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THE ROLE OF AUDITORS IN BANK FAILURE IN NIGERIAN BANKS

CHAPTER ONE                                                                

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Bank’s managements are saddled with the responsibility of preparing the accounts and financial statements of a bank. An Audit is expected to be carried out annually to ensure that the statements of accounts that have been prepared and presented as required by law. (CAMA 1990)

According to Webster’s English Dictionary, an Audit is “an examination intended to serve as a basis for an expression of opinion regarding the fairness, consistency, and conformity with accepted accounting principles of statements prepared by a corporation or other entity for submission to the public or to other interested parties”.

In another way, an Audit is defined as “an independent examination of the books and records of an entity in order to express an opinion as to whether the accounts and financial statements represents a true and fair view of the state of affairs of the entity” (Clinton, 2006). From these definitions, it is clear that an Audit is an independent examination and expresses an opinion on the fairness, conformity and truth about the statements as to the state of affairs of an entity.

The Auditor therefore plays a fiduciary role in the running of a bank, as such; they owe the bank and its stakeholders a duty of care in the performance of their duties. The Nigerian law made giant strides in guaranteeing the independence of  the Auditors which is important for his position as a trustee. Such strides have been made in the area of Appointment, Remuneration, Rights, Powers and renewal of tenure section 359, 360, 361, and 363 respectively of company and Allied Matters Act (CAMA 1990) .

Auditing in Nigeria is regulated by various statutes and standards of Accounting and Auditing. But inspite of this, accusations has been made against the professional Auditor as to it failure to express a truly independent opinion as to the true and fail view of financial statement of banks presented before her. The veracity of these allegation is the object of this study.

1.3            IN THE LIGHT OF THE ABOVE THE RESEARCH QUESTIONS ARE

Do the  existing laws   permit the auditors to do  what the stakeholders expect of them?

Have banks auditors actually contributed to the distress and failure of their client banks?

 1.4        OBJECTIVE OF THE STUDY

The  objective of this study is to establish an independent opinion on the argument that banks auditors have contributed to the failure of their client banks

·         To Ascertain whether the auditors have any role to play in checking the  abuse of powers and ensuring efficient reporting Ascertain whether auditors collaborates in bank failure

·         STATEMENT OF THE RESEARCH HYPOTHESIS

Hypothesis one

 H0:it is not true that auditors have collaborated to the distress and failure of their client banks

H1: it is true that auditors have collaborated to the distress and failure of their client banks

Hypothesis two

H0it is not true that auditors have contributed the  failure of their client banks

H1 it is true that auditors have contributed the  failure of their client banks

HYPOTHESIS THREE

H0: The relationship between auditor and  bank management enhances

bank failure.

H1:  The  relationship between does not enhance bank failure.

1.6     SCOPEOF THE STUDY

The study examines the existing legal provisions in Nigeria on auditing particularly. (CAMA 1990, NDIC Decree of 1998 and BOF1A 1991 as amended to date). The study questionnaire is administered on owners and depositors within Benin metropolis to ascertain their opinion on the allegation against the auditors

Secondary data on bank   distress from the NDIC publications are used in the study

1.7     RELEVANCE AND SIGNIFICANCE OF THE STUDY

The significance of this study are numerous. The result of the study could be useful to the following due  to the accompanying reasons;

The result of the study will assist professional like ICAN, BOFIA and CBN  in drawing up more stringent codeof ethics and robust professional requirements for members.

The professional accountants will find the outcome of the study helpful in that he will become fully aware of the consequences of his actions or inactions  on his integrity more so as me ac- a is now a global village. If the assertion is found true, it will help to improve their supervisory efforts and place less reliance on auditors report.

These set of stakeholders will be enabled to evaluate the existing   legal provisions and make necessary amendment or enactment of further law if necessary

1.8     LIMITATION OF THE STUDY

The limitations of this study reveal certain problems that wasencountered during the information gathering process to problem of the data itself. They include

1.     Insufficient and scare related materials to make the work more robust

2.     Time constraints:   there   was   equally   the   problem   of   time constraints which inhibits the period of study or investigation ought to have been done.

iii.    Un co-operative and intimidating attitude of respondents during the course of interview militated against the speed of time

iv  Absence of  uniformity   in  financial  year  endings  of financial institutions is another constraints

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