An audit report is only useful if the reader can trust it. The reader cannot check the auditor’s work, so the rules around the auditor do that job instead. Laws say who may audit and what the auditor must report. Ethical codes say how the auditor must behave. Standards say how the work must be done.
In Nigeria, the Financial Reporting Council (FRC) now sits at the centre of this system.
This topic covers why audit and assurance are regulated, the three sources of regulation, self-regulation compared with regulation by government, the FRC of Nigeria and its rules, the FRC Audit Regulation 2020, and the case for harmonising regulation across countries. Examiners like questions on the FRC rules and the Audit Regulation, because they contain numbers that can be tested: years, days and percentages.
The next topic covers the Companies and Allied Matters Act 2020 (CAMA 2020) rules on appointing, removing and replacing auditors (sections 401 to 413).
In 30 seconds
Audit and assurance are regulated to serve the public interest: assurance providers must work within ethical limits and to consistent standards. They are regulated by the law of the country, by ethical rules from bodies such as Institute of Chartered Accountants of Nigeria (ICAN) and International Federation of Accountants (IFAC), and by professional standards such as the ISAs. Regulation may be by the profession itself or by government.
The FRC of Nigeria (Act No. 6 of 2011, amended in 2023) registers professionals, sets rules, inspects and sanctions. Its Audit Regulation 2020, in force from 25 January 2021, requires firm rotation after 10 continuous years (15 for joint audits) with a seven-year cooling-off period, caps non-audit services at 80% of the audit fee, and requires a system of quality management under International Standards on Quality Management (ISQM). Regulation across countries is moving towards harmonisation and unified national regulators.
Why audit and assurance are regulated
The main reason is the public interest. An assurance provider gives an impartial, professional view on matters that users care about. That view is only worth anything if it can be trusted, so assurance providers must work in two ways. They must stay inside ethical boundaries, and they must follow consistent standards.
Without rules, one firm could do a thorough job and another a careless one, and the users would not know which report to believe.
Assurance providers are regulated from three directions:
- the law of the country where they work;
- the ethical standards of the country and of the professional body they belong to; and
- the professional standards their country has adopted, for example the International Standards on Auditing (ISAs). In Nigeria the ISAs replaced the earlier Nigerian Standards on Auditing (NSAs).
Ethical regulation
Ethical guidance for assurance providers comes from professional bodies such as the Institute of Chartered Accountants of Nigeria (ICAN), from laws, and from the International Federation of Accountants (IFAC). Rules on paper are not enough, so the profession must also be regulated to make sure that members follow them. The detail of the ethical rules is covered in the topics on ethics.
Legal regulation
Most countries put legal requirements on auditors in particular. The syllabus gives these Nigerian examples:
- the Companies and Allied Matters Act (CAMA) 2020, whose Chapter 15 (Audit) includes s. 401 (appointment of auditors), s. 403 (qualification of auditors), s. 404 (auditors’ report and audit committee), s. 407 (auditors’ duties and powers) and s. 415 (liability of auditors for negligence);
- the Banks and Other Financial Institutions Act (BOFIA) 2020;
- the Pension Reform Act;
- the Insurance Act 2003 (the syllabus lists it, but it was repealed in 2025 by the Nigerian Insurance Industry Reform Act, so cite the 2025 Act for current work);
- the Financial Reporting Council of Nigeria Audit Regulations 2020;
- rules issued by the Financial Reporting Council of Nigeria; and
- the Financial Reporting Council (Amendment) Act 2023.
An auditor must know and comply with the laws, regulations and guidance of the industry the client operates in. A bank, an insurer and a manufacturer are audited under different rules.
Changes in standards and technology
Business and society change. New products, new markets and new technology bring new risks. Standards, laws, codes and regulations for audit and assurance must therefore be updated so that they reflect the changes. A rule that fits last decade’s business may leave a gap today.
Self-regulation and regulation by government
Who regulates auditors? There are two models.
