One of the functions of the Financial Reporting Council of Nigeria (FRCN) by virtue of Section 8(1)f of the Financial Reporting Council Act2 is `to maintain a register of professional accountants and other professionals engaged in the financial reporting process.' The FRCN replaced the erstwhile Nigerian Accounting Standards Board. The Board's primary duty was to develop and publish in the public interest, accounts standards to be observed in the preparation of financial statements. Similarly, FRCN's core duty is to also develop and publish financial reporting standards to be observed in the preparation of financial statements of public interest entities.
Financial reporting is the process of producing statements that discloses an organization's financial status to management, investors and the government. The question that arises is whether a lawyer produces a statement disclosing an organization's financial status simply by signing such document as a company secretary and is therefore caught by the new registration requirement? In order to unravel this query, it is necessary to review the following relevant sections:
Section 41(1) of the FRC Act states that the Council shall maintain a register of professionals.
Section 42(1) also states that `every registered professional accountant (emphasis supplied) shall not later than 3 months before the expiry of the registration make a written application for the renewal of registration to the Council in such form and manner as the Council may from time to time prescribe.'
The Interpretation Section to the Act, i.e., Section 77 has the following useful definitions:
"a professional Accountant means a person who is a member of a body of professional Accountancy board established by an Act of National Assembly and registered with the council."
"Practice in relation to an auditor means the practice of the auditor or the audit firm." There is no definition of the term `professional' in the Act.
On the other hand, the Financial Reporting Council Order3 defines a professional to mean professional accountants and other professionals engaged in the financial reporting process.
"Financial Reporting Standard means accounting, auditing, actuarial and valuation standards issued by the Council under this Act." This definition clearly makes no reference to legal practitioners and furthermore, the financial reporting standard as defined in the Act does not specifically reference lawyers.
The FRCN on its website4 indicates that "a professional, for the purpose of this registration, refers to any person whose education and training allow for his judgment to be relied upon and possesses a certification issued by a recognised professional body or association and is currently working or wishing to work in Nigeria."
In our view, this is an overly broad delineation of the term `professional' and constitutes an overreach of FRCN's statutory powers under the enabling law, as the registration requirement is only aimed at:
- professionals engaged in financial reporting; and
- Persons holding appointment or offering service for remuneration as a professional for public interest entities. Section 77 of the FRC Act defines public interest entities to mean governments, government organization, quoted and unquoted companies and all other organizations which are required by law to file returns with regulatory authorities and this excludes private companies that routinely file returns only with the Corporate Affairs Commission and the Federal Inland Revenue Service.
The only reason lawyers have to register with the FRCN is if they fall into option (b) above and not because they are engaged in financial reporting. The requirement for professionals offering services to `public interest entities' to be registered with the FRCN is equally an over-reach of the council's mandate. The council should focus on its core mandate of regulating professional accountants and not the registration of other professionals even if they render professional services to public entities as defined by the Act. Most professional bodies are regulated, including lawyers who are regulated by the Nigerian Bar Association (NBA).