FINANCIAL STATEMENTS FINANCIAL STATEMENTS Financial Statements of a

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS • Financial Statements of a company show the annual state of affairs of a company and they are important not only to members of the company but to the public, so as to decide whether to invest or de-invest

FINANCIAL STATEMENTS • From the company. • Examples, Profit and Loss Account, Balance Sheet, etc. • S. 331 of CAMA provides that, every company must keep accounting records that will be

FINANCIAL STATEMENTS • Sufficient to show and explain the transactions of the company, so as to • (a) disclose with reasonable accuracy, at any time, the financial position of the company;

FINANCIAL STATEMENTS • (b) enable the directors to ensure that financial statements comply with the requirements of the Act. • CONTENTS OF ACCOUNTING RECORDS: -

FINANCIAL STATEMENTS • It must contain; • (a) entries from day to day of all sums of money received and expended by the company; • (b) a record of the assets and liabilities of the company; and

FINANCIAL STATEMENTS • (c) statements of all goods sold and purchased. • LOCATION AND PRESERVATION OF ACCOUNTING RECORDS: • The accounting records shall be kept at the company’s registered

FINANCIAL STATEMENTS • Office or such other place in Nigeria as the directors think fit and will be open at all times for inspection by officers of the company. • The company is required to preserve the accounting records

FINANCIAL STATEMENTS • For a period of six years though subject to any directive with respect to the disposal of records given under winding up rules.

FINANCIAL STATEMENTS • DIRECTORS’ DUTY TO PREPARE ANNUAL ACCOUNTS: • The directors of a company must yearly prepare financial statements. • At the first board meeting of a

FINANCIAL STATEMENTS • Company, the directors must determine the date each year, when financial statements shall be made up and notify CAC within 14 days of the determination. This date is known as the Accounting

FINANCIAL STATEMENTS • Reference Date. • CONTENTS OF FINANCIAL STATEMENT: • By the provision of S. 334(2) of CAMA, financial statements shall include;

FINANCIAL STATEMENTS • (a) statement of the accounting policies, • (b) the balance sheet as at the last day of the year, • (c) profit and loss account or an income and expenditure account

FINANCIAL STATEMENTS • For a company not trading; • (d) notes on the accounts; • (e) the auditor’s report; • (f) director’s report which accompanies annual account. • (g) a statement of the source and

FINANCIAL STATEMENTS • Application of fund; • (h) value added statement for the year which is the wealth created by the company during the financial year. • (i) a five year financial summary;

FINANCIAL STATEMENTS • And; • (j) in the case of a holding company, the group financial statements i. e, consolidated profit and loss account and balance sheet.

FINANCIAL STATEMENTS • It must be noted that , the financial statements of a private company need not include matters stated in paragraphs a, g, h and I above. See S. 334(3) of CAMA. • See also, SS 335, 336, 337, 340

FINANCIAL STATEMENTS • And 341 of CAMA that deals with additional contents of a financial statements as the circumstances permit. • DIRECTORS’ REPORT: • The directors of a company must

FINANCIAL STATEMENTS • Prepare a report yearly which is annexed to the balance sheet; • Containing a fair view of the development of the business of the company and its subsidiaries during the year and

FINANCIAL STATEMENTS • Stating the amount, if any, which they recommend should be paid as dividend and the amount if any, which they propose to carry to reserves. See S. 342(1). • PERSONS ENTITLED TO RECEIVE FINANCIAL STATEMENTS: -

FINANCIAL STATEMENTS • The following are entitled to receive financial statements; • Every member of the company; • Every debenture holder; • All persons other than members and debenture holders, being

FINANCIAL STATEMENTS • Persons so entitled; and • With respect of company not having share capital, only members and debenture holders entitled to receive notices of AGM of the company. See S. 344 of CAMA.

FINANCIAL STATEMENTS • THOSE NOT ENTITLED: • Members or debenture holders who are not entitled to notices of general meeting and members whose addresses are unknown; • More than one of the joint

FINANCIAL STATEMENTS • Holders of shares and debentures, who are not entitled to receive notices of meeting; and • Other joint holders of shares and debentures not entitled to

FINANCIAL STATEMENTS • receive such notices. See S. 344(3). • S. 349 provides for sending of financial statements on demand to members and debenture holders who as of right are not entitled to receive them.

