ABSTRACT

This study was specifically carried out to ascertain the roles and responsibilities of  external auditor in banking operation. A case study of three selected banks in Aba.

In the year past, there has been a misconception of the roles of external auditor in an organization or a firm, in chapter one, it try to cover the introduction and that of  the explanation of the role of external auditor in an organization or an industry, why chapter two and three cover the aspect of literature review and that of the researcher methodology respectively. In term of chapter four and as well chapter five treated about the data analysis how the data has been analyzed to make the reader understand what the chapter is all about and it also went further to summarize the data and as well the conclusion, recommendation and that of the suggestions part items of further study or further research respectively. Questionnaire, interview and observation were instrument sued to elicit explanation from the employees of the banks in Aba, who formed