Self-regulation by the profession
Under self-regulation, the right to act as an external auditor depends on membership of a professional body such as ICAN. The body regulates its own members. Its normal role is to:
- offer professional qualifications, so there is evidence that auditors have a minimum level of technical competence;
- make sure audits are done only by fit and proper people who act with integrity;
- require members to follow technical standards such as the ISAs;
- keep auditors up to date, for example through continuing professional development;
- monitor and enforce compliance, including investigating complaints and applying discipline; and
- keep a public list of registered auditors.
Background: The ICAN Act, named in the syllabus, is the law that establishes the Institute as the professional body for chartered accountants in Nigeria. It is the legal source of the Institute’s power to qualify, register and discipline its members. The syllabus does not set out its provisions.
Regulation by government
The alternative is for the government to appoint a public body with similar duties. That body sets rules for approving individuals to do audit work, makes sure that approved auditors have the skills and knowledge for the work, and handles complaints and discipline.
In both models, the statute law also lists people who may not act as auditor of a particular company, even if they belong to a professional body. These exclusions protect independence. The next topic lists them.
Professional standards and the move to global regulation
Auditors must carry out audits according to professional standards, which are the ISAs. Some other assurance work is covered by standards too, though this area is still developing and there is less guidance. Where there is no specific guidance for an assurance service, the guidance in the auditing standards can often be adapted. As assurance becomes more global, harmonising professional guidance across countries has become necessary.
The Financial Reporting Council of Nigeria
The Financial Reporting Council of Nigeria was set up by Act No. 6 of 2011, which was amended in 2023. Its job is to develop, publish, promote and enforce compliance with the accounting and related standards issued by IFAC, the International Financial Reporting Standards (IFRS) Foundation, the International Public Sector Accounting Standards Board (IPSASB), the International Sustainability Standards Board (ISSB), or any other body designated in Nigeria.
The Act has two features that matter to auditors. It requires the Chief Executive Officer and the Chief Financial Officer to certify the financial statements. It also requires management to assess internal controls, including information systems controls, with independent attestation.
The Council works through seven directorates:
- Accounting Standards (Private Sector);
- Accounting Standards (Public Sector);
- Auditing Practices Standards;
- Actuarial Standards;
- Inspections and Monitoring;
- Valuation Standard; and
- Corporate Governance.
All professionals who offer services for payment in this area must be registered with the Council and must follow its guidelines and rules. The Council can deregister or suspend a member whose conduct breaks its rules. It can also investigate any complaint or allegation of professional misconduct against a professional.
Filing financial statements with the Council
The syllabus says in its general description that public interest entities must file their financial statements with the Council within thirty days after approval by the board. Rule 6 below gives a different period: sixty days from approval. Rule 6 is the more detailed provision, so use it in answers and state the rule you are applying. This difference is listed for review at the end of the run.
The FRC rules
To carry out its mandate, the Council has issued rules, and non-compliance attracts sanctions. The syllabus summarises them as follows.