FINANCIAL STATEMENTS • Failure to send after demand attracts penalty. • DIRECTOR’S DUTY TO LAY AND DELIVER FINANCIAL STATEMENTS: • S. 345(1) provides that, the

FINANCIAL STATEMENTS • Directors must at a date not later than 18 months after the incorporation of the company and subsequently once at least in every calendar year, lay before the company in general meeting, copies of the financial

FINANCIAL STATEMENTS • Statements of the company, made up to a date not exceeding 9 months, previous to the date of the meeting. • Also, the directors shall in each year, deliver the notes on the

FINANCIAL STATEMENTS • Statements which were laid before the general meeting. See S. 345(3). • MODIFIED FINANCIAL STATEMENTS BY SMALL COMPANIES: -

FINANCIAL STATEMENTS • A small company may deliver to CAC, modified financial statements in accordance with Part 1 of Schedule 7 and SS. 350 – 353. • The modified balance sheet shall be an abbreviated version of the

FINANCIAL STATEMENTS • Full balance sheet. In this circumstance, the profit and loss account, director’s report and auditor’s report need not be delivered to CAC as annexure to the balance sheet. The abridged balance sheet must be

FINANCIAL STATEMENTS • Signed by 2 directors. • By the provision of S. 351(1), a small company is one that; • (a) is a private company having share capital; • (b) the amount of its turnover

FINANCIAL STATEMENTS • For that year, is not more than N 2 million or such amount, as maybe fixed by CAC. • (c) its net assets value is not more than N 1 million or such amount as maybe fixed by CAC;

FINANCIAL STATEMENTS • (d) none of its members is a government or a Government Corporation or agency or its nominee; and • (e) the directors between them hold not less than 51% of its

FINANCIAL STATEMENTS • equity share capital. • PUBLICATION OF FINANCIAL STATEMENTS: • SS 345 & 355 provide for publication of financial statements of a company.

FINANCIAL STATEMENTS • Publication refers to laying the account before the general meeting of the company, reading auditor’s report before the company in general meeting and delivering to CAC, a copy each of the balance sheet, profit and loss

FINANCIAL STATEMENTS • Account and notes on the statements laid before the company in general meeting along with annual return of the company. • Note that, an Unlimited Company is exempted from

FINANCIAL STATEMENTS • Delivering to CAC, its financial statements and the annexures unless, it is a subsidiary or a holding company of a limited liability company. • S 345 deals with publication of full financial statements while,

FINANCIAL STATEMENTS • S. 355 deals with publication of abridged financial statements.

AUDITOR • An auditor is a person appointed and saddled with the responsibility of examining company’s books and accounts, make a report to the members on the accounts examined by him including every balance

AUDITOR • Sheet, profit and loss account and all group accounts, laid before a company in general meeting, during his tenure of office. • APPOINTMENT OF AUDITORS: -

AUDITOR • Every company must at each annual general meeting, appoint an auditor or auditors to audit the financial statements of the company. See S. 357(1) of CAMA. • APPOINTMENT OF AUDITORS BY DIRECTORS: -

AUDITOR • The directors have the powers to appoint auditor(s) for the company under the following circumstances; • (a) the first auditor(s) usually at the 1 st board meeting to hold office till the conclusion of the

AUDITOR • 1 st AGM. See S. 357(5) of CAMA. • Any auditor(s) appointed by the directors may be removed by the company at a general meeting and the company appoint in his place, any other person(s) who has been nominated for

AUDITOR • Appointment, by any member of the company and notice of whose nomination, has been given to the members, not less than 14 days before the date of the meeting – S. 357(5)(a);

AUDITOR • (b) the directors may fill any casual vacancy in the office of the auditor – 357(6); and • (c) if members at AGM fail to appoint or re-appoint auditor(s), the directors may appoint a person to fill the vacancy– 357(3).

AUDITOR • Members at AGM also have powers to appoint auditor(s) under the following circumstances; • (a) where the directors fail to exercise their power to appoint the 1 st auditor(s) – 357(5)(b);

AUDITOR • Subsequent appointments of auditor(s) are made by members at each AGM with the exception of filling casual vacancies – S. 357(1). • At any AGM, a retiring auditor however appointed, shall be re-

AUDITOR • Appointed without any resolution being passed unless; • (a) he is not qualified for reappointment; or • (b) a resolution has been passed at the meeting appointing some

AUDITOR • Other person instead of him or expressly providing that, he should not be re-appointed; or • (c) he has given the company written notice of his unwillingness to be re-appointed S. 357(2).

AUDITOR • QUALIFICATION OF AUDITORS: • A person shall be qualified to be appointed as a company auditor if, he is a member of a body of accountants in Nigeria e. g, ICAN and ANAN – S. 358(1) of CAMA.

AUDITOR • The following persons shall be disqualified for appointment as auditor of a company; • (i) an officer or servant of the company; • (ii) a person who is a partner of

AUDITOR • Or in the employment of an officer or servant of the company; • (iii) a person or firm who or which offers to the company, professional advise in a consultancy capacity, in respect

AUDITOR • Of secretarial, taxation or financial management; and • (iv) a body corporate. • See S. 358(2) of CAMA. • A person disqualified to be an auditor of a holding company or

AUDITOR • Subsidiary company cannot be qualified to be appointed an auditor of any other company that is , a member of that group of companies. • SPECIAL NOTICE: -

AUDITOR • A special notice is a notice given by a member to the company, at least 28 days before the holding of the general meeting, expressing desire to include a particular business in the agenda of the general meeting.

