FRC Sanctions 33 Audit Firms for Violating Regulatory Rules

The Financial Reporting Council of Nigeria (FRC) has sanctioned 33 audit firms for violating its regulatory requirements, particularly Rule 14 on Non-Compliance with Laws and Regulations (NOCLAR), as the Council intensifies enforcement of professional and statutory obligations in the country’s financial reporting sector.

The Council also identified nine audit firms that failed to register with the FRC while simultaneously contravening Rule 14, highlighting concerns over compliance with regulatory requirements governing audit practices in Nigeria.

Under Rule 14, external auditors are required to ensure that their clients comply with applicable laws, regulations, codes, rules and guidelines issued by the FRC that affect their financial statements and business operations.

The rule also requires auditors to verify that reporting entities and all relevant signatories have fulfilled their statutory obligations to the Council before signing audit opinions.

To demonstrate compliance, auditors are required to send confirmation to the FRC through the designated email address, rule14@frcnigeria.gov.ng, before issuing their audit opinions.

The requirement is intended to strengthen regulatory oversight, promote accountability and ensure that companies subject to the Council’s supervision meet their statutory obligations before their financial statements are certified by external auditors.

The FRC warned that auditing a Public Interest Entity (PIE) without the requisite registration with the Council constitutes a regulatory offence.

Public Interest Entities are organisations whose financial reporting and operations are considered significant to the public interest, including investors, creditors and other stakeholders who rely on credible financial information to make economic decisions.

The Council’s latest sanctions signal a shift from regulatory sensitisation towards stricter enforcement, following continued instances of non-compliance among audit firms and practitioners.

Backed by its statutory powers under the Financial Reporting Council of Nigeria Act, the regulator said it would sustain enforcement of Rule 14 through intensified monitoring, inspections and appropriate sanctions against firms and practitioners found to be in violation of its requirements.

The enforcement drive is expected to reinforce compliance with professional standards and strengthen the reliability and integrity of financial reporting in Nigeria.

By requiring auditors to confirm their clients’ regulatory compliance before signing audit opinions, the FRC aims to ensure that external auditors fulfil their responsibilities as gatekeepers of corporate accountability rather than limit their work to examining financial statements.

The sanctions also underscore the importance of registration with the Council for audit firms undertaking engagements involving Public Interest Entities.

The FRC’s continued monitoring of audit practices forms part of broader efforts to improve corporate governance, strengthen investor confidence and ensure that financial statements prepared by Nigerian entities comply with applicable reporting standards and regulatory requirements.

The Council reiterated that enforcement of Rule 14 would continue, with non-compliant audit firms and practitioners liable to face appropriate regulatory action.