| Rule | What it requires |
|---|---|
| 1. Certification by officers | Financial statements must be certified by at least the Chief Executive Officer and the Chief Financial Officer |
| 2. Certification by professionals | Every professional engaged in the financial reporting process must show name and FRC registration number. This covers external auditors, the chairman of the audit committee, certifying directors, the company secretary, valuers and other professionals giving assurance |
| 3. Audit and non-audit services | Audit and non-audit fees paid to the external auditor or a related entity must be disclosed. Where the firm gives non-audit services, this must be shown in a note to the financial statements |
| 4. Registration of transactions with statutory bodies such as the National Office for Technology Acquisition and Promotion | Cancelled after a court judgement against it |
| 5. Modified opinions | Financial statements on which the auditor gives anything other than an unqualified opinion, including an emphasis of matter, must go to the Council within 30 days of the date the opinion is expressed |
| 6. Late submission | Financial statements of public interest entities approved by the board must be submitted to the Council within 60 days of approval. Where the entity also submits them to a regulatory authority, they must reach the Council within 30 days |
| 7. Other national disclosures | Value added and a financial summary must be added as supplementary information to financial statements |
| 8. Currencies | The presentation currency for general purpose financial statements in Nigeria is the naira. A company that chooses to disclose its functional currency must treat that as supplementary information |
| 9. ISA 701 in Nigeria | Key audit matters must be communicated in the auditor’s report on the financial statements of public interest entities |
| 10. Audit committees | The Council must be told of changes in the membership of the audit committee or other board committee responsible for audit during the year |
| 11. Auditor’s logo and brand | The auditor’s name, logo or identity may appear in a client’s annual financial report only on the opinion page |
| 12. Audit transparency report | Firms that give audit or other assurance services to public interest entities must submit a transparency report in the prescribed manner |
| 13. Non-resident companies | Financial statements of unregistered companies that make profit or are taxable under the Finance Act in Nigeria must be sent to the Council by the professional who attests to them, within 30 days of sending them to any other government department or authority |
| 14. Non-compliance with laws and regulations | External auditors must make sure that their clients comply with all sections of the Council’s regulations, codes, rules, guidelines and guidance that directly or indirectly affect the financial statements |
The FRC Audit Regulation 2020
The Council issued the Audit Regulation 2020, which started on 25 January 2021. It applies to auditors, audit committee members and other assurance providers, all of whom must register with the Council. It sets out the rules for registering auditors, the non-audit services that are prohibited, mandatory audit firm rotation, quality assurance standards, and the duties of auditors and audit committees.
Its aim is to make auditors follow international auditing standards, and to bring them under monitoring and enforcement in line with the IESBA Code. Non-compliance can lead to administrative sanctions or deregistration. Overall, the regulation aims to secure high-quality audit services and to promote integrity and trust in financial reporting.
| Area | What the regulation says |
|---|---|
| Non-audit services | An auditor may provide non-audit services only with the approval of the board of directors, after a recommendation from the audit committee. Permitted non-audit services are limited to not more than 80% of the annual audit fees paid for the statutory audit of the audited entity and, where it applies, its parent and controlled undertakings |
| Rotation of firms | The external auditor must rotate after a continuous period of 10 years. For a joint audit the period is 15 years |
| Cooling-off | The audit firm, or any member of its network, may be engaged again as auditor only after a cooling-off period of seven years |
| Engagement partner rotation | Companies are expected to require the engagement partner to rotate after five years |
| Quality | Every audit firm must have a system of quality that complies with the International Standards on Quality Management (ISQM) issued by the International Auditing and Assurance Standards Board (IAASB) |
| Audit committees | The regulation sets out guidelines on appointment, composition, qualification, duties and sanctions of audit committee members. These must not conflict with CAMA 2020 (section 404) or the Nigeria Code of Corporate Governance as revised from time to time |
| Internal audit | Companies are expected to have an effective, risk-based internal audit function. If the board thinks this is not needed, the company must disclose in its financial statements how it will get assurance that internal processes and systems, such as risk management and internal controls, are effective |
Harmonising regulation across countries
IFAC is the international body for the profession, but each country has its own regulatory regime for auditing. These regimes may not apply the same principles of audit behaviour as IFAC. The arguments for adopting international accounting standards worldwide can be made for the regulation of auditing as well.
| Advantages | Disadvantages |
|---|---|
| Global auditing standards should make the audit of multinational companies more efficient | It is hard to get international agreement on auditing practices |
| Audit reports should become more transparent | Many countries would have to change local law to match the agreed international practice |
Initiatives to harmonise regulation include:
- audits of all listed companies in the European Union now follow International Standards on Auditing;
- moves towards a formal, statute-based corporate governance regime, such as the Sarbanes-Oxley Act in the United States; and
- national regulatory models headed by a single unified body.
The Securities and Exchange Commission (SEC) in the United States is a long-established unified body. In the United Kingdom the Financial Reporting Council has a unified role. It sets accounting standards, sets auditing standards, enforces and monitors compliance with them, and oversees self-regulating professional bodies such as ACCA, ICAEW and ICAN. The Financial Reporting Council of Nigeria is expected to play this unifying role in Nigeria.