AUDITOR • S. 364(1) provides that, a special notice is required for a resolution at a general meeting of a company, for any of the following purposes; • (a) appointing as auditor, a person other than a retiring

AUDITOR • Auditor; or • (b) filling a casual vacancy in the office of auditor; or • (c) re-appointment as auditor a retiring auditor appointed by the directors to fill a casual vacancy;

AUDITOR • Or • (d) removing an auditor before the expiration of his term of office. • Copy of the special resolution must be sent to the concerned

AUDITOR • Auditor(s) that is, auditor to be appointed, to be retired, to be removed or to resign as the case may be, to enable him make representations to the company and request the company to circulate them to members of

AUDITOR • The company – S. 364(2) & (3) of CAMA. • However, the company or an aggrieved person may apply for court order that, the representation should not be sent out or read out on the

AUDITOR • Ground that, the right to do so, is being abused to secure needless publicity for defamatory matter.

AUDITOR • AUDITOR’S REPORT: • The auditor(s) of a company, shall make a report to the members on the account examined by him and on every balance sheet and profit and loss account and on all group

AUDITOR • Financial statements, copies of which are to be laid before the company in a general meeting, during the auditor’s tenure of office.

AUDITOR • A legal practitioner. • A similar report shall be made to the audit committee in the case of a public company. • See S. 359 of CAMA.

AUDITOR • REMOVAL OF AUDITORS: • An auditor maybe removed by ordinary resolution of which special notice was given notwithstanding, any agreement between them, before the expiration of his tenure provided

AUDITOR • He shall be paid compensation or damages for such termination, if he is entitled to them. • See SS. 362 & 364 of CAMA. • Notice must be given to CAC within 14 days of the removal.

AUDITOR • RESIGNATION OF AUDITOR(S): • SS. 365 & 366 provide for the resignation of auditor(s) and the right of a resigning auditor to requisition general meeting of the company respectively.

AUDITOR • An auditor may resign his appointment by depositing a notice of his resignation in writing at the registered office of the company. • Any such notice shall operate to end the auditor(s) appointment,

AUDITOR • On the date of which the notice is deposited or on a later date as maybe specified in the notice. • The notice of resignation shall not be effective unless, it contains either;

AUDITOR • (a) a statement that there are no circumstances connected with his resignation which he considers, should be brought to the notice of the members or creditors of the company; or • A statement of any such

AUDITOR • Circumstances connected with his resignation, which he considers, should be brought to the notice of the members or creditors of the company. • The company shall within 14 days of the deposit of the notice

AUDITOR • Of resignation, send to CAC or if court orders against sending the notice, shall send to CAC, a statement setting out the effect of the order. • Note that, an aggrieved person or the company may apply to

AUDITOR • Court, within 14 days of the receipt of the notice, containing statement that, the notice of resignation should be brought to the notice of members or creditors, for an order that the auditor is using the notice to

AUDITOR • Secure needless publicity for defamatory matters. • It is upon such an application that, the court may order that such notice may or may not be sent. See S. 365 of CAMA.

AUDITOR • By the provisions of S. 366(1) of CAMA, an auditor may deposit together with his notice of resignation containing statements that the notice of his resignation should be brought to the notice of the members or

AUDITOR • Creditors, a requisition signed by him, calling the directors to convene an extra-ordinary general meeting of the company for the purpose of receiving and considering such explanation, of the circumstances connected

AUDITOR • With his resignation, as he may wish to place before the meeting. • Copies of the statement need not be sent out and the statement need not be read out at the meeting if, on the

AUDITOR • Application either of the company or of any other person who claims to be aggrieved, the court is satisfied that, the rights conferred by this section, are being abused to secure needless publicity for defamatory matter.

AUDITOR • An auditor who has resigned his office shall be entitled, to attend any general meeting convened on his resignation or at which his term of office would have expired or at which it is proposed to fill the vacancy

AUDITOR • Caused by his resignation and to receive all notices of and other communications, relating to any such meeting, which any member of the company is entitled to receive, and to be heard at any such meeting,

AUDITOR • Which concerns him as former auditor of the company. • See S. 366 of CAMA.

