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Financial reporting to investors, banks and key stakeholders


Financial reporting to investors, banks and key stakeholders

Since the adoption of the International Financial Reporting Standards (IAS/IFRS) by the Federal Government of Nigeria and subsequently, requiring there usage in the preparation and presentation of Financial Statements by companies, operating in Nigeria, especially those listed on the trading floor of the Nigerian Stock Exchange, there are new challenges and compliance obligations on daily basis about how to develop and apply  accounting policies and acceptable Financial Reporting Frameworks that meets the needs of investors, banks and key stakeholders, who rely on their financial reports in making short-term and long-term financial and non-financial appraisals and decisions. Companies must understand how important the accounting function is to all parties relating and dealing with them and must develop and utilize the capacity to meet their expectations as a group or as individuals, by increasing and sustaining the confidence of the users of financial statements on their financial reporting processes. In this article, I will talk about the roles of the parties involved in the financial reporting process, and proceed to examine who the users of financial reports are, and what kind of information they seek from it and what decisions they make by relying on it.

Financial Reporting generally refers to the process of preparing and presenting the financial statements of a company that are consistent and comparable, relevant and reliable, and in accordance with the generally accepted accounting practices (GAAP). The players in the structured processes are; the Chief Financial Officer (CFO) or Chief Accountant and his operatives, the Internal and External Auditor, the Audit Committee and the Chief Executive Officer and Managing Director (CEO/MD). The role of the Chief Financial Officer or Chief Accountant and his operatives is to ensure that all monies that comes in and goes out of the company are classified and recorded in the appropriate accounts, and that those accounts are adequate, safe and provided for audit. The Internal Auditor is an employee of the company and is answerable to the Management. His role in the financial reporting process is to ensure that the internal controls, including financial and non-financial control systems, put in place by the management, are relevant, adequate and effective. He also makes sure they are complied with, reports any deviations and makes recommendations to management for modification and improvement. The External Auditor is responsible for examining the accounts and records of the company for the primary aim of forming an opinion, whether the financial statements prepared from those accounts and records are in agreement, and if it presents a true and fair view of the financial position, financial performance and changes in financial position and performance. Though the external auditor’s duty is not to prevent or detect frauds or errors, but when he becomes suspicious of it, he develops and performs additional audit procedures to prevent and detect the frauds or errors. Section 359 of the Company and Allied Matters Act 2004 and the Codes of Best Practice for Corporate Governance in Nigeria, issued by the Securities and Exchange Commission in 2003, requires companies listed on the stock exchange to have a functional audit committee. The Audit Committee is made of an equal number of dependent and independent directors, not exceeding six members of which the chairman must be an independent director. The members of the audit committee must be individuals with cognate and diverse experience in business, accounting, finances, and of high ethical stance. Their role in the financial reporting process includes decisions about the scope of statutory audit work, recommendation to the shareholders on nomination and remuneration of the external auditor, the review of audit findings and opinions and so on. The Chief Executive Officer and Managing Director has the legal responsibility for developing and implementing internal control systems that is adequate, relevant and capable of detecting frauds and errors, ensuring that all financial transactions of the company are captured in the accounts and records. He must also assume the responsibility for preparing and presenting financial statements that shows a true and fair view of the company’s affairs for the financial reporting period.

Just like I said initially that financial reporting must follow a coordinated and structured process for it users to have confidence in it and thereafter rely on it to make their decisions, I will at this point, in a very concise manner talk about financial statement users and what they can use it for. For easy understanding I will classified them into internal and external users;


  1. The Management. Being the individuals responsible for driving the goals and objectives of the company, uses it in evaluating performance against established standards.
  2. The Employees. They may use it to know when their jobs are no longer secured and when to ask for better pay.


  1. Investors: Existing investors uses it to decide whether to hold or sell their investments, when to sell and at what amount. Potential investors uses it to make decisions about which company to invest in, when to invest and how much to invest.
  2. Banks and Other Creditors: Banks uses it to assess the ability of a company seeking for loan to honor their debt obligations and to know the fate of previous loans granted to companies. Creditors use it to assess the credit worthiness of companies.
  3. Government: The government, through its relevant agencies uses it to know the amount of tax receivable from companies, compliance with regulatory requirements and formulation of economic policies.
  4. Others: Customers, Suppliers and the general public uses it to know the ability of the companies to continue in business, and able to satisfy their diverse interests.


Naghabun, Osayande is a Chartered Accountant, blogger, writer and business development professional. He loves helping Small and Medium Enterprises to grow. He can be reached on 08148358201 for further discussion on this subject. Or send an email to

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