By Okechukwu Nnodim

The Securities and Exchange Commission has called on members of audit committees of quoted companies to uphold the standards of corporate governance when dealing with management and shareholders of their respective firms.

According to SEC, the slow recovery from the global economic crisis and the yearning for cost efficiency and growth have continued to put financial reporting and compliance systems and processes to test.

The Director-General, SEC, Ms. Arumah Oteh, in her keynote address at an audit committee conference in Lagos, said there had been an increased focus on the role of the audit committee in the emergence of credible financial reporting and good governance culture in the business environment.

She said, “The role of audit committee in the entrenchment of financial reporting standards and corporate governance in public companies cannot be over emphasised. The World Economic Forum ranked Nigeria 127 out of 139 countries on the 2010/11 Global Competitive Index while Ghana was ranked 114; South Africa, 54; Brazil 58 and Malaysia, 26.”

Oteh added that in the area of corporate governance with strength of auditing and reporting standards, Nigeria ranked 130; Ghana, 73; South Africa, 1; Brazil, 94 and Malaysia, 32.

She said, “It is evident from the above that corporate governance in the world today is a competitive tool. It is a tool of true advantage to the investors, the firm and the nation at large.

“On the other hand, the financial crises had also underscored the importance of developing a competitive economic environment, which is only achievable through the entrenchment of corporate governance standards in our business entities.”

While calling on audit committees to always ensure vigilant oversight functions to safeguard the interest of public companies, shareholders and the Nigerian economy, Oteh said the right persons, who understood the business, must be chosen as members.

She noted that each member of the committee must be capable of understanding the financial reporting issues and complexities arising from the company’s business activities, adding that he must take active role in determining the committee’s agenda.

According to her, audit committees should ask the following questions: “Do we have the right relationship with management? Is it clear who works for whom? Do we insist on transparency, both internal transparency – between management and the audit committee – and external transparency? Do we speak our minds, listen, and build consensus? Do we take a hard look at our committee’s performance and assess the performance of individual committee members?”

Source: Punch