…to enterprise risks, sustainability
Audit committees in Nigerian organisations are facing broader oversight responsibilities as businesses prepare for new financial reporting requirements, mandatory sustainability disclosures and the growing use of artificial intelligence.
Experts emphasised that organisations need to expand beyond assessing financial statements to reviewing potential problems or uncertainties that could prevent an organisation from achieving its business objectives and remaining competitive.
Emmanuel Adekahlor, country managing partner, Ernst & Young(EY), made reference to the implementation of IFRS 18 set to commence in 2027, and implored audit committees to ensure organisations comply with the standards required and develop a plan for the transition.
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The new standard will change how companies classify and present income and expenses in their financial statements, requiring businesses to reorganise their profit and loss statements under standard categories, including operating, investing and financing activities.
He said companies must first conduct a gap assessment to identify differences between their current reporting practices and the new requirements.
“Has management done the gap assessment in terms of what we are doing today versus what needs to happen from 2027?” he said at the EY Audit Summit held in Lagos.
Adekahlor said audit committees should also establish whether companies need to review their chart of accounts, reporting systems, internal controls and processes to accommodate the changes, and external auditors ought to be involved from the beginning of the transition to avoid disagreements with management.
For listed companies, he said committees should examine how finance teams would work with investor relations teams to communicate the changes to shareholders.
Olayinka Oyetunji, associate partner at EY, examined Nigeria’s economic outlook and noted that improvements in economic growth, foreign exchange stability and external reserves had yet to translate into lower operating costs for businesses and improved purchasing power for households.
She said high energy costs continued to increase transportation, freight and logistics expenses, while Nigeria’s 23 percent monetary policy rate made access to credit expensive for businesses.
Oyetunji also identified rising public debt and debt servicing costs as major concerns, warning that about 43 percent of government revenue was projected to go towards debt servicing in 2026.
She said insecurity could weaken agricultural production, worsen food inflation and discourage investment, while uncertainty surrounding the 2027 elections could affect investor confidence and policy continuity.
“Macroeconomic gains have to be translated into micro, and that is what sustainable growth really is about”, she said.
She urged audit committees and board members to encourage businesses to diversify their suppliers, increase local sourcing, improve energy efficiency and strengthen liquidity and working capital management.
The summit also emphasised that audit committees should ensure organisations adopt technology responsibly while putting safeguards in place to manage risks associated with its use.
Kadulechi Ezeogu, lead technology assurance, said businesses needed to identify how AI could support their strategies, improve efficiency and drive growth, rather than adopt the technology without a clear purpose.
Ezeogu noted that employees were increasingly using generative AI tools in their daily work, raising concerns about data privacy and how information shared with these platforms was handled.
She said organisations should not prevent employees from using AI, as doing so could limit efficiency, but must establish rules to guide its use.
“How do we ensure privacy? And so we start asking, what are the use cases? It’s not about stopping and preventing them from doing this because we have to continue to enable efficiency,” she said.
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She stated AI has been in existence since the late 70s, but the post-COVID era made it more popular, and so, audit committees must ensure management provides proper oversight and promote responsible adoption of the technology.
“There’s a need to provide the right oversight to ensure responsible use of AI and ensure adaptability within the organisation”, she said.
Audit committees and organisations must therefore strengthen their oversight structures, equip their teams with the necessary skills and put appropriate systems in place to prepare for changing reporting requirements, manage emerging risks and ensure that new technologies such as AI are used responsibly.
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