Some argue that stricter regulation by an external authority is needed to balance the growing global power of the “Big Four” accounting firms.
The rules in more depth
Why self-regulation alone is not enough
A professional body knows the work and can set technical standards cheaply. But it is also run by the people it regulates, so the public may doubt whether it will discipline its own members firmly. Regulation by government or by a unified public body such as the FRC supplies independence from the profession.
This is why the syllabus points to a unified regulator in Nigeria, the United States and the United Kingdom, and why it records the view that stricter external regulation is needed to balance the power of the largest firms.
Why the Audit Regulation limits non-audit work and forces rotation
Two threats to independence sit behind these rules. A firm that earns large fees from non-audit work for the same client may hesitate to challenge that client in the audit: this is the self-interest threat. A firm that audits the same client for many years may become too close to management and too comfortable with its own earlier judgements: this is the familiarity threat.
The 80% cap and the 10-year rotation rule address these threats by law. The seven-year cooling-off period stops a firm from leaving and returning at once.
Numbers: the cap on non-audit fees
The annual audit fee paid by a public interest entity is ₦40 million. The maximum permitted non-audit fee is 80% of that, which is ₦40 million × 0.80 = ₦32 million. A firm that is paid ₦35 million for tax advice breaks the cap by ₦3 million (₦35 million − ₦32 million). Where the entity has a parent and controlled undertakings, the audit fees of the whole group for the statutory audit are used in the calculation.
Numbers: rotation dates
A firm that has audited a company continuously since 1 January 2013 reaches 10 continuous years on 31 December 2022. It must rotate off after that period, and neither the firm nor any member of its network may act again before the seven-year cooling-off ends, which is the end of 2029 (2022 + 7). If the audit is a joint audit, the period is 15 years instead, so it would end on 31 December 2027.
Why rotation is required, and what it costs
After several corporate collapses, many people felt the audit firm had become too close to the client and missed the warning signs. Long association creates a familiarity threat to independence, objectivity and integrity, and rotation reduces complacency. There are two ways to rotate. In audit partner rotation the firm stays, but the lead engagement partner and other key team members change at set intervals.
In audit firm rotation the firm itself leaves after a maximum period. Nigeria uses both: ten continuous years for the firm (fifteen for a joint audit) and five years for the engagement partner. In many countries firm rotation needs a change in the law, because an appointment is normally for one year and can be renewed without limit.
Rotation brings fresh expertise, new ideas and more credibility in the eyes of investors. The cost is a learning curve. A new firm needs time to understand a complex business and its controls, and may lack the resources at first. The transition can strain the entity and delay reporting.
Partner rotation is less visible to the public than firm rotation, but it keeps the firm’s knowledge of the client while removing the personal closeness.
Worked example: a public interest entity
Scenario. Niger Cement Plc is a public interest entity. Eze and Co has audited it continuously since 1 January 2013. In the year just ended, the statutory audit fee was ₦50 million. Eze and Co also earned ₦45 million from tax and consulting services for the company. The year just ended is the year to 31 December 2023. The board approved the financial statements on 10 March 2024, and Eze and Co gave a qualified opinion on 20 March 2024.
Advise on compliance with the FRC rules and the Audit Regulation 2020.
- Rotation. The regulation requires rotation after 10 continuous years. Eze and Co has audited since 1 January 2013, so it reached 10 continuous years on 31 December 2022. The audit of the year to 31 December 2023 is its eleventh year, so the firm should already have rotated off. Neither the firm nor its network may return until the seven-year cooling-off period has ended, which is after 2029.
- Non-audit services.
The cap is 80% of the audit fee: ₦50 million × 0.80 = ₦40 million.
The firm earned ₦45 million, which exceeds the cap by ₦5 million.
