financial statements, audits and annual returns

The accounting records of a company are to be kept at its registered office or such other place in Nigeria as the director thinks fit, and at all times shall be open to inspection by the officers of the company. Section 375 (2) CAMA, 2020.

According to Section 374(3) of the Companies and Allied Matters Act, the contents of an accounting records are as follows:

• a. Entries from day to day of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure took place.
• b. A record of the assets and liabilities of the company.
• c. By the provisions of Section 374(4) of the Companies ad Allied Matters Act, if the company deals in goods, then in addition, the accounting records shall contain:
• 1. All statements of stocks held by the company at the end of each year of the company.
• 2. All statements of stock taking from which any such statement of stocks has been or is to be prepared
• 3. All statements of all goods sold and purchased other than by retail trade.

A company may in addition to original hard copies, keep electronic copies or registers of any document or record it is obliged to keep or maintain under this Act, and where a company chooses to maintain electronic copies or registers of its documents or records, the company shall give sufficient consideration to the quality of the hardware and software to be used, and technical specification such as protocol, security, anti-virus protection or encryption. Section 375(3) CAMA, 2020.

Accounting records are to be preserved for a minimum period of 6 years from the date on which they were made, after which the company is at liberty to destroy them. This is not applicable where a company is wound up and its records are disposed - Section 375(2) CAMA 2020. Failure to comply with keeping accounting records and preserving them for 6 years by a company amounts to an offence committed by every officer of the company and they will be liable to a penalty as the Corporate Affairs Commission shall specify in its regulations. An officer can escape liability if he can prove that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable. Section 376(1) (2) (3) CAMA 2020.

It is the duty of the directors to prepare a financial statement in respect of each financial year of a company. Section 377(1) CAMA, 2020.

According to Section 377(2)(3) of the Companies and Allied Matters Act, the contents of a financial statement are:

• a. Statement of the accounting policies.
• b. The balance sheet or balance sheet as at the last day of the year.
• c. A profit and loss account or, in the case of a company not trading for profit, an income and expenditure account for the year.
• d. Notes on the account.
• e. The auditors’ report.
• f. The directors’ report.
• g. A statement of the source and application of fund or statement of cash flow.
• h. Changes in equity.
• i. A value-added statement for the year.
• j. A five year financial summary.
• k. In the case of a holding, the group financial statements.
• l. Such other matters as are required in accordance with the applicable accounting standards.

The balance sheet of a company and every copy of it which is laid before the company in general meeting or delivered to the Corporate Affairs Commission must be signed on behalf of the board by two of the directors of the company. Section 386(1) CAMA, 2020.

According to Section 386 (2) of the Companies and Allied Matters Act, if a copy of the balance sheet is laid before the company or delivered to the Corporate Affairs Commission without being signed as required, the company and each officer of it are liable to a penalty as the Corporate Affairs Commission shall specify in its regulations.

Financial statements of a company are to be presented at the Annual General Meetings of a company. Directors of a company have the duty to lay financial statements of a company at a date not later than 18 months after incorporation of the company and subsequently once at least in every year, before the company in a general meeting. The financial statements of the company to be laid out must be made up to a date not exceeding 9 months previous to the date of the meeting. Section 388 (1) CAMA, 2020.

According to Section 387(1) of the Companies and Allied Matters Act, in the case of every company, a copy of the company’s financial statements for the year shall, at least 21 days before the date of the meeting at which they are to be laid be sent to the following persons:

• a. Every member of the company whether or not entitled to receive notice of general meeting.
• b. Every holder of the company’s debentures whether or not so entitled.
• c. All persons other than members and debenture holders, being persons so entitled.

There are no required qualifications for appointment as a company auditor both in terms of profession or professional body. However, auditors are usually qualified accountants since auditing is specialized branch of accountancy. They must be independent. According to the provisions of Section 403(1) of the Companies and Allied Matters Act, the provisions of any Act establishing a body of accountants shall have effect in relation to any investigation or audit for the purpose of the Companies and Allied Matters Act and none of the following persons is qualified for appointment as auditor of a company:

• a. An officer or servant of the company.
• b. A person who is a partner of or in the employment of an officer or servant of the company.
• c. A body corporate.

Failure to send a copy of a copy of the financial statement of a company to those so entitled will make the company and every officer who is default liable to a penalty as the Corporate Affairs Commission shall specify in its regulations. Section 389 CAMA, 2020.

The procedure for the appointment of auditors is as follows:

• a. Appointment of first auditors: The first auditors of a company are to be appointed by the directors at any time before the company is entitled to commence business and auditors so appointed hold office until the conclusion of the next annual general meeting. Section 405 CAMA, 2020.
• b. Re-appointment of retiring directors: By the provisions of Section 401(2) of the Companies and Allied Matters, at any Annual General Meeting, a retiring auditor, however appointed, shall be automatically re-appointed without any resolution being passed unless:
• 1. He is not qualified for re-appointment.
• 2. A resolution has been passed at that meeting appointing some other person instead of him or providing expressly that he shall not be re-appointed.
• 3. He has given the company notice in writing of his unwillingness to be re-appointed.
• c. Vacancy based on non-appointment of company auditor: By the provisions of Section 401(3) CAMA 2020, where no auditors are appointed or re-appointed at an Annual General Meeting, the directors may appoint a person to fill that vacancy as auditor.

The duties of an auditor of a company are as follows:

• a. Conducting an investigation in order to form an opinion whether proper accounting records have been kept by the company.
• b. Whether the company’s balance sheet and if not consolidated, its profit and loss account are in agreement with the accounting records and returns.
• c. The auditors also have the duty to consider whether the information given in the director’s report for the year for which the accounts are prepared is consistent with those accounts and if they are of opinion that it is not, they are to state the fact in their report. Section 407(5) CAMA, 2020.

Where a company suffers loss or damages as a result of the failure of its auditor to discharge the fiduciary duty imposed on him, the auditor shall be liable for negligence and the directors may institute an action for negligence against him in court. Section 415(2) CAMA, 2020.

An auditor is entitled to remuneration. By the provisions of the Companies and Allied Matters Act, in the case of an auditor appointed by the directors, the remuneration may be fixed by the directors or by the company in general meeting or in such manner as the company in general meeting may determine. Section 408 CAMA, 2020.

An auditor who wishes to resign his position must deposit a notice in writing to the effect at the company’s registered office, and such notice operates to bring his term of office to an end on the date of which the notice is deposited, or on such later date as may be specified. Section 412 CAMA, 2020. The notice of resignation by an auditor will only be effective where it contains a statement to the effect that there are no circumstances connected with his resignation which he considers should be brought to the notice of the members or creditors of the company or a statement of any such circumstances connected with his resignation which he considers should be brought to the notice of the members or creditors of the company. Section 412 (2) CAMA, 2020.

A company may by ordinary resolution remove an auditor before the expiration of his term of office notwithstanding anything in any agreement between it and the auditor. Section 409(1) CAMA, 2020. An auditor is removed by passing of an ordinary resolution after special notice must have been given. Section 409 CAMA, 2020.

A company may by ordinary resolution remove an auditor before the expiration of his term of office notwithstanding anything in any agreement between it and the auditor. Section 409(1) CAMA, 2020. An auditor is removed by passing of an ordinary resolution after special notice must have been given. Section 409 CAMA, 2020.

The objectives and functions of the audit committee are provided for in Section 404 (7) of the Companies and Allied Matters Act. They are as follows:

• a. Examine the auditor’s report and make recommendation thereon to the annual general meeting as it may deem fit.
• b. Ascertain whether the accounting and reporting policies of the company are in accordance with legal requirements and agreed ethical practices.
• c. Review the scope and planning of audit requirements.
• d. Review the findings on management matters in conjunction with the external auditor and departmental responses thereon.
• e. Keep under review the effectiveness of the company’s system of accounting and internal control.
• f. Make recommendation to the board with regard to the appointment, removal and remuneration of the external auditors of the company.
• g. Authorize the internal auditor to carry out investigations into any activities of the company which may be of interest or concern to the committee.

Every company must , once at least in every year, make and deliver to the Corporate Affairs Commission, its annual returns but the company need not make a return in the year of its incorporation or the following year or if it does not hold a meeting in that year under review. Section 417 CAMA, 2020.

The annual returns of a company must be completed, signed by a director and the secretary and delivered to the Corporate Affairs Commission not later than 42 days after the annual general meeting for the year, whether or not that meeting is the first or only general meeting of the company in that year, but the company may apply to the Corporate Affairs Commission for the extension of time within which to file its annual return for any given calendar year. Section 421 CAMA, 2020.

According to Section 422 of the Companies and Allied Matters Act, the documents to be annexed to an annual return are :

• a. A written copy, certified both by a director and secretary of the company to be a true copy, of every balance sheet and profit and loss account laid before the company in general meeting held in the year to which the return relates including every document required by law to be annexed to the balance sheet.
• b. A copy, certified by both the director and the secretary, of the report of the auditors on, and of the report of the directors accompanying, each such balance sheet.

Any document required to be annexed to the annual return may be delivered to the Commission either in hard copy or through electronic communications. Section 422 (3) CAMA, 2020.

The consequences of failure to file annual returns is as follows:

• a. Penalty: If a company required to comply with any of the provisions of the Companies and Allied Matters on annual returns but fails to do so, the company and every director or officer of the company are liable to a penalty as may be prescribed by Corporate Affairs Commission. Section 425 (1) CAMA, 2020.
• b. Enforcement of Returns: Under the Companies and Allied Matters Act, the Corporate Affairs Commission can enforce the duty of the company to file returns. Within 14 days after the Corporate Affairs Commission serves on the company a notice to file its annual returns as required by law, a member, creditor or the Corporate Affairs Commission itself can apply to the Federal High Court to order the company to comply and file its annual returns. Section 744 (1) CAMA, 2020.
• c. Striking off as a defunct company: Failure to file annual returns for a consecutive period of 10 years is a ground for striking the name of a company off the companies’ register. **Section 425 (3) CAMA, 2020. **