LIQUIDATION OF COMPANIES IN NIGERIA
Under the Companies and Allied Matters Act (CAMA) in Nigeria, companies in voluntary liquidation are not required to appoint a qualified auditor to sign off on the statement of affairs. However, the liquidator may choose to engage the services of a qualified auditor to assist with the preparation of the statement or to review the accuracy and completeness of the information contained in the statement.
The Financial Reporting Council of Nigeria (FRCN) is the regulatory body responsible for setting accounting and auditing standards in Nigeria. The FRCN requires that the financial statements of all companies, including those in voluntary liquidation, be audited by a qualified auditor in accordance with the International Standards on Auditing (ISA).
The financial statements of the company would be up to the date of the liquidation, let us say is 30 March 2022 (the date that the board of directors passed a special resolution that the company should go into the liquidation) This means that the financial statements should cover the period from the beginning of the accounting year (1 January 2022) up to the date of the liquidation (30 March 2022).
As for the final statement of affairs, this should reflect the financial position of the company as of the date of liquidation, which is 30 March 2022. The final statement of affairs should provide information on the expected proceeds from the sale of non-current assets held for sale, the claims of creditors, and the expected distribution of the remaining proceeds to shareholders.
The financial statements of a company and the final statement of affairs prepared in a liquidation context are two different types of financial reports with different purposes.
The financial statements of a company are prepared on an annual basis and provide information about the financial position, performance, and cash flows of the company over a specific period, such as a fiscal year. The financial statements are intended to provide information to various stakeholders, including shareholders, creditors, lenders, and other interested parties, about the financial health of the company and its operations. Financial statements typically include a balance sheet, income statement, statement of changes in equity, and cash flow statement, among other components.
In contrast, the final statement of affairs is prepared in the context of a liquidation and is intended to provide information to creditors and shareholders about the assets and liabilities of the company as of the date of liquidation. The statement of affairs includes information about the expected proceeds from the sale of assets, the claims of creditors, and the expected distribution of the remaining proceeds to shareholders. The final statement of affairs is typically prepared by the liquidator, who is responsible for realizing the value of the company's assets, paying off its liabilities, and distributing the remaining proceeds to creditors and shareholders in accordance with the law.
It's important to note that the financial statements of the company and the final statement of affairs should be prepared in accordance with the applicable accounting standards, including International Financial Reporting Standards (IFRS) The financial statements should be audited by a qualified auditor in accordance with the International Standards on Auditing (ISA). The final statement of affairs should be prepared by the liquidator, who is responsible for realizing the value of the company's assets, paying off its liabilities, and distributing the remaining proceeds to creditors and shareholders in accordance with the law.
The IFRS (International Financial Reporting Standards) standard that relates to liquidation of a company is IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations.
IFRS 5 provides guidance on how to account for non-current assets held for sale and discontinued operations, including assets and liabilities of a company that is being liquidated. The standard sets out the requirements for classifying assets and liabilities as held for sale, and provides guidance on how to measure and recognize the assets and liabilities.
IFRS 5 requires that the financial statements of a company in liquidation reflect the fact that the company is in liquidation, and that its financial statements are being prepared on a realization basis. This means that the financial statements should report the net realizable value of the company's assets, rather than their historical cost or fair value.
In addition, IFRS 5 requires specific disclosures to be made in the financial statements of a company in liquidation, including a statement that the company is in liquidation, a description of the liquidation process and the expected timeline for completion, and a detailed listing of the company's assets and liabilities and their net realizable value. The standard also requires that the financial statements be audited in accordance with the relevant auditing standards.

However, in the case of a company in voluntary liquidation, the auditor's report would relate to the financial statements of the company up to the date of the liquidation resolution, rather than the final statement of affairs. As stated earlier, the statement of affairs is not required to be audited, but the liquidator may engage the services of a qualified auditor to provide additional assurance to creditors and shareholders regarding the accuracy and completeness of the information provided in the statement of affairs.
In the context of IFRS 5, the main difference between the financial statements of a company and the final statement of affairs is that the latter focuses on the non-current assets held for sale and the presentation and disclosure of discontinued operations, while the former provides information on the financial performance and position of the company over a specific period. The final statement of affairs includes information on the expected proceeds from the sale of non-current assets held for sale and information on any discontinued operations of the company.
There are still some other requirement checks out for the conclusion of this write-up after the Nigeria general election in the month of February 25th 2023.
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