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JANUARY 29, 2007 VOL. 20. NO 16

Breaching Best Practices

**Bunmi Oni**

Recent developments in the country indicate that accounting firms much more than scrutinise the books of client institutions assist them in doctoring their records
By Udo Onyeka
When in November 2006, revelations were made to the effect that Cadbury Nigeria Plc’s financial book for some years have been the product of doctored analysis, a lot of Nigerians and financial stakeholders were taken aback, especially as the Cadbury saga came barely two weeks after the former Managing Director of Afribank Nigeria Plc, Patrick Akinkuotu, opened a can of worms in which he told bewildered stakeholders that the 2006 financial report of the bank was cooked.
Even though the two discoveries jolted many, some financial watchers, however, said that they were not surprised. To them, a growing number of companies were joining the league of big-time perpetrators of this fraud. “A situation where some companies including banks before the consolidation exercise embarked upon by Professor Chukwuma Soludo, the Central Bank of Nigeria governor, would prepare different financial reports to present to different bodies, such as the regulatory authorities, shareholders and external auditors, while keeping the authentic one for the management of the concerned establishment has been rampant,” one stakeholder told The Source.
Indeed, it was not the first time that this kind of fraud – fiddling with the financial reports of companies would be blown open – as in 1997, Unilever Nigeria Plc’s financial records contained certain ambiguities when the late Rufus Giwa was the chairman/chief executive officer of the company.
After that Unilever, Union Dicon Salt Company and African Petroleum Plc, have their own share of cooked financials.
According to some financial experts, the situation becomes more worrisome especially when it involves a highly respected accounting firm such as Akintola Williams Deloitte.
“For an accounting firm such as Akintola Williams Deloitte with its international connections and as a member-firm of Deloitte Touche Tohmatsu to be associated with companies that overstate and doctor their annual financial reports is highly embrassing” a financial analyst told The Source.
Cadbury Nigeria Plc had last November announced the discovery of an over-statement in its financial position for 2006 and prior years, and to get to the roots of the matter, the chairman of the company, Dr. Uduimo Itsueli, appointed an independent accountants, Price Waterhouse Coopers, to further investigate the matter and report to the boards its findings.
In a bid to save its face, Cadbury Nigeria claimed that the discovery was made following an internal review. But the most questions are: why did the internal review come so late until the parent organisation Cadbury Schweppes of United Kingdom sent somebody from the United Kingdom (UK) to assist in looking into the accounts of the company; and why was previous instance of similar offence not discovered?
To ensure that the records were clean before handing over to another person, Cadbury Schweppes UK, which has 50.02 per cent stake in Cadbury Nigeria had appointed a new finance director, Martin Newlands, to work closely with a retiring finance director of Cadbury Nigeria, Ayo Kadiri.
It was while working with Kadiri that Newlands, the new finance director-designate, discovered the discrepancies in the company’s accounts and blew it open, first reporting to Cadbury Schweppes UK, that sent him.
In fact, it was learnt that the parent organisation had been suspecting some foul dealings by the management of Cadbury Nigeria, hence the decision to send Newlands ahead of time.
Concerning the role of the company’s Auditors, Akintola Williams Deloitte ,The Source gathered that the Cadbury Schweppes UK were disappointed that they are now considering terminating the contract between Cadbury Nigeria and the accounting firm, since the firm was unable to dictate the fraud that has been going on for several years – a scam which is said to have cost the company between N13 and N15 billion, according to the report of Price Waterhouse Coopers, another accounting firm.
Many financial watchers believe that Akintola Williams Delloitte has some questions to answer regarding the Cadbury mess despite its management’s claim that the accounting firm has for over 40 years discharged its duties as auditor to the company “satisfactorily, professionally, and without blemish.”
Indeed, experts are of the view that the company’s Audit committee and its board simply failed in its oversight functions.
For instance, Oladimeji Alo, Director-General, Financial Institutions Training Centre (FITC), said that both the Audit committee and board of Cadbury did not discharge their duties very well and wondered what role the External Auditors Akintola Williams Delloitte played in the scam.
