i. Background of the Clarity Project

The International Auditing and Assurance Standards Board (IAASB) initiated Clarity Project in response to feedback that International Standards on the Auditing (ISAs) were complex, inconsistent, and difficult to understand or implement uniformly across jurisdictions.

ii. Objective of the Clarity Project

to enhance the understandability, consistency, and application of the ISAs, and to ensure that ISAs are clearly written, appropriately structured, and understandable for auditors globally.

iii. IAASB Clarity Project Update

In October 2008, the IAASB issued a final Clarity Project Update – slightly ahead of the December 2008 date by which the last of the clarified ISAs were to be approved by the Public Interest Oversight Board. The clarified ISAs came into effect for audits of financial statements beginning on or after December 15, 2009.

Key points from this update, which give some background to the project, are as follows:

i. the Clarity Project was the IAASB‟s 18-month programme to comprehensively review all of its ISAs and ISQCs to improve their clarity and therefore, the consistency of their application; ii. 36 clarified ISAs were issued, along with a clarified ISQC1;

iii. 16 of the ISAs were substantially revised as well as redrafted and one new ISA (ISA 265) was issued. The other 19 ISAs were redrafted, but not revised; All the clarified ISAs contain improvements, including:

 identifying the overall objectives of the auditor when conducting an audit in accordance with ISAs;

 setting an objective in each ISA;

 establishing an obligation on the auditor in relation to those objectives

 clarifying the obligations imposed on auditor by the requirements of the ISAs and the language used (using “shall” instead of “should”);

 eliminating ambiguity about the requirements which an auditor needs to fulfil; and

v. the ISAs have a new structure with Introductory Material, Objectives, Definitions, Requirements and Application and Other Explanatory Material presented in separate sections in the ISA.

The Code of Corporate Governance for Public Companies in Nigeria states what the duties and responsibilities of the Audit Committee should be. The duties and responsibilities include:

i. assist in the oversight of the integrity of the company’s financial statements, compliance with legal and other regulatory requirements, assessment of qualifications and independence of external auditor, and performance of the company’s internal audit function as well as that of external auditors;

ii. establish an internal audit function and ensure that there are other means of obtaining sufficient assurance of regular review or appraisal of the system of internal controls in the company;

iii. ensure the development of a comprehensive internal control framework for the company, obtain assurance and report annually in the financial report, on the operating effectiveness of the company’s internal control framework; iv. oversee management’s process for the identification of significant fraud risks across the company and ensure that adequate prevention, detection and reporting mechanisms are in place;

v. at least on an annual basis, obtain and review a report by the internal auditor describing the strength and quality of internal controls including any issues or recommendations for improvement, raised by the most recent internal control review of the company;

vi. discuss the annual audited financial statements and half yearly unaudited financial statements with management and external auditors;

vii. discuss policies and strategies with respect to risk assessment and management;

viii. meet separately and periodically with management, internal auditors and external auditors;

ix. review and ensure that adequate whistle-blowing procedures are in place and that a summary of issues reported are highlighted to the chairman;

x. review, with the external auditor, any audit scope limitations or problems encountered and management’s responses;

xi. review the independence of the external auditors and ensure that where non- audit services are provided by the external auditors, there is no conflict of interest;

xii. preserve auditor’s independence, by setting clear hiring policies for employees or former employees of independent auditors;

xiii. consider any related party transactions that may arise within the company or group;

xiv. invoke its authority to investigate any matter within its terms of reference for which purpose the company must make available the resources to the internal auditors with which to carry out this function, including access to external advice where necessary; and

xv. report regularly to the board.

The objectives of the Audit Committee include, to:

i. ascertain whether the accounting and reporting policies of the company are in accordance with legal requirements and agreed ethical practices;

ii. review the scope and planning of audit requirements.

iii. review the findings on management matters in conjunction with the external auditor and departmental responses thereon;

iv. keep under review the effectiveness of the company’s system of accounting and internal control;

v. make recommendations to the Board in regard to the appointment, removal and remuneration of the external auditors of the company; and vi. authorise the internal auditor to carry out investigations into any activities of the company which may be of interest or concern to the committee.