Nigerian companies need to strengthen financial reporting, internal controls and corporate governance to improve transparency, accountability and investor confidence, Peter Asemah, Partner at Kreston Pedabo, has said. In this interview, he discusses persistent reporting weaknesses, the role of the Financial Reporting Council of Nigeria (FRC), preparations for the implementation of IFRS 18 and reforms needed to strengthen the country’s financial reporting framework.
Peter Asemah is a Partner at Kreston Pedabo, a leading professional services and assurance firm in Nigeria. Based in the firm’s Lagos office, he has extensive experience in audit, assurance and advisory services, working with clients across diverse industries to enhance financial reporting, strengthen governance and support regulatory compliance. He is recognised for his client-focused approach, technical expertise and commitment to delivering high-quality professional services. He works closely with business leaders and stakeholders to provide practical insights that support sustainable growth, operational efficiency and sound financial management.
The Financial Reporting Council of Nigeria (FRC) continues to play an important role in strengthening financial reporting standards and accountability. From your perspective as an audit partner, how has the evolving regulatory environment changed the way Nigerian companies approach financial reporting and statutory audits?
I would say the biggest shift is that companies are increasingly recognising that financial reporting goes beyond producing numbers; it requires supporting, explaining and defending those numbers. There is now greater emphasis on proper documentation, strong internal controls and compliance with IFRS requirements.
The FRC’s oversight has helped make financial reporting discussions more substantive, focusing not only on the accuracy of figures but also on the appropriateness of accounting treatments and the quality of disclosures. Ultimately, this contributes to stronger confidence in financial information among investors, lenders and other stakeholders. However, the level of compliance and commitment to transparency still varies across organisations.
Despite increased regulatory oversight, deficiencies in financial reporting continue to emerge. What are the most common reporting weaknesses or compliance gaps identified during audits, and why do these issues persist?
The recurring weaknesses we observe often relate to areas requiring significant management judgement. These include impairment assessments under IFRS 9, revenue recognition, fair value measurements, provisions, going-concern evaluations and related-party disclosures, among others.
In practice, this shows up in expected credit loss models built on limited historical data, fair value inputs that are not adequately supported, going-concern assessments that stop at 12 months without stress testing, and related-party records that are not kept up to date.
These challenges are often linked to capacity gaps, weaknesses in internal controls and, in some cases, business growth that has outpaced the development of governance structures. Addressing these issues requires investment in people and systems, as well as continuous training for both preparers and those charged with governance.
Auditors can only provide meaningful assurance when the underlying financial information is supported by sufficient appropriate evidence. What are the most common weaknesses you encounter in Nigerian companies, and how have regulatory expectations influenced the way audits are conducted?
I sometimes tell people that auditors are probably the only professionals who can ask for the same document three times and still be told, ‘We have already explained this to you!’ Often, that reflects stretched finance teams rather than bad faith. But audits are built on evidence, not explanations.
A recurring challenge is the gap between the figures reported in the financial statements and the supporting documentation. Incomplete reconciliations, weak records and insufficient evidence can increase audit risk and make it more difficult to support an audit opinion. This highlights the importance of strong record-keeping, effective internal controls and compliance with auditing and quality management standards.
Typical examples are bank and debtor confirmations that do not agree with the ledgers, and fixed asset registers that cannot be traced to the physical assets. Regarding regulatory expectations, FRC audit quality inspections and the requirements of ISQM 1 have pushed firms to document their judgements more fully, challenge management more rigorously and retain evidence that supports every key conclusion.
Investors and other stakeholders rely heavily on financial statements when making decisions. In your view, are current financial reporting practices providing stakeholders with a sufficiently clear picture of companies’ financial performance and position?
There has been considerable progress, and many organisations provide reliable financial information that supports informed decision-making. Nevertheless, there is still room for improvement in the quality and transparency of disclosures.
Stakeholders increasingly want to understand not only the numbers but also the underlying assumptions, risks, uncertainties and business drivers. Financial statements are most valuable when they tell the full economic story behind the numbers rather than merely satisfying disclosure requirements.
Related-party transactions are one area where the quality of disclosure can determine whether an investor really understands a company’s financial position. From your audit experience, where are the biggest weaknesses in the disclosure of related-party transactions in Nigeria, and what should the FRC be looking at more closely?
Related-party transactions remain a key focus area, as weak disclosures can obscure a company’s true financial position. Common issues include incomplete identification of related parties, inadequate disclosure of transaction terms and balances, and limited transparency around non-arm’s-length transactions. Beyond these, we often see key management compensation omitted, interest-free balances with no IFRS 9 assessment, and an assumption that related-party loans are exempt from expected credit loss assessment.
Auditors assess the substance of these relationships and transactions to ensure disclosures provide a fair and complete picture. The FRC can support this through effective monitoring, clear guidance and consistent enforcement, ensuring stakeholders have the information needed to make informed decisions.