Non-audit services also need board approval after the audit committee’s recommendation, and Rule 3 requires disclosure of audit and non-audit fees in the financial statements. - Modified opinion. A qualified opinion falls under Rule 5. The financial statements must be sent to the Council within 30 days of the date the opinion is expressed. Counting from 20 March, 11 days remain in March and 19 more are needed in April, so the deadline is 19 April 2024.
- Submission after approval. Under Rule 6 the statements must reach the Council within 60 days of board approval. From 10 March, 21 days remain in March, 30 in April and 9 more are needed in May, so the deadline is 9 May 2024. The earlier date, 19 April 2024, is the binding one in practice.
- Conclusion. The firm has breached the rotation rule and the non-audit cap. It should tell the audit committee, reduce non-audit work and plan for rotation. The entity must file by 19 April 2024.
How to score full marks
- Memorise the numbers and attach them to the right rule. Ten years, fifteen years, seven years, five years, 80%, 30 days, 60 days and 25 January 2021 each earn a mark when stated with the right rule. A correct rule with no number often earns half.
- For “explain why audit should be regulated”, give a reason, then a consequence. Say that regulation protects the public interest, then explain that users cannot check the auditor so they need consistent standards and ethical limits. State the three sources: law, ethics and professional standards.
- For “discuss” questions on harmonisation, give both sides. At least two advantages and two disadvantages earns the discussion marks. Add a conclusion of one sentence.
- For FRC questions, group the points. Use headings: establishment, powers, directorates, certification, registration and discipline. Examiners can then see all the heads of credit.
- For scenarios, work through each rule in turn. Name the rule, state the requirement, apply it with dates or figures, and state the conclusion. Show your date or percentage workings.
- Use the terms correctly. Say “modified opinion” for any opinion other than unqualified, and remember that Rule 5 includes an emphasis of matter.
- Time. Allocate time in proportion to marks. Do the scenario calculation before the discussion so you do not run out of time for the numbers.
Common mistakes in the exam
- Mixing up the rotation period of 10 years with the 15 years that applies to a joint audit.
- Confusing the seven-year cooling-off with the five-year engagement partner rotation.
- Saying the cap on non-audit services is 80% of total fees from the client. It is 80% of the audit fee.
- Forgetting that Rule 5 covers an emphasis of matter paragraph as well as qualified, adverse and disclaimer opinions.
- Writing that the FRC registers only auditors. It registers all professionals offering services for payment in this area.
- Saying the FRC Act 2011 was passed in 2023. It was set up by Act No. 6 of 2011 and amended in 2023.
- Listing only advantages of harmonisation and giving no disadvantages.
- Putting the auditor’s logo on pages other than the opinion page, which Rule 11 forbids.
Quick revision
- Reason for regulation: public interest. Three sources: law, ethics, professional standards (ISAs, earlier NSAs).
- Self-regulation (ICAN) or government regulation. Statute also bars some people from acting as auditor.
- FRC of Nigeria: Act No. 6 of 2011, amended 2023; seven directorates; chief executive officer (CEO) and chief financial officer (CFO) certify; registration, deregistration, investigation.
- FRC rules: 14 rules. Rule 5: modified opinions in 30 days. Rule 6: 60 days from approval, or 30 days if also filed with a regulator. Rule 8: naira. Rule 9: International Standard on Auditing (ISA) 701. Rule 11: logo only on opinion page. Rule 4 cancelled.
- Audit Regulation 2020 (from 25 January 2021): 80% non-audit cap; 10 years (15 for joint audits); seven-year cooling-off; five-year partner rotation; ISQM; risk-based internal audit or disclosure.
- Harmonisation: efficiency and transparency against difficulty of agreement and the need to change local law.
Practice questions
These are original questions written in the style of the ICAN exam. Try each one before you open the answer. Full model answers follow the written questions.
Recall check: multiple choice
The real ICAN paper has no multiple-choice section. These questions are for quick recall. The written questions that follow are closer to the exam.