The authorities involved would do the country good, financial watchers say, to slam the role played by the external auditors. Said Boniface Okezie, chairman, Progressive Shareholders Association of Nigeria: “It is important to declare the role played by Akintola Williams Delloitte, since they were also mentioned concerning the doctoring of Afribank’s 2006 financial reports which they; however, denied not knowing any thing about.”
Olusegun Odubogun, chief executive officer of the accounting firm, stated that “it is important to note that the press release by Cadbury Nigeria Plc, do not indict Akintola Williams Deloitte of any wrong doing.”
The questions, according to financial experts, are: why is Cadbury Nigeria silent on Akintola Williams Delliote’s role in the fraud? And how reliable is Price Waterhouse Cooper’s report on the issue, especially as some have begun to canvass an alleged deliberate attempt by Cadbury Schweppes to paint Cadbury Nigeria black in furtherance of its quest for a firmer grip of the latter.
But Chief Akintunde Asalu, president, Nigerian Shareholders Solidarity Association, cautions: “While I am still worried about the veracity of the figures involved in the Cadbury issues, I must say Akintola Williams Delloitte has to be extra careful. Their reputation is so much at stake.”
As it were, Asalu seemingly spoke the minds of many financial experts and watchers. For instance, Fred Usifo, a financial expert said that instead of Akintola Williams Delloitte to continue to carry on as if nothing is wrong, they should do well by taking stock of their reputation and image lately.
“I would advice the management of Akintola Williams Delloitte to internally review their processes and resource especially human resource and show the bad eggs in their system the way out. This is important because if nothing is done, this firm would have messed up the reputation of all other accounting firms operating in the country especially considering the regard given to it even internationally.”
Another issue the expert raised was the challenge of regulating financial bodies and institutions. He argue that it would be counter-productive waiting till messy and shameful situation like Cadbury, Afribank’s cases crop up before lifting a finger in the right direction.
In addition, the experts urged other regulators concerned to borrow a leaf from the Nigeria Stock Exchange (NSE) that sanctioned the two former Cadbury Nigeria chiefs by banning the from heading quoted companies in the country.
The Source gathered, that the Securities and Exchange Commission (SEC), Nigerian Accounting Standards Board (NASB) and the Institute of Chartered Accountants of Nigeria (ICAN), are yet to come out with the result of their investigations and probe into the Cadbury affair.
Describing it as a corporate governance challenge, the Registrar and Chief Executive Officer of the Certified Institute of Cost management, Reverend Nosa Omoregie, stressed that a focus on cost management by all stakeholders would have prevented the Cadbury episode. He noted that the Cadbury case would serve as an eye opener for all stakeholders in the economy to do all they can to support cost practice management, for a stable economic development.
Similarly, Omoregie like other financial experts that spoke to The Source pointed out that it was time the Economic and Financial Crimes Commission (EFCC), beam its searchlight on corporate governance in order to ensure that such trend of economic fraud is not encouraged.
In this regard, however, The Source authoritatively gathered that the EFCC has concluded plans to launch a rating exercise that would match the claims made by banks and other financial institutions.
The project, to be called Integrity Rating is supported by the European Union and the United Nations office on Drugs and Corruption is intended to change the way financial institutions are being evaluated by the public.
The Source was told that the rating, which is to be co-ordinated by Convention on Business Integrity (CBI), will accommodate all financial institutions such as banks, insurance companies, finance firms stock- broking firms and other allied institutions.
This arrangement, it was gathered, would be an extension of the work of the National Financial Intelligent Unit, an arm of the EFCC that compiles and monitor intelligence information on customers of various financial institutions.
In the light of the foregoing, some financial experts equally called on the EFCC to take a critical look at the rating given to financial institutions and companies across the country.
For instance, they contend that prior to November 2006, Cadbury Nigeria Plc, was the toast of corporate Nigeria going by the ratings given to the company by rating outfits which named it Nigeria’s most respected company and its former Managing Director Bunmi Oni as Nigeria’s most admired Chief Executive Officer (CEO).