Weak Audit Oversight Raises Risk of Corporate Collapse, Experts Warn

Financial experts have underscored the need for greater independence in audit practice, warning that compromised auditors and weak oversight structures expose organisations to financial misstatements, fraud and eventual corporate collapse.

Founder and chief executive officer of Regulatory Compliance Readiness Advisors Limited, Dr Iheanyi Anyaghara, speaking at the Audit Committee Conference in Lagos, stressed that auditors, audit committees and internal auditors must demonstrate courage, professional scepticism and independence to safeguard the integrity of financial reporting.

Anyaghara described auditor independence as the foundation of credible assurance, saying the quality of an audit is measured not only by technical competence but also by the auditor’s ability to remain objective.

According to him, “independence transforms technical audit work into credible, trusted assurance”, as he warned that where independence is compromised, the entire assurance process loses credibility. “Without independence, assurance collapses into affirmation and oversight becomes a ritual,” he said.

Anyaghara explained that auditor independence remains central to sustaining public confidence in financial reporting, governance frameworks and institutional integrity, noting that it empowers auditors and audit committees to speak the truth even when such truth is uncomfortable or contested.

He added that maintaining independence goes beyond complying with professional rules, requiring constant vigilance against subtle influences capable of impairing professional judgement.

According to him, auditors must remain alert to emerging risks and possess the courage to resist incentives, relationships and organisational pressures that could compromise objectivity.

He, however, observed that independence remains vulnerable because of human bias, workplace relationships and organisational cultures that often reward conformity rather than dissent.

To preserve independence, he said auditors must deliberately cultivate professional scepticism, continuous reflection and moral courage.

Also speaking, former president of the Institute of Chartered Accountants of Nigeria (ICAN), Doyin Owolabi, urged audit committees to strengthen oversight by asking probing questions capable of uncovering errors and financial manipulation before they escalate.

Presenting a paper titled “Gate Keeping: Detecting Error and Fraud in Financial Reporting”, Owolabi said effective gatekeeping demands vigilance, sound knowledge and constant attention to emerging risks.

According to him, gatekeepers have the responsibility of ensuring that financial statements faithfully reflect the true economic position of organisations. He noted that audit committees must demonstrate informed oversight and maintain a questioning mindset to minimise the risk of financial misstatement, while internal auditors should pay close attention to internal controls and reporting processes.

Corroborating his position, Partner, Assurance Services at EY Nigeria, Williams Erimona, said audit committees must evolve beyond the traditional role of reviewing reports to becoming active drivers of accountability and corporate transparency.

He described audit committees as guardians of truth whose responsibilities include interrogating management assumptions, challenging corporate narratives and ensuring that oversight decisions are evidence based.

Speaking on the role of internal audit, former chief audit executive of the Nigerian Institute of Management and West African Portland Cement Company (WAPCO), Festus Ogunmokun, warned that sidelining internal audit functions could have devastating consequences for organisations.

Speaking on “Internal Audit: Guarding the Truth from Inside”, Ogunmokun said the marginalisation of internal auditors has contributed to some of the biggest corporate failures recorded globally. He cited the collapse of Enron, the Wirecard accounting scandal and Toshiba’s accounting irregularities as examples of the enormous cost of weak internal audit functions.

According to him, internal audit must move beyond identifying irregularities after they occur to preventing them through proactive risk management and stronger internal controls. He explained that detecting irregularities requires investigative competence to identify existing and emerging problems through unbiased examination of evidence and careful analysis of warning signals.

Preventing such failures, he added, requires organisations to strengthen controls before crises emerge by identifying risks early, reinforcing internal control systems and embedding ethical values across business operations.