Question 1. The main reason why audit and assurance services should be regulated is:
- To increase audit fees
- To serve the public interest
- To reduce the number of audit firms
- To protect directors
Show the answer
B. Users rely on the assurance provider’s view, so it must be trustworthy.
Question 2. The Financial Reporting Council of Nigeria was set up by:
- The Companies and Allied Matters Act 2020
- Act No. 6 of 2011, amended in 2023
- The Insurance Act 2003
- The Audit Regulation 2020
Show the answer
B. The Act was passed in 2011 and amended in 2023.
Question 3. Under the Audit Regulation 2020, an external auditor must rotate after a continuous period of:
- Five years
- Seven years
- Ten years
- Fifteen years
Show the answer
C. Ten years. Fifteen years applies to a joint audit.
Question 4. After rotation, an audit firm or any member of its network may be engaged again as auditor only after a cooling-off period of:
- Three years
- Five years
- Seven years
- Ten years
Show the answer
C. Seven years.
Question 5. A public interest entity pays its auditor a statutory audit fee of ₦60 million. The maximum permitted fee for non-audit services under the Audit Regulation 2020 is:
- ₦36 million
- ₦42 million
- ₦48 million
- ₦60 million
Show the answer
C. ₦60 million × 80% = ₦48 million.
Question 6. Under FRC Rule 5, financial statements on which the auditor expresses a modified opinion, including an emphasis of matter, must be submitted to the Council within:
- 14 days
- 30 days
- 60 days
- 90 days
Show the answer
B. 30 days from the date the opinion is expressed.
Question 7. Which one of the following is NOT a normal role of a self-regulating professional body?
- Offering professional qualifications
- Monitoring members’ compliance and disciplining them
- Keeping a public list of registered auditors
- Setting the audit fee for each client
Show the answer
D. Fees are set by whoever appoints the auditor, usually the board on the shareholders’ behalf.
Question 8. FRC Rule 11 says that an auditor’s name, logo or identity may appear in a client’s annual financial report:
- On every page
- On the cover and the opinion page
- Only on the opinion page
- Nowhere at all
Show the answer
C. Only on the opinion page.
Question 9. Which one of the following is a disadvantage of harmonising audit regulation across countries?
- Improved efficiency of multinational audits
- Greater transparency in audit reporting
- The difficulty of getting international agreement and the need to change local laws
- Wider use of global standards
Show the answer
C. The other three are advantages.
Question 10. The presentation currency for general purpose financial statements in Nigeria, under FRC Rule 8, is:
- The functional currency of the company
- The United States (US) dollar
- The naira
- Any currency the board chooses
Show the answer
C. The naira. A company may disclose its functional currency only as supplementary information.
Written questions
Question 11 (10 marks). Explain why audit and assurance services should be regulated, and describe the three sources of regulation that apply to assurance providers.
Question 12 (20 marks). (a) Describe the establishment, powers and structure of the Financial Reporting Council of Nigeria. (6 marks) (b) Explain the provisions of the FRC Audit Regulation 2020 on non-audit services, rotation, quality and audit committees. (8 marks) (c) Discuss the arguments for and against harmonising the regulation of the auditing profession internationally. (6 marks)
Question 13 (10 marks). Kano Steel Plc is a public interest entity. Musa and Co has audited it continuously for 12 years. The statutory audit fee is ₦80 million. In the same year Musa and Co earned ₦72 million from information technology (IT) consultancy and tax services, which the chief executive approved alone.
The board approved the financial statements on 5 April 2024, and Musa and Co dated an opinion containing an emphasis of matter paragraph on 12 April 2024. The auditor’s logo appears on the front cover of the annual report. Evaluate the compliance of the firm and the company with the FRC Audit Regulation 2020 and the FRC rules, using dates and figures. (10 marks)
Model answers
Show the model answer to Question 11
Why regulate. The key reason is the public interest. Assurance providers give an impartial, professional view on matters that users care about, such as financial statements. Users cannot check that view themselves, so they must be able to trust it. For that to be so, providers must work within ethical boundaries and to consistent standards.
