The forensic audit conducted by PWC on NNPC to ascertain the veracity of the alleged missing $20 billion from the Federation account is generating furor and counter claims among stakeholders. PWC had qualified the audit saying it did not obtain needed information from NPDC a subsidiary of NNPC.
The qualification of the audit report has cast doubt on the reliability of the report. A source who has a working knowledge of the audit report at PriceWaterhouse told Vanguard that what the auditors did was a review and not a forensic audit. He said “It is not an auditing job. It is a review of what has happened and you are expected to present a report. The qualification in the audit report is a normal qualification.
“When you are given a job there are procedures for doing the job based on agreement with the client. So you want to put a caveat so that others would not use it or rely on it for decision making. It is also to protect the company from any legal action that may arise from the job.
President Institute of Chartered Accountants of Nigeria Mr. Chidi Onyeukwu Ajaegbu (FCA) told Vanguard that an account is qualified when the auditors do not agree with the auditee on some issues. He said there are two levels of qualifying an account, modification and actual qualification. He said the qualification could be expressed on strong terms or mild terms. He said a qualified account call for further instigation. He said that the NNPC case is that of material qualification where a unit being audited did not provide the needed material substance. He said the reason given by PWC was enough to qualify the account. He further said that auditors qualify accounts to shed themselves from blame by potential users of the account when they discovered some misstatement or representation in the account.
PricewaterhouseCoopers in their introductory letter addressed to Nigeria’s Auditor General, the audit firm said findings in its 199-page report were limited to available information and did not constitute a review in accordance with generally accepted standards. The report said “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”. PWC said that the report “was solely for the Office of the Auditor-General for the Federation, for their internal use and benefit and not intended to, nor may they be relied upon, by any other third party. The firm concluded that the NNPC should refund to the government a minimum of $1.48 billion of missing oil funds, a figure many Nigerians believe is smaller than the likely actual figure.
The report did not give strong and independent opinion of its findings despite saying the investigation was carried out using forensic techniques.
PWC in its report said “We did not obtain any information directly from NPDC, but in accordance with NPDC former Managing Director’s (Mr Briggs Victor) submission to the Senate Committee hearing on the subject matter, for the period, NPDC generated $5.11billion (net of royalties and petroleum profits tax paid). We have relied on the Legal Opinion provided to the Senate Committee by the Attorney General (AG) on the subject of the transfers of various NNPC (55%) portion of Oil leases (OMLs) involved in the Shell (SPDC) Divestments which impact crude oil flows in the period. The AG’s opinion indicated that these transfers were within the authority of the Minister to make. Thus, these assets were validly transferred to NPDC. The same AG’s Legal Opinion also indicated that NPDC was to make payments for Net Revenue (dividend) to NNPC, which should ultimately be remitted to the Federation Account. A sale will mean the following should be due to be remitted to the Federation accounts; Petroleum Profit Taxes (PPT); Royalties; Signature bonus payment Dividend from profit for the period (according to dividend declared in line with NPDC’s dividend policy)
“We have not obtained any information that suggests that NPDC has been assessed for
PPT and Royalty for the review period. However, as disclosed by the former MD of
NPDC at the senate hearing, NPDC had done a self assessment of PPT and Royalty and had unpaid self assessed PPT and Royalty to the tune of $0.47 billion related to the review period.
“The resulting potential excess remittance indicates that the Corporation operates an
unsustainable model. Forty six percent (46%) of proceeds of domestic crude oil revenues for the review period was spent on operations and subsidies. The Corporation is unable to sustain monthly remittances to the Federation Account Allocation Committee (FAAC), and also meet its operational costs entirely from the proceeds of domestic crude oil revenues, and have had to incur third party liabilities to bridge the funding gap.
“We therefore recommend that the NNPC model of operation must be urgently reviewed and restructured, as the current model which has been in operation since the creation of the Corporation cannot be sustained. The report reflects the fact that $3.38 billion was spent on DPK subsidy for the review period. We also confirmed using third party vessel tracking platforms that all vessels carrying NNPC cargoes arrived in Nigeria within the periods disclosed by PPPRA.
A major consideration centers on the ownership of oil and gas assets controlled by NPDC. Subject to additional information being provided, we estimate that the NNPC and NPDC should refund to the Federation Account a minimum of $1.48billion. A determination is required as to whether all or a portion of ‘other costs not directly attributable to crude oil operations can be defrayed by NNPC.
According to Audit Opinion a guide for auditing, an auditor’s report is a formal opinion, or disclaimer thereof, issued by an auditor as a result evaluation performed on a legal entity. The report is subsequently provided to a “user” (such as an individual, a group of persons, a company, a government, or even the general public, among others) as an assurance service in order for the user to make decisions based on the results of the audit.
The Guideline said that an auditor’s report is considered an essential tool when reporting financial information to users, particularly in business. Since many third-party users prefer, or even require financial information to be certified by an independent external auditor, many auditees rely on auditor reports to certify their information in order to attract investors, obtain loans, and improve public appearance. Some have even stated that financial information without an auditor’s report is “essentially worthless” for investing purposes
It said that auditor’s reports on financial statements are neither evaluations nor any other similar determination used to evaluate entities in order to make a decision. The report is only an opinion on whether the information presented is correct and free from material misstatements, whereas all other determinations are left for the user to decide.
According to the President of the Institute of Chartered Accountants of Nigeria Chidi Onyeukwu Ajaegbu a qualified opinion report is issued when the auditor encountered one of the two types of situations which do not comply with generally accepted accounting principle. The two types of situations which would cause an auditor to issue this opinion include
Single deviation from GAAP – this type of qualification occurs when one or more areas of the financial statements do not conform to GAAP (e.g. are misstated), but do not affect the rest of the financial statements from being fairly presented when taken as a whole.
Limitation of scope – this type of qualification occurs when the auditor could not audit one or more areas of the financial statements, and although they could not be verified, the rest of the financial statements were audited and they conform to GAAP. is modified accordingly and an explanatory paragraph is added to explain the reason for the adverse opinion after the scope paragraph but before the opinion paragraph. However, the most significant change in the adverse report from the qualified report is in the opinion paragraph, where the auditor clearly states that the financial statements are not in accordance with GAAP, which means that they, as a whole, are unreliable, inaccurate, and do not present a fair view of the auditee’s position and operations.
