By Kayode Tokede
Investigation has revealed that three audit firms cornered 50 per cent of audit jobs in Nigeria’s banking industry under a monopoly. This shows that a total of 12 commercial banks operating in Nigeria paid these three auditing firms, PricewaterhouseCoopers (PWC), KPMG, and Ernst & Young a accumulative sum of N5.1 billion in 2017, information gathered by Nigerian NewsDirect has revealed.
According to NewsDirect findings, charges by the big three auditing firms on Nigerian Banks increased by 15 per cent year on year earnings of about N4.44 billion from the same 12 commercial banks in 2016.
Nigerian NewsDirect can exclusively report that leading Central Bank of Nigeria (CBN) Domestic-Systemic Important Banks (D-SIBs), United Bank for Africa (UBA), FBN Holdings, Access Bank Plc and Guaranty Trust Bank Plc were audited by PWC.
The other two D-SIBs, Zenith Bank Plc and Diamond Bank Plc were audited by KPMG.
KPMG also audits the books of Union Bank of Nigeria Plc, Wema Bank and Stanbic IBTC Holdings Plc while Ernst & Young over the years audits Fidelity Bank Plc and Sterling Bank Plc.
PWC in 2017 earned N2.7 billion from the above banks, an increase of about 15 per cent from N2.35 billion in 2016. Auditing six commercial banks, KPMG was next as the audit firm earned N2 billion in 2017 an 15.2 increase from the N1.74 billion received as fees in 2016.
However, for Ernst & Young, the company generated N415 million from two commercial banks, Fidelity Bank Plc and Sterling Bank in 2017, an increase of about 18.9per cent from N349 million in 2016.
Further findings by Nigerian NewsDirect revealed that commercial banks with large subsidiaries pay more fees to auditing firms as checking of their books involved more assets home and abroad.
Specifically, FBN Holdings with various business groups-Commercial Banking, Insurance, Merchant Banking & Asset Management and others paid PWC N856 million in 2017 from N803 million the firm collected in 2016.
Also, PWC earned N712 million from GTBank in 2017 from N596 million in 2016 while UBA paid the same auditing firm N607 million in 2017, an increase of about 24 per cent from N490 million in 2016.
However, Access Bank paid PWC N529 million in 2017, 15 per cent increase over N460 million in 2016.
GTBank noted that auditor’s remuneration represents fees for both the interim and full year audits of the Group and Bank.
According to GTBank, “the auditors’ professional fees in the sum of N8.4 million for non-audit service (certification of financial covenant with the Bank’s foreign lenders) rendered during the year. This service, in the Bank’s opinion, did not impair the independence and objectivity of the external auditor.”
Of the six firms audited by KPMG, Zenith Bank paid the firm highest value in the year under review at N693 million in 2017 from N626 million in 2016, followed by Stanbic IBTC Holdings’ N340 million and ., N324 million in 2017.
Meanwhile, Union Bank paid KPMG N249 million in 2017 from N180 million in 2016 while Wema Bank and Diamond Bank paid the same auditing firm N120 million and N220million in 2017 respectively.
A chartered accountant explained to Nigerian NewsDirect that charges by auditing firms are based on economic realities, stressing that adaptation of International Financial Reporting Standard has aided increased auditing charges in companies operating in Nigeria.
An accountant, Mr. Adebayo Adeleke attributed the hike in auditors’ fees to assets expansion.
According to him, “Auditors’ fees increased in 2017 due to increase in cost of work since balance sheet of commercial banks has increased and more volume of work is expected from auditors to do the job in a short period of time.
“Aside that, most auditors are always making provision for inflationary hike for a year.”
He noted that auditors do not increase their firms, stating that audit committee of companies that comprises shareholders are in-charge of auditors’ remuneration.
Another chartered accountant who does not want his name in print said, audit fee is charged based on the knowledge and skills that an audit firm uses for the process as well as the time taken for the assignment.
“Fees charged depend on the complexity of the assignment, risk and the time spent on a particular assignment.
“Banks’ audit is very risky and you don’t expect audit firms to send audit assistants. Most of the time such audits will be handled by audit seniors and above. The audit fee for banks will therefore tend to be higher,” he explained.
However, with greater market demand for new technologies and innovation in audit and the increasing demands of the regulatory environment, it seems likely that fees will inevitably rise over the coming years.
“Society also seems to be demanding more than what the traditional audit delivers and our clients, together with the profession and the regulator, need to respond to meet this need,” he added.