Obazee Questions KPMG, EY Independence Over CBN Audit and ₦50m Non-Audit Fees

 

President Bola Tinubu’s Special Investigator, Jim Obazee, has raised concerns over the independence of KPMG Professional Services and Ernst & Young (EY), the joint external auditors of the Central Bank of Nigeria (CBN), following the disclosure that each firm received ₦50 million for non-audit services relating to the apex bank’s internal control over financial reporting.

 

Obazee questioned whether the payment arrangement could create concerns about auditor independence, particularly as the two firms were also involved in providing assurance over the CBN’s internal controls.

 

He raised the concerns while speaking at the commissioning of the new headquarters of the Financial Reporting Council of Nigeria (FRC) in Lagos, where he urged the Council to subject the CBN’s 2025 audited financial statements to urgent regulatory scrutiny.

 

According to Obazee, the CBN’s financial statements showed that KPMG and EY each received ₦50 million for non-audit services connected with internal control over financial reporting.

 

He questioned whether the firms could maintain the required level of independence when providing audit and assurance services to the same institution while simultaneously receiving fees for non-audit engagements.

 

Obazee, however, noted that the payment did not automatically establish that the auditors had breached independence requirements, but argued that the arrangement raised issues that warranted examination by the FRC.

 

“Will CBN accept this kind of Financial Statements from any of the Deposit Money Banks? Will the joint auditors have issued a different opinion and/or allowed this kind of financial statements from any of their clients other than the CBN?” he asked.

 

The former FRC boss said the issue should be considered against the broader responsibility of auditors to provide independent assurance to users of financial statements.

 

He questioned whether the same accounting and auditing arrangements would have been accepted if the client had been one of Nigeria’s Deposit Money Banks rather than the country’s central bank.

 

Obazee also raised questions over the nature of the services provided by the two audit firms and whether their involvement in internal control work could create a potential self-review threat when they subsequently provided assurance over those controls.

 

He urged the FRC to examine the circumstances surrounding the engagements and determine whether the arrangements complied with applicable financial reporting and auditing requirements.

 

The concerns form part of a wider criticism by Obazee of the CBN’s 2025 financial statements, which he said contained several accounting and disclosure issues requiring urgent attention.

 

He questioned why the apex bank had published a summary of its 2025 audited financial statements instead of making the full audited accounts and the joint auditors’ report available to Nigerians.

 

Obazee urged the FRC Executive Secretary, Rabiu Olowo, to obtain both the summary and complete financial statements from the CBN for a detailed review.

 

“Ask them to bring you the summary and the full account because they urgently need to withdraw that financial statement and re-issue it,” he said.

 

According to Obazee, the auditors’ report contained important information, including Key Audit Matters, which was not contained in the summary financial statements made available to the public.

 

He questioned why such information should remain outside the public domain given the CBN’s importance to the Nigerian economy and financial system.

 

Obazee also questioned the accounting basis adopted by the CBN in preparing its 2025 financial statements.

 

He noted that the CBN had applied its Financial Reporting Manual from January 1, 2025, while the previous year's accounts had been prepared under IFRS Accounting Standards and the FRC guideline.

 

He said the change resulted in the CBN stating that the 2025 and 2024 figures were not comparable, raising questions about the opening adjustments and the treatment of comparative figures.

 

The former FRC boss also raised concerns over the CBN’s treatment of foreign exchange gains and losses, including the Derivative and Foreign Exchange Revaluation Account (DFERA), which he said stood at about ₦13.7 trillion.

 

He questioned the accounting treatment of liquidity management costs that could be deferred and amortised over several years, saying the arrangement could have implications for the timing of earnings recognition.

 

Obazee further questioned the treatment of an approximately ₦2.98 trillion overdraft facility extended by the CBN to the Federal Government in 2025.

 

He said the accounts showed no corresponding interest income on the facility and argued that the transaction required further examination under Section 38 of the Central Bank of Nigeria Act, 2007.

 

He urged the FRC to conduct a comprehensive review of the CBN’s accounts and recommend their withdrawal and restatement if the concerns raised were established.

 

Obazee also called on the FRC to investigate the controversial ₦210 trillion figure associated with the financial statements of the Nigerian National Petroleum Company Limited (NNPCL).

 

He said the Council should request the relevant documents from the NNPCL and the National Assembly if they had not already been submitted.

 

“If they don’t, please request for them and review them so you can give Nigerians closure,” he told the FRC management.

 

The intervention comes at a time when concerns over the quality, transparency and independence of financial reporting in major public institutions are attracting increased attention.

 

Speaking at the commissioning of the FRC headquarters, Lagos State Governor, Babajide Sanwo-Olu, said regulatory institutions must evolve alongside the economy and strengthen their capacity to respond to emerging challenges.

 

Sanwo-Olu said businesses needed confidence in the rules under which they operate, while shareholders required assurance that their interests were protected.

 

He also said Nigerians needed confidence that institutions responsible for safeguarding the integrity of the country’s economic system were performing their duties effectively.

 

“This is where the Financial Reporting Council plays such an important role. By promoting credible financial reporting, sound corporate governance and greater transparency, the Council helps to reduce uncertainty in the marketplace. This makes investment easier, leading to significant socio-economic consequences,” Sanwo-Olu said.

 

The governor also described Obazee’s concerns over the CBN’s 2025 accounts and the NNPCL’s ₦210 trillion controversy as clear marching orders for the FRC.

 

The event also featured the naming of the FRC’s Inspections and Investigation Room after Obazee in recognition of his contribution to the development of financial reporting and regulatory oversight in Nigeria.