AUDIT COMMITTEE • Audit committee is applicable to only public companies. The purpose of setting it up is to act as watchdog on the company’s records and accounts, ensures probity by moderating the expenses incurred by the

AUDIT COMMITTEE • Company, help the external auditor(s) in performing their duties, makes it impossible for the internal and external auditors to liaise and defraud the company and questioning the directors on the findings of the

AUDIT COMMITTEE • Auditor(s). • COMPOSITION OF THE AUDIT COMMITTEE: • The audit committee is made up of an equal number of directors

AUDIT COMMITTEE • And representatives of the shareholders of the company, subject to a maximum of 6 members. • Nomination of a shareholder as a member of the committee maybe made by a member,

AUDIT COMMITTEE • Giving notice of such nomination to the secretary of the company at least, 21 days before AGM. • A member appointed to the committee maybe re-elected annually and shall not be entitled to remuneration – S. 359

AUDIT COMMITTEE • OBJECTIVES AND FUNCTIONS OF AUDIT COMMITTEE: • S. 359(6) of CAMA provides that, subject to other additional functions and powers that a company’s articles may stipulate, the following shall be the

AUDIT COMMITTEE • Objectives and functions of the audit committee; • (a) to examine the auditor’s report and make recommendations thereon to AGM.

AUDIT COMMITTEE • (b) to ascertain that the accounting and reporting policies of the company are in accordance with the legal requirements and agreed ethical practices; • (c) to review the scope and planning of audit requirements

AUDIT COMMITTEE • planning of audit requirements (d) to review the findings on management matters in conjunction with the external auditors and departmental responses thereon; • (e) to keep under review the

AUDIT COMMITTEE • Effectiveness of the company’s systems of accounting and internal control; • (f) to make recommendations to the board of directors regarding the appointment, removal and remuneration of the external

AUDIT COMMITTEE • Auditors of the company; and • (g) to authorize the internal auditors to carry out investigations into any activities of the company, which maybe of interest or concern to the committee.

ANNUAL RETURNS • Annual Returns is one of the returns made by a company to CAC. • S. 370 provides that, every company shall, once at least in every year, make and deliver to CAC, an annual return provided

ANNUAL RETURNS • That a company need not make a return either, in the year of its incorporation or, is not required by S. 213, to hold AGM during the following year. • FORM OF ANNUAL RETURN: -

ANNUAL RETURNS • The ANNUAL return shall be in the following form; • (a) Schedule 8, which is for company having share capital other than small company-S. 371 • Schedule 9, which is for small

ANNUAL RETURNS • Company-S. 372; and • Schedule 10, is for company limited by guarantee –S. 373. • TIME FOR COMPLETION OF ANNUAL RETURN: • Annual return must be

ANNUAL RETURNS • Completed within 42 days after AGM for the year and the company must forthwith forward to CAC, a copy signed by a director and the secretary of the company.

ANNUAL RETURNS • CONTENTS OF ANNUAL RETURN BY COMPANY HAVING SHARE CAPITAL OTHER THAN SMALL COMPANY: • (a) address of the registered office;

ANNUAL RETURNS • (b) situation of the register of members and the register of debenture holders; • (c) summary of share capital and debentures; • (d) particulars of indebtedness;

ANNUAL RETURNS • (e) list of past and present members; and • (f) particulars of directors and secretary. • DOCUMENTS TO BE ANNEXED TO ANNUAL RETURN: -

ANNUAL RETURNS • Subject to the provisions of S. 377, exempting unlimited companies and small companies, the annual returns must have annexed to it, the following; • (a) a written copy, certified by a director and the secretary to be

ANNUAL RETURNS • True copy of every balance sheet and profit and loss account laid before the company in general meeting, held in the year to which the return relates; • (b) a copy certified by a director and the secretary of the

ANNUAL RETURNS • Auditor’s report and the report of the directors accompanying the balance sheet. • If a balance sheet after laying it before the general meeting is amended, it must be stated on the balance sheet that is

ANNUAL RETURNS • Delivered to CAC, as annexure to the annual returns -375. • In the case of a private company whether small company or limited by guarantee, the annual return will be accompanied by

ANNUAL RETURNS • The following; • (a) a certificate by a director and the secretary of the private company, to the effect that, the company has not since the date of its incorporation or last annual return, as the case maybe

ANNUAL RETURNS • Issued any invitation to the public to subscribe for any of its shares or debenture; • (b) where the annual return discloses the fact that the number of members of the company exceed 50 also, a

ANNUAL RETURNS • Certificate signed by a director and the secretary that the excess number consists wholly of persons who under S. 22(3) are not included in reckoning the number of 50; • (c) a small company in addition

ANNUAL RETURNS • To the above certificates, shall send with the annual report, a certificate signed by a director and the secretary that it is a small company, containing all the conditions specified in SS. 351 & 376(2) of CAMA, to

ANNUAL RETURNS • Qualify as a small company. • See S. 376 of CAMA generally.