(3 marks: 1 for public interest, 1 for users relying on the view, 1 for ethical boundaries and consistent standards)
Sources of regulation. First, the law of the country, for example CAMA 2020, BOFIA 2020 and the FRC Act, which set eligibility, duties and rights of auditors. (2 marks) Second, ethical standards of the country and of the professional body, such as ICAN and IFAC, which require integrity, objectivity and other principles and are enforced by the bodies.
(2 marks) Third, professional standards adopted by the country, such as the International Standards on Auditing (earlier the Nigerian Standards on Auditing), which set how the work must be done. (2 marks)
Change. Rules must be updated as business and technology change, otherwise gaps appear. (1 mark)
Show the model answer to Question 12
(a) The FRC of Nigeria (6 marks). It was set up by Act No. 6 of 2011, amended in 2023 (1). It develops, publishes, promotes and enforces compliance with standards issued by IFAC, the IFRS Foundation, IPSASB, ISSB and any other designated body (1). The Act requires the CEO and CFO to certify financial statements and requires management to assess internal controls, including information systems controls, with independent attestation (1).
It works through seven directorates: private sector and public sector accounting standards, auditing practices standards, actuarial standards, inspections and monitoring, valuation standard and corporate governance (1.5). All professionals who offer services for payment must register and follow its rules (0.5). It can deregister or suspend members who break the rules, and can investigate complaints and misconduct (1).
(b) The Audit Regulation 2020 (8 marks). Non-audit services: allowed only with board approval after the audit committee’s recommendation, and limited to 80% of the annual audit fees for the audited entity and, where applicable, its parent and controlled undertakings (2).
Rotation: the external auditor must rotate after 10 continuous years, or 15 for a joint audit, and the firm or its network may return only after a seven-year cooling-off period; the engagement partner is expected to rotate after five years (3). Quality: every firm must have a system of quality that complies with ISQM issued by the IAASB (1).
Audit committees: there are guidelines on appointment, composition, qualification, duties and sanctions, and they must not conflict with CAMA 2020 (section 404) or the Nigeria Code of Corporate Governance (2).
(c) Harmonisation (6 marks). For: global auditing standards should make the audit of multinational companies more efficient (1.5) and make audit reporting more transparent (1.5). Against: it is hard to get international agreement on practices (1.5), and many countries would have to change their local law to match (1.5).
Show the model answer to Question 13
Rotation (3 marks). The regulation requires an external auditor to rotate after 10 continuous years, or 15 for a joint audit. Musa and Co has served for 12 years, so it has overstayed by two years and is in breach. (2) It may return, with its network, only after a seven-year cooling-off period, and the engagement partner is expected to rotate after five years. (1)
Non-audit services (3 marks). The cap is 80% of the audit fee: ₦80 million × 0.80 = ₦64 million. The firm earned ₦72 million, which is ₦8 million over the cap. (2) Non-audit services also need board approval after a recommendation from the audit committee, so approval by the chief executive alone is not enough. (1)
Disclosure (1 mark). Rule 3 requires audit and non-audit fees to be disclosed, with a note on the non-audit services.
Filing (2 marks). An emphasis of matter makes this a modified opinion under Rule 5, so the statements must reach the Council within 30 days of 12 April, which is 12 May 2024 (1). Rule 6 allows 60 days from board approval on 5 April, which is 4 June 2024, so 12 May is the binding date (1).
Logo (1 mark). Rule 11 allows the auditor’s identity only on the opinion page, so the logo on the front cover is a breach.
Pathfinder on audit regulation, the FRC and the Audit Regulation 2020
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
Requirements for audit firm and audit partner rotation in a long-running audit. This topic gives the Nigerian rules and the reasoning behind rotation.
Revise first: The rules in more depth
Section A is a single compulsory case with several requirements. It has drawn on ethics, quality management, group audits and reporting. Practise the scenario method in this topic before you attempt it.
Revise first: How to score full marks
Source: ICAN Pathfinder, Advanced Audit, Assurance and Forensics. Diets covered: May Diet, 2026 and November Diet, 2025.
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