A thematic review should cover both the disclosures under IAS 24 and the accounting for related-party balances, including expected credit loss assessments under IFRS 9, fair value on initial recognition of interest-free balances, and their current or non-current classification. It would show where the gaps are widest and help preparers close them.
Your organisation has also examined the implementation of IFRS 18, which introduces greater structure around operating profit, management performance measures and disclosures. What do you expect IFRS 18 to expose about the way Nigerian companies currently present performance, and could it make it harder for companies to hide weak underlying performance behind preferred metrics?
IFRS 18 will not prevent management from presenting its performance positively, but it will make it easier for investors to understand and evaluate that performance. By introducing a more consistent structure for presenting financial results and requiring greater transparency around management-defined performance measures, the standard will improve comparability across companies.
It is also expected to highlight inconsistencies in how some entities currently present alternative performance metrics by requiring clearer disclosures and reconciliations to the audited financial statements. As a result, it will be more difficult to emphasise preferred measures without adequately explaining the underlying performance. For auditors, this means increased focus on the classification, presentation and transparency of performance measures disclosed by management.
With IFRS 18 mandatory for periods beginning on or after 1 January 2027, many non-financial companies will see income such as investment returns and dividends move out of operating profit, so reported operating profit may fall without any change in profit before tax. Financial institutions are likely to be affected differently because lending and investing are part of their main business activities.
How prepared do you believe Nigerian companies are for IFRS 18 and other emerging reporting requirements, and what challenges do you anticipate during implementation?
Preparedness varies significantly depending on the size and maturity of the organisation. Large listed entities and multinational groups are generally more advanced in assessing the impact of IFRS 18 and preparing implementation plans. Smaller entities, however, may still be at the awareness stage.
The key challenges will likely involve identifying management-defined performance measures, redesigning reporting templates, updating systems and ensuring staff have sufficient technical knowledge to apply the standard consistently. Early planning, stakeholder engagement and adequate training will be critical to a smooth transition.
Practical steps include a trial restatement of the 2026 figures on the IFRS 18 basis, remapping the chart of accounts, identifying every performance measure used externally, including in investor presentations and press releases, and engaging lenders early on covenants.
Stronger regulatory expectations can be demanding for businesses, but they can also create opportunities for audit firms. How has increased emphasis on financial reporting quality enhanced your audit practice and opened doors to new clients?
Absolutely, it has created opportunities, but the bigger story is that companies increasingly recognise the value of getting financial reporting right. Greater regulatory scrutiny has reinforced the importance of high-quality audits and strong governance.
For audit firms, this has increased demand for services such as statutory audits, IFRS advisory, financial reporting reviews and internal control assessments, subject to applicable independence requirements. It has also shifted client conversations beyond cost and timing to how a robust audit process can strengthen controls, improve accountability and enhance the credibility of financial information.
One of the FRC’s notable governance initiatives in recent years has been Rule 14. What was the rationale behind its introduction, what concerns was it intended to address, and how effective has it been in practice?
Rule 14 was introduced to strengthen the responsibilities of external auditors when responding to actual or suspected non-compliance with laws and regulations that may have a material effect on the financial statements. More broadly, it seeks to enhance corporate governance, accountability and confidence in financial reporting.
Based on our experience, the rule has increased awareness of governance and compliance obligations among companies. We have also observed that some organisations were previously unaware of their obligations under the rule and related FRC requirements, prompting increased engagement and client education on their regulatory responsibilities. While implementation has presented some challenges, Rule 14 has generally encouraged stronger reporting practices and greater accountability within the financial reporting process.
If you were advising the FRC, corporate boards and audit committees on strengthening Nigeria’s financial reporting framework in 2026 and beyond, what three reforms would you prioritise to further enhance transparency, investor confidence and accountability?
I would prioritise: stronger board and audit committee oversight to enhance accountability and the quality of financial reporting, improved disclosure quality, particularly around significant judgements, estimates, risks and related-party transactions and greater regulatory awareness and compliance through continuous stakeholder engagement, education and effective enforcement.
Looking ahead to the next five years, what would success look like for Nigeria’s financial reporting ecosystem, and what role should the FRC, auditors, corporate boards and management collectively play in achieving that outcome?
Success in Nigeria’s financial reporting ecosystem would be reflected in greater stakeholder confidence, stronger governance and financial statements that accurately reflect economic reality. Achieving this requires regulators, boards, management and auditors to fulfil their respective responsibilities effectively in promoting transparency, accountability and integrity.
Ultimately, this would enhance investor confidence, improve access to capital and strengthen Nigeria’s reputation for high-quality financial reporting. Measurable signs would include fewer restatements and qualified opinions, more timely filings, and boards and management taking ownership of the numbers.