10 NEEDFUL LAWS YOU MUST KNOW TO BE A SUCCESSFUL PROFESSIONAL ACCOUNTANT

Don’t you wonder that accounting cannot be ‘divorced’ from law? Don’t you often wonder that the practice of accounting in its varying forms is inseparable from the various national as well as international laws that regulate it? Well, you just have to understand (if you haven’t) that basically there are some laws you have to know and understand in toto  in

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your quest as either a prospective or practising professionally qualified accountant.

A detailed and functional knowledge of the various laws and standards that regulate the practice of the profession nowadays is a must for both practitioners and students of accounting. An accountant, either an employee in an organization or in public practice should always be conversant with all the laws that affect the effective discharge of his duties as a tax consultant, financial adviser, financial accountant (i.e. as a preparer of financial statements), management accountant etc.

In this short piece, I simply give you a run-through and overview of some important laws in Nigeria and which exist in varying but similar forms in some other countries with similar legal systems. You must have these laws at your finger tips for you to function successfully and competently as a professional accountant. For a student studying to become a professional accountant a working knowledge of these laws are indispensable.

These laws are:

1. Companies and Allied Matters Act: Forming a company and accounting for its performance

Company and Allied Matters Act 2004 (CAMA) as amended was promulgated in 1990 as Companies and Allied Matters Decree (CAMD) by the military government but later amended and passed by the Act of the parliament in 2004.

CAMA provides the rules guiding how a company is to be formed, the rights and powers of a company, accounting for the performance of the company and not the least, it sets up the Corporate Affairs Commission (CAC) as an agency charged with the administration of the provisions of this Act.

To succinctly put it; CAMA provides the requirements for the formation of companies in Nigeria and all the matters that relate to obtaining finances in the form of shares, debentures etc., and the rights of these providers of such finances.

2. Bank and Other Financial Institution Act: Forming a bank and the implications of its activities.

Bank and Other Financial Institutions Act (BOFIA) was promulgated in 2004. It provides the requirements for establishing a bank and any other financial institutions in Nigeria. BOFIA states the functions, duties and powers the Central Bank of Nigeria (CBN) has over the financial institutions in Nigeria.

3. Company Income Tax Act: Assessing a company for tax

Company Income Tax Act (CITA) promulgated in 2007 repealed its predecessor Act of 1977. It among other things provides for the levying of tax on the incomes of companies in Nigeria and how to determine the incomes or profits chargeable to tax. It states the guidelines for the determination of assessable profit, incentives available to specific industry in the country, tax rate, double taxation relief, how to file returns, offences and penalties for contravening the provisions of the Act.

4. Personal Income Tax Act: Your personal liability to tax and how to handle it.

Personal Income Tax (Ammendment) Act 2011 (PITA) does not repeal the Personal Income Tax Act 2004, but rather it amended some of the sections of this Act (i.e. PITA 2004) which still remain extant to the extent of the amendment. In PITA 2011, PITA 2004 is dubbed the principal Act.

PITA 2004 together with PITA (Ammendment) 2011 provides guidelines and rules for the determination of the tax payable by eligible individual tax payer other than incorporated businesses. It also includes provisions as per the tax rate, incomes that are taxable and the allowances or reliefs available to tax payers.

5. Investment & Securities Act: Public companies’ shares on the stock exchange

Investments and Securities Act, 2007 repealed the Investments and Securities Act 1999. It details and enlarges the functions and powers of the Securities and Exchange Commission over the Capital Market in Nigeria, and sets regulations as regards mergers, acquisitions, takeover bid and how the shares of publicly quoted companies are traded (i.e. bought and sold).

6. Central Bank of Nigeria Act: Providing guidance to banks and their forms of returns

The Central Bank of Nigeria Act 2007 repealed the CBN Act of 1991 and re-enacted the CBN Act. It among other things details the main objectives of the Central Bank of Nigeria, its general reserve fund, its board composition, appointment of governor and deputy governor of the CBN, their qualifications and remunerations, establishment of monetary policy committee, meetings of the board, the Nigerian currency, exchange rate determination, issuance of notes and coins, denomination and forms of notes and coins, lost and damaged notes and coins, management of external reserves, the banking, treasury and credit operations of the CBN etc.

7. Value Added Tax Act: Accounting for VAT returns

Value Added Tax Act imposes Value Added Tax on the list of goods and services it describes as taxable goods and services. It equally listed out some goods and services as exempted from Value Added Tax. The Act states the prescribed VAT rate while equally detailing how the tax will be administered, VAT collection, remission, payment , offences and the penalties under the Act.

8. Insurance Act: Insurance companies’ corporate reports and contents.

Insurance Act 2003 classifies insurance businesses. It prescribes the guidelines for registration and qualification of would-be insurer, the minimum share capital and records to be kept, accounts and reserve funds, unexpired risks and claims. The rules regulating the activities of insurance agents, brokers and loss adjuster are also contained in the Act.

9. Industrial Training Fund Act: Need to promote skill acquisition for economy’s needs

This Act sets up the industrial training fund. A fund is usually a reserve of money set aside for a purpose. The Act sets up the Industrial Training Fund Governing Council for the administration of its provisions. It among other things mentions the purpose of the fund, the powers of the industrial Trust Fund Governing Council, who to contribute to the fund, amount to contribute and the offences and penalties under the Act.

Industrial Training Fund Act Cap.19 Laws of the Federation of Nigeria, 2004 and the Industrial Training Fund (Ammendment) Act 2011 are the extant Industrial Training Fund Act.

10. Financial Reporting Council of Nigeria Act: Bedrock of Financial Reporting in Nigeria.

The Financial Reporting Council of Nigeria Act 2011 is an Act that provides the rules and principles governing the corporate reporting or financial reporting of incorporated businesses in Nigeria.

It is a very important law because of its elevated position among all the other Acts where corporate and financial reporting and regulation of such in Nigeria are concerned. I aptly termed this Act the new Nigerian GAAP since it serves as a door to all the other standards, principles and laws that guide accounting, tax practices etc in Nigeria.

In the opening words of the Act, the Financial Reporting Council of Nigeria (FRCN) was established and charged with enormous responsibilities of developing and publishing accounting and financial reporting standards that align in principles with the International Financial Reporting Standards (IFRS). These standards (IFRSs) are to be observed in the preparation of financial statements by incorporated businesses in Nigeria.

The FRCN  is equally charged with the administration and enforcement of the provisions of the Act by monitoring the compliance of companies to IFRSs in preparing their financial statements.  

Now consider this: Every labour you expend in preparing your company's financial statements in line with the International Financial Reporting Standards (IFRS) is a labour expend in abiding by the provisions of the FRCN Act. This is because the Financial Reporting Council of Nigeria is licensed by the Act to adopt any standards, international or otherwise as the 'de facto' standards guiding the preparation of financial statements  and corporate reporting in Nigeria. Therefore, any deviation from the principles of the IFRSs is tantamount to a breach of the FRCN Act which the FRCN is empowered to enforce.