Accounting Failures 101: Overstatement of Account Receivables

In this new series, we will beam our search light on past and present accounting and audit failures in the financial reporting of organisations. The purpose of this is to re-educate ourselves on past failures that we need not repeat.

Background

This first episode is on the overstatement of account receivables of a company. On March 20, 2017 the Public Company Accounting Oversight Board (PCAOB) sanctioned Wander Rodrigues Teles, the former partner of PricewaterhouseCoopers Auditores Independentes in Brazil (PWC Brazil) for audit failures and violations of PCAOB rules and standards in connection with the audit of the consolidated financial statements of Sara Lee Corporation for the fiscal year ended July 3, 2010 and July 2, 2011.  

FEDERAL HIGH COURT NULLIFIES N50 STAMP DUTY ON BANK DEPOSIT

On 13 March 2017, in the case between Retail Supermarkets Nigeria Limited (AKA Shoprite) and the defendants Citibank Nigeria Limited (Citibank) and Central Bank of Nigeria (CBN), a Federal High Court (FHC) delivered a judgment on the validity of the circular issued by Central Bank of Nigeria (CBN) referenced CBN/GEN/DMB/02/006

The issue considered in the case is determining if the CBN circular aligns with the provisions of the Stamp Duties Act (SDA). The FHC held that the provisions of the CBN circular are inconsistent with the provisions of the SDA and as such are null and void.

Background of the Case

CBN issued a circular on 15 January 2016, mandating all banks and other financial institutions to enforce collection of ₦50 stamp duty on all electronic transfers and teller deposits from ₦1,000 and above.

WHAT HAS CHANGED ABOUT THE AUDITORS’ REPORT?

Over the years, companies have grown in leaps and bounds and so also have the complexities of these companies. Financial reporting is also becoming more complex with more room for estimates and management judgements. To effectively assure users and shareholders of the truth and fairness of these financial statements, the International Audit and Assurance Standards Board (IAASB) has come up with changes to make the auditors’ report a useful guide for shareholders. 

Before now, the auditors’ page carries less weight beyond the opinion paragraph. It fails to reveal the underlying challenges of the company identified during the audit exercise. With increasing company failures and near-failures, the auditors’ report has been revamped to show more than just the opinion paragraph.

So what are the changes in the auditors’ report? What do you need to know about the new auditors’ report? Well, quite a lot.