PwC reputation at risk after NNPC audit controversy

PricewaterhouseCoopers (PwC), one of the leading global networks of ‘big four’ audit and assurance firms faces grave reputation risk as Nigerians clinically scrutinise the report it submitted in the middle of the 2015 presidential election campaigns.

 

Reliable sources told BusinessDay that one or two other firms rejected the audit job, given the very delicate balancing act they faced between pleasing the Federal Government and looking out for public interest.

“When you audit an alleged corrupt government institution, if things go wrong you will certainly face a reputation crisis,” one of our sources said.

According to a senior partner in a firm of auditors, “It is common practice that auditors of most government businesses and parastatals face serious reputation risks because they (auditor) find it difficult to write a potent management report that could indict those who appointed them.”

He further said that they are forced to split their professional fees with the management of the enterprises they were appointed to audit. In practice, an auditor is supposed to be the eye of the public in ascertaining that a company’s books have been properly kept and represents a true and fair view of the financial records for a period. People forget that auditors are in business, and as such need to protect their sources of revenue, therefore it is not uncommon to find auditors carrying out the biding of the payer without a consideration of the need to balance his fiduciary responsibility to the public,” he added.

While some audit experts BusinessDay spoke  to called for caution, others expressed reservation on the professionalism PwC put in to the work.

Eben F. Joels, chairman, Stransact LLC, agreed that the PwC forensic audit report on NNPC does not qualify as a forensic audit in the first place.  He told BusinessDay that at the beginning of the entire controversy, both the former CBN governor and the minister of finance agreed on a figure that was reconciled -$10 billion.”

Joels, who is also the president of Boston Knowledge Company LLC, further said, “I would have expected that a proper explanation of how this amount was reconciled be prominent in the report. It was not. By submitting the report to the President at a media event during the election campaign period, it will appear that a firm as revered as PwC chose to lend its name to a political cause.”

He said: “It appears that the firm lacked the strength of character to speak truth to power. Truth is the basis of the professional ethics of objectivity. Clearly, the cause of truth was not served,” he insisted.

On the other hand, Clement Ofuani, an Associate of the Chartered Insurance Institute of Nigeria (CIIN) said, “I believe PwC would have worked on certain terms of reference. And those would have been clearly specified. So we must be certain that part of the brief is that they were asked to investigate the NNPC account. In this case they will be looking for XYZ to come up with answers and results.”

Ofuani added: “If they (PwC) were less professional in doing their job under the terms of reference, then we will be talking of negligence which is a serious issue. But it is only the person who gave them the brief that can ascertain whether they met the terms of reference. So for now there is no proof that they erred in anyway”.

He further told BusinessDay that if PwC auditors “were asked to do an audit, then that will be subject to the Companies and Allied Matters Act; it is only when we have determined what their terms of reference are that we can make informed judgment. For now the noise is political”.

Analysts who are closely following the development say the issue raises serious questions around ethical crisis within accounting firms in the country, given the recurring negative questions around their work. Their role became a serious issue since the 2009 Nigerian banking crisis when the Central Bank of Nigeria (CBN) injected N420 billion ($2.8 billion) into five banks –Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank – that the audit firms certified healthy, but were declared sick the CBN.

President Goodluck Jonathan recently ordered the immediate release of the full audit report after President-elect Muhammadu Buhari said his administration would take a second look at the claim by a former governor of the Central Bank, Sanusi Lamido Sanusi (now Emir of Kano, Muhammad Sanusi II), that $20bn, that was supposed to be remitted by the NNPC to the Federation Account, could not be accounted for.

Before this development, PwC which investigated the allegation of unremitted funds into the Federation Account leveled against the NNPC, suggested both the NNPC and the Nigerian Petroleum Development Company (NPDC) refund to the Federation Account “a minimum of $1.48bn,” representing about N274.54bn at the Central Bank of Nigeria’s inter-bank exchange rate of N185.50 to the dollar.

PwC had in the report submitted to the office of the Auditor-General of the Federation, specified that their services were performed and the report was developed in accordance with “our engagement letter dated 5 June 2014 and subject to the terms and conditions included herein; as well as scope of work which included: analysis of remittance shortfalls from NNPC into the Federation Account; analysis of submissions made by key stakeholders in relation to these alleged shortfalls; and producing an independent forensic report detailing our findings”.

“The procedures we performed did not constitute an examination or a review in accordance with generally accepted auditing standards or attestation standards. Accordingly, we provide no opinion, attestation or other form of assurance with respect to our work or the information upon which our work was based,” according to Pedro Omontuemhen, PwC engagement leader who signed off the report on Investigative Forensic Audit into the Allegations of Unremitted Funds into the Federation Accounts by the NNPC.