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Oando: SEC-ordered forensic audit boosts shareholders’ confidence

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The recent move by the Securities and Exchange Commission to commence the long-awaited forensic audit on Oando Plc has rekindled the hopes of shareholders, writes STANLEY OPARA

After the apex regulator of the country’s capital market, the Securities and Exchange Commission, directed the forensic auditors it appointed to resume the probe of Oando Plc based on petitions from some shareholders of the company, more shareholders have expressed optimism over the fate of their investments and the Nigerian capital market at large.

They say the move shows a respect for global best practices and due diligence, adding that a new precedence has been set in the country’s capital market as far as regulation and monitoring are concerned.

Describing the development as “long-awaited,” the shareholders maintain that it is only proper that things are put in perspective with proper accountability and stewardship promoted.

SEC had on March 6, 2018 instructed an audit firm, Deloitte, to start the hitherto planned forensic audit on Oando, and according to its Acting Director-General, Dr. Abdul Zubair, the decision was based on some of the findings from a preliminary investigation, which prompted the commission to take steps to preserve the shareholder value of the firm and protect the investing public.

The National President, Progressive Shareholders Asociation of Nigeria, Mr. Boniface Okezie, tells our correspondent that the development is a positive one and very commendable owing to the fact that SEC has never declined to go on with the audit despite the initial pressure from some quarters to stop the move.

Notwithstanding the initial  delay in the process, he commends the regulator, saying the respect for court proceedings by SEC depicts an act of responsibility and decorum by the regulator.

But he canvasses that the audit assignment should be carried out at the lowest possible cost, so that at this time of resource dearth, excess spending is minimised.

Minister of Finance, Mrs. Kemi Adeosun loans
Minister of Finance, Mrs. Kemi Adeosun

Okezie says, “SEC as the regulator needs to ensure the timetable of the audit assignment is followed. This is because we need to conclude this matter as quickly as possible and forge ahead. We dwelt on this issue for too long, which is not constructive.

“We are calling for a speedy process so that, if possible, the suspension on trading of the company’s shares on the floor of the Nigerian Stock Exchange could be lifted with normalcy returning.”

In the same vein, the National President, Constance Shareholders Association of Nigeria, Alhaji Shehu Mikail, says the commencement of the forensic audit is a welcomed development if the process will continue on a transparent note.

He says, “Shareholders and other stakeholders should be kept abreast of proceedings and happenings. This whole Oando incident had done more ills than good to the market. This is an opportunity we now have to do things right and register our virtues in the heart of investors and other industry watchers.

“For SEC to have come this far in its quest to prove a point, I believe this recent move will be for the good of all, with the economy inclusive. We need to instill confidence on our systems and agencies. That is what should be on the mind of every Nigerian. It is time to do things right.”

Mikail says he is confident that Deloitte, being an audit firm of international repute, is qualified to handle the assignment and present its findings in a true and fair manner, while adhering strictly to global best practices.

The SEC DG recently revealed that prior to its latest decision to see the audit process through, two law suits were filed by Oando and some shareholders of the company to restrain SEC and the NSE from effecting the technical suspension on the shares. The company (Oando) was challenging the decision of SEC to appoint a team of forensic auditors to conduct an audit of its affairs.

But on March 5, Oando withdrew the pending law suit against SEC by an application heard and granted by the Court of Appeal.

The SEC DG, while confirming the development, said the application for withdrawal by the shareholders had also been heard and granted by the federal court on February 21, stating that following the striking out of the two suits, SEC through its auditor, Deloitte, would be proceeding with the forensic audit.

Meanwhile, the General secretary, Ibadan Zone Shareholders Association, Mr. Eric Akinduro, says the issue of the forensic audit on Oando is non-negotiable if SEC must live up to its regulatory responsibilities.

Akinduro maintains that, “This is one thing SEC must do in this case. It is its responsibility. It will bring confidence to the market especially among minority shareholders. That is the primary function of SEC. The move will give us a good image as a serious people.

