How To Improve the Reliable of My Company's Financial Reports

The fulcrum of our lead discussion in the maiden edition, “How Reliable is Your Company’s Financial Report” is the need to improve your company’s internal control system in order to improve the reliability of the Financial Report being generated by the persons in charge of Accounts and Finance.

Ensuring that Company’s Financial Report shows a true and fair view is actually a statutory requirement. According to Nigerian’s Company and Allied Matters Act 1999, (As Amended 2011) Cap C20 it is stated that

“ the company’s Directors are responsible for the preparation and fair presentation of the company Financial Statements” and this responsibility also include Designing, implementing, and maintaining internal controls relevant to the preparation and fair presentation financial statements and of selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances”

Here below are some tit-bits of How You Can Improve the Reliability of your Company’s Financial Report. The first step towards improving the reliability of the company’s financial report is for the management to accept the fact that they have the utmost responsibility to ensure adequate Internal Controls System is in place.

To ensure adequate ICS is in place, Management must:

  1. Establish Accounting Processes, Procedures and Policies and ensure these are documented in form of a manual
  2. Review the Internal Control System (which forms part of Accounting Procedures) periodically.
  3. Carry out periodic Compliance tests (test carried out to ensure internal controls are adhered to) and result evaluated.
  4. Establish a well-functional Internal Audit Section (for Medium & Large Scale Businesses)
  5. Strive to deploy an Enterprise-Wide Solution (ERP) that ensures all Key Business Functions are well integrated.
  6. Insist as much as possible that all reports are generated from the available software.

Our Thoughts

International Financial Reporting Standards (IFRS): A MUST for Business Owners.

Lately, so much is being said on the need for Corporate Nigeria to join the comity of nations adopting IFRS as the Financial Reporting Standards. So much benefit has been adduced to accrue from adopting IFRS. Some of the benefits range from Cross-Border Listing, Ease of Financial Comparison between companies in similar industry, Increase in Foreign Direct Investment (FDI) into the country, Easier access to external capital, and Easier regulations of financial information of entities in Nigeria.

However, we think nothing is much compared to the opportunity of improving the quality of the Financial Report being prepared by the Company for the Business-owners. One of the major components of IFRS is a strong and effective Internal Control System (ICS). In deploying IFRS, managers of business would have no other option that to have a second- look at the ICS of the company and ensure its compliance with the global standard.

The Initial cost of complying with IFRS might look immediately enormous, however, the long term Capital Gain really belongs to the Business Owners.