditing and ethical standards in India, contributing to stability and transparency of the country’s financial structure. Its members subscribe to a code of ethics and professional standards, the breach of which invites strong disciplinary consequences.

The extant enabling statutes are the Company’s Act, 2013 and the Income Tax Act, 1961. Both Acts control the appointment of statutory auditor and tax auditor, which are the exclusive preserve of licensed members of ICAI with valid certificate of practice. This author has not come across any law in India authorizing corporate bodies to practise auditing. However, the big four global accounting firms prevalent in Nigeria, are also found in India. KPMG, Deloitte, EY and PwC are also found in India, recruiting qualified accountants to provide auditing services to clients. But they cannot practice as auditors in India, except through surrogate means by which they cooperate with local audit firms made up of accountants with practice certificate as partners. The National Financial Reporting Authority (NFRA) established in 2018, took over the role of recommendation of accounting and auditing standards to the government of India which finally set the auditing standards to be complied with in all audit of financial statements. This recommendation was formally done by the ICAI, until 2018. Companies are prohibited from practising accountancy in India[35]. Only individual Chartered Accountants, who have Certificate of Practice (COP) can practise in a wide range of areas, including business and finance, audit, taxation, financial and general management[36]. While some accountants are in public practice, others practise in the private sector while others are employed in government establishments. Apart from the Chartered Accountants Act of 1949, practitioners are also guided by the Chartered Accountants Regulation of 1988, Code of Ethics and Manual for Members, Peer Review Board.  

CRITIQUE OF THE EXTANT LAW IN NIGERIA

Masquerading of Chartered Accountants

An accountant could either be engaged to render continuous accounting services by a client or be enlisted in an accounting firm which renders accounting consulting services to clients. The following activities constitute the practice of accountancy, namely: holding one’s self out to the public as an accountant; performing or offering to perform any services involving auditing or verification of financial transactions, books, accounts or records or preparations, verification, or certification of financial, accounting and related services; provision of professional services or assistance in or about matters of principle or details concerning accounting procedure or certification of financial facts or data; or rendering any other service which may be regulated by the accountancy council with the approval of the Minister of Finance, and considered as practice of accountancy[37]. The foregoing follows the definite mandate given to the ICAN to determine the standard of knowledge and skill required of aspiring accountants, as well as keep the register of practitioners of accountancy and audit.[38]  

The law, as it stands today, is that the signature of an audit firm on an Audit Report is valid, as contrast to the legal profession where the signature of a law firm on a court process renders the process invalid. The justification for these contrasting positions is that, while there are statutes conferring the role of auditor on firm of accountants, there is no similar statute conferring legal practice on a firm of lawyers. The practice of audit is considered the practice of accountancy. But the ICAN Act provides that an accountant whose term of employment in any corporate environment demands the practice of accountancy, is not considered to be practising accountancy[39]. This provision appears to be the fillip by which the Companies and Allied Matters Act[40] provided that audit firms be appointed auditors for corporate bodies. By the provision, individual accountants who practise accountancy in a firm of auditors are deemed not to be practising accountancy, but their practice is absorbed and subsumed in the identity of the firm which employs them, since the firm has expressly and statutorily been conferred with the status of an auditor. This implies that it is the firm that is carrying out the audit practice.

But the above position conflicts with the express requirements for qualification as an accountant. Perhaps, the only escape route is to list this condition as the exception to the definition of the practice of accountancy. In other words, Audit Reports prepared by audit firms and signed by them are not products of accountancy, since the audit firm is not an accountant. The Nigerian Standard on Auditing, issued by ICAN[41], expressly directed the imposition of the signature of the audit firm on Audit Reports prepared by the firm.   

The cumulative effect of the above provisions, encouraging the sharing of the individual auditor’s expertise with corporate entities, is the erosion of the essentialism of the personal visibility of the individual accountant or auditor. What mischief the draftsman is avoiding by introducing this provision is yet to be comprehended by this author. The justification for enabling firm of auditors to share in this all-important identity of the individual auditor, still eludes this discourse.  This author sees no mischief cured by allowing audit firms to share the signing of audit reports with individual auditors. Rather what appears apparent in the present position of the law, is the risk of apportioning responsibility and discipline, where the Audit Report presented to the stakeholders is misleading and unreliable. How can the individual accountant responsible for such substandard product be disciplined? Even though the individual accountant’s seal is placed on the Audit Report, the seal does not bear his name, but a number assigned to him. By identifying the number on the Audit Report, the name and personality of the errant accountant/auditor who is responsible for the substandard report is shielded away from the public who needs the information on the personality of the accountant, in deciding who to assign such responsibility of auditing the books.

