In the course of the review of the 2010 audited accounts submitted to National Insurance Commission (NAICOM) by the above named companies, some errors/lapses were observed and communicated accordingly to the companies by NAICOM. Rather than deal with the issues raised in the accounts, the companies provided entirely different sets of accounts, incorporating items that were not originally included in the accounts under review. Curiously, the different sets of accounts were signed by the same firm of chartered accountants (External Auditors).

The matter was brought to the attention of the Financial Reporting Council (FRC).

The Council requested the two companies to submit the versions they regarded as the Financial Statements that should be relied upon. The Financial Statements sent to the Council were reviewed and several non compliance with Statements of Accounting Standards were also observed.

The companies’ managements were invited for inspection by letters dated June 01, 2012. Thereafter, several meetings were held with teams from both companies, drawing their attention to matters of non-compliance with some Statements of Accounting Standards, several financial reporting irregularities and corporate governance issues in the said financial statements for the year 2010 which they submitted to the National Insurance Commission (NAICOM) and separately to the Financial Reporting Council.

On  July 31, 2012, a closing meeting was held with the team from both companies, with representatives of their External Auditors (both disengaged and new), Asset Management Corporation of Nigeria (AMCOM), Institute of Chartered Accountants of Nigeria (ICAN) and NAICOM in attendance, The following issues were taken into consideration before reaching a decision:

The non consolidation of their subsidiaries, the several accounting abuses noted in the said 2010 financial statements, the tax issues (non disclosures) dating from 2007 and the liabilities now unnecessarily held by AMCOM are strong enough to mislead a significant stakeholder

  1. The corporate governance of the companies is opaque and very worrisome.
  2. The policyholders are exposed to untold risks due to the inadequacy of the asset cover and poor solvency margin of the companies.
  3. The approach to changing External Auditors and the confusing assignment given to them are questionable.

Accordingly, the FRC has informed both companies that the underlisted actions are the arrangements that will lead to amicable resolution of the contraventions. They were directed to bring this to the attention of their Board immediately.

a) The companies are directed to refrain from engaging any External Auditors on the said 2010 accounts and financial statements and submit itself to the National Insurance Commission; their primary regulator.

b) NAICOM has been notified to suspend the managements of the companies and appoint interim managements which shall recommend a firm of External Auditors to NAICOM (and FRC) to carry out a substantive audit of the companies.

c) The organisations are to publish, within the next seven business days  and not later than August 10, 2012, in at least two widely read national newspapers (full page), that the managements of the companies have presented misleading financial information to regulatory authorities and that in the interest of policyholders interim managements shall be appointed by NAICOM.

d) FRC shall post the information on its website and inform other relevant regulatory agencies accordingly.

They are also required to furnish the FRC with the following documents as agreed at the meeting:

–      The Financial Statements of Fidelity Bond Limited for 2010;

–      The Board minutes that led to the appointment of AAE Professional Services and Baker Tilly  Nigeria (Chartered Accountants); and

–      Management letter issued by the external auditors of Fidelity Bond Limited for the year 2010.


The companies were duly informed of the implication of non-compliance with the directives of the FRC as it may result in administrative, civil and/or criminal sanctions.

Decision meeting on the external auditors involved in the matters on the two companies has been scheduled for August 13th, 2012 with NAICOM and the Investigative Committee of their professional body in attendance.

August 3, 2012