“The international community will smile at this development, and will continue to watch how the exercise will be executed. Even if the status quo remains, the gain will be that the audit was finally done and executed properly.”

SEC had, after carrying out a comprehensive review of the petitions received from the shareholders -Alhaji Dahiru Barau Mangal and Ansbury Incorporated-against Oando , had made the following findings among others: breach of the provisions of the Investments & Securities Act 2007; breach of the SEC Code of Corporate Governance for Public Companies; suspected insider dealing, related party transactions not conducted at arm’s length; discrepancies in the shareholding structure of Oando Plc.

In a report, SEC said then that, “The commission notes that the above findings are weighty and, therefore, needs to be further investigated. After due consideration, the commission believes that it is necessary to conduct a forensic audit into the affairs of Oando.

“This is pursuant to the statutory duties of the Commission as provided in section 13(k), (n), (r) and (aa) of the ISA 2017. “To ensure the independence and transparency of the exercise, the forensic audit shall be conducted by a consortium of experts made up of auditors, lawyers, stockbrokers and registrars. To further ensure that the interests of all shareholders of Oando Plc are preserved during the course of the exercise, the commission directed the NSE to place the shares of Oando Plc on technical suspension.”

On February 6, 2018, the spokesperson for Oando, Alero Balogun, told our correspondent in a telephone interview that following SEC’s resolve to go ahead with the planned audit, the company would cooperate with the regulator, but would not fail to seek legal redress.

“Despite our objections to the forensic audit, the company will like to reiterate that it recognises and respects the authority of the commission and in the spirit of cooperation, transparency and full disclosure, the company will comply with the directives of the commission while reserving its legal rights in this matter,” Balogun stated.

Interestingly, a recent report by Premium Times, an online publication cited ‘payment to the external auditors and other logistic concerns’, as the cause of the delay in the forensic audit of Oando by SEC.

On the prevailing SEC and Oando issue, the Minister of Finance, Mrs. Kemi Adeosun, had said, “The integrity of the capital market is vital to the growth of the Nigerian economy and must be managed in an orderly and transparent manner to ensure investors’ confidence. Its leadership must maintain and be seen to maintain the highest standards of integrity.

“The original decision taken by SEC on October 20, 2017 to suspend the shares of Oando Plc and conduct a forensic audit, was approved and endorsed by the Federal Ministry of Finance. The SEC team, led by Mr. Mounir Gwarzo, then presented adequate evidence to the Minister of Finance and her team, that Oando Plc had a clear case to answer with regard to infractions of the ISA.

“No contrary evidence has been presented and thus, the investigative work on Oando and all other ongoing investigations being undertaken by SEC in the discharge of its statutory functions have continued.

“For the avoidance of doubt, there was no directive whatsoever to discontinue investigation into Oando and this was reiterated to the current SEC leadership at the formal handover meeting. The fact that the investigation has continued further corroborates that this is the minister’s position.”

Meanwhile, Oando, on March 1 this year, said there would be a delay in the release of its financial results for the 12 months ended December 31, 2017 as the Financial Reporting Council of Nigeria had indicated interest in undertaking a more detailed review of the company’s audited financial statements.

According to Oando, the show of interest is part of the FRC statutory review due to the issues raised by the recent investigation of the company by SEC.

While informing its shareholders and key stakeholders in a letter, the oil firm said it envisaged that the FRC’s review might take longer than originally anticipated.

Oando said, “The company may not be able to file the accounts until the second week in May, the exact date of filing will be dependent on the turnaround time at the FRC. Oando Plc apologises for any inconvenience caused and will update the market in due course.”

The development, Oando noted, was expected because of the ongoing SEC forensic audit of the company. The forensic audit was precipitated by the alleged findings of SEC, following an investigation into the company which commenced in July 2017.

Oando said that for three consecutive quarters it had released its results on time and posted strong revenues and profits, despite a challenging environment.

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