The veiling of the identity of the individual accountant on the Audit Report deserves to be revisited, as it appears laden with enormous challenges, particularly in the area of maintaining premium standards in the profession. For instance, the Enron Scandal of 2001in the US led to its collapse and its long-standing auditor, Arthur Andersen LLP was investigated and convicted of obstruction of justice by shredding documents associated with the company’s audit. The consequence is the disappearance of Arthur Andersen LLP from the global map of auditors[42]. But how about the individual auditors who perpetrated the offence? Some of them are still very much around, practising the profession. The individuals that played the condemnable role, may have been shielded since it was the firm that was found guilty and convicted. This is exactly the Nigerian scenario.

The advantage of unveiling the identity of accountants in audit reports is manifested in the Indian case in which two accountants of Price Waterhouse partners were disciplined by the ICAI Disciplinary Committee for wrongful auditing and inflation of financial statement of a company called Satyam Computer Services Limited.[43] The Disciplinary Committee has no powers to proceed against the audit firm, but can proceed against the individual accountant partner of the firm for professional misconduct. This is the advantage of not permitting audit firms to be appointed as auditors in their own name. If it were in Nigeria, the liability would have been on the audit firm and it would have been an issue as to whether or not the law can proceed against the individual accountants who perpetrated such fraud, since the firm may have been found guilty.    

Multiplicity of Accountancy Bodies

As seen above, the accountancy profession in India is controlled by just one body, the Institute of Chartered Accountants of India (ICAI). In Nigeria, at least two bodies control the practice of accountancy: the Institute of Chartered Accountants of Nigeria (ICAN) and the Association of National Accountants of Nigeria (ANAN). While ICAN was established by an Act of the National Assembly in 1965, ANAN was also established by an Act of the National Assembly in 1993. A look at the purpose of establishing both bodies, will reveal that they are established to provide and set the standard and skill expected from persons who want to become and practise accountancy in Nigeria. This duplicity of purpose by both ICAN and ANAN is more of a curse to the accountancy profession than a blessing. One of the biggest shortcomings of this reality is the perceived disparity in standards between the two bodies. In reality today, there is a preference for one of the bodies over the other and some clients would rather appoint members of the preferred body as auditors over the other. This surely leads to unhealthy competition. To eliminate this unhealthy competition, ICAN and ANAN must merge into one body. It is doubtful whether the establishment of the Nigerian Accounting Standards Board, pursuant to the enabling Act, has been able to resolve this reputational challenge between the two prominent accounting bodies in Nigeria    

CONCLUSION

This discourse is concluded by recommending options which are considered progressive and an improvement on the extant position of the law and the status quo. The first recommendation is the adoption of the standard kept under the Legal Practitioners Act. By this recommendation, the provision of various statutes assigning the role of auditor to audit firms need to be deleted from such statutes, through necessary amendments. Where, for any reason, those provisions are to remain, it is recommended that the firm be prohibited from signing audit reports in its name. Audit Reports should be signed by the individual auditor responsible for preparing the report, or who can vouch for its reliability and credibility. This will make the responsibility for substandard reports rest on the individual auditor and make the imposition of disciplinary measures less challenging.

The second recommendation is the centralization of the supervisory role of the profession in one body. ICAN, ANAN and any other body that plays in the accountancy profession should be fused and merged into one organized body and charged with the responsibility of controlling the accountancy profession. This way, a common standard will be maintained in the delivery of accountancy services in Nigeria. This will also eliminate the present-day reality where one body claims superiority over the other and thereby creating unnecessary friction in the noble profession. It is doubtful whether the existing Nigerian Accounting Standards Board under the Nigerian Accounting Standards Board Act of 2003, has succeeded in unifying and establishing a common perception among the two competing body of accountants in Nigeria.

But if the present fragmentation of the professional bodies must persist, then the government must create a strong regulatory body, independent of the competing bodies, charged with the responsibility of setting the very standard which must be common to anybody aspiring to practice accountancy. In this wise, the recognition of the competence and qualification to practise accountancy must not only be based on membership of any of the competing bodies but on approved certification of the regulatory body put in place by the government.  The establishment of the Nigerian Law School, is a testament to the advantage of setting up one body to set the standard for practitioners in any given profession. Every legal practitioner must be certified by the Council of Legal Education, through the Nigerian Law School. It should be emulated and applied to every professional practice.