Court bars FRC from sanctioning KPMG

In from Ali Smart . . .
The Federal High Court in Lagos at the weekend stopped the Financial Reporting Council of Nigeria (FRC) from imposing any form of sanctions on KPMG Professional Services.
Justice Ibrahim Buba further restrained FRC’s Executive Secretary, Mr. Jim Obazee, from sanctioning a partner in the firm, Mr. Ayodele Othihiwa.
The order was granted following an application by the plaintiff’s lawyer, Chuka Ikwuazo of the firm of Aluko and Oyebode.
The applicants also prayed the court to ensure an accelerated hearing of the suit, which will come up on Thursday.
It may be recalled that the FRC had, in an October 30 letter, conveyed its ‘regulatory decision’ to the applicants following their role in the financial statements of Stanbic IBTC Holdings Plc for 2013 and 2014.
The council stated that it had suspended Othihiwa “until the investigation as to the extent of the negligence of KPMG Professional Services is ascertained.”
KPMG and Othihiwa contend that the FRC decision was published and issued without informing or notifying them, of the nature of the allegations made against them, nor were they invited to respond to the allegations.
They claim the FRC decision not only violated their constitutional right to fair hearing but flouted Section 62(2) of the FRC Act, which spells out the procedure to be adopted in investigating a professional body for any ‘complaint or dishonest practice, negligence, professional Misconduct or malpractice’.
The applicants argue that FRC and Obazee did not only breach the provision, but they also violated Section 15(2) b of the FRC Act, which states that a Technical and Oversight Committee shall review “sanctions to be meted out to any professional accountant, professional or public interest entity.”

Read also: Stanbic IBTC kicks as FRC suspends directors, KPMG

KPMG and Othihiwa further claimed that even where the Technical and Oversight Committee had ratified the decision of the FRC, the council had failed to exhaust the provisions of its own law.
According to them, it ought to allow them to exercise their right of appeal to the Technical Committee, thereby subjecting its decision to the approval of the FRC board.
The applications also contended that FRC allegedly has no board at the moment, saying it was dissolved on July 16.
The plaintiffs said they have been greatly affected and have the potential of suffering greater loss of business opportunities and turnover of business, as a result of FRC action, which they consider unfair, ultra vires and a breach of their fundamental rights to fair hearing.
KPMG’s Chief Operating Officer, Mr. Yomi Sanni had earlier faulted the FRC decision, saying his firm complies with the requirements of all regulations, acts and policies that govern its business. KPMG insists it stands by its audit opinions on Stanbic IBTC Holdings.
“We wish to state categorically that KPMG does not agree with the decision taken by the FRC, as it does not reflect the true position in this matter.
The plaintiff’s motion for interlocutory injunction will be heard on Thursday.

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