Effective internal controls over financial reporting has been described as necessary to help ensure that companies provide investors with accurate financial statements, which will in turn boost investor protection and confidence.
This was stated by the Executive Commissioner Legal and Enforcement of the Securities and Exchange Commission, Mr. Reginald Karawusa during a training on Internal Controls over Financial Reporting, an implementation of Section -60-63 of the Investment and Securities Act 2007, organised by the SEC in collaboration with the Nigeria Capital Market Institute which commenced in Lagos, Monday.
Karawusa stated that with the plethora of Ponzi schemes plaguing the nation, accurate financial statements are essential for the vitality of financial markets and by extension the economy.
The Executive Commissioner said, “Once investors no longer have confidence in the accuracy and completeness of companies’ financial statements and other disclosures, they will naturally be unwilling to invest, and the financial markets will certainly suffer as is currently experiencing in our country.
In his remarks, Managing Director of NCMI, Dr Emomotimi Agama said that the starting point to evaluate the sufficiency of an ICFR program should be with a financial statement risk assessment.
He said, “The risk assessment, which includes specific financial reporting objectives and identification of risks to achieving those objectives, answers these fundamental questions: Which controls are necessary to address the company’s risks? How many controls does the company need? What is “just enough” for the company’s ICFR program?
He listed proactive steps management can consider to include: Refreshing the risk assessment program to incorporate the right people, processes, and technologies to unlock the hidden value. Integrating data analytics and visualization to improve the quality of the data analysed to support robust risk identification and report results succinctly to key stakeholders. This, in turn, can rationalize risks of material misstatement to a level of granularity to focus on what could truly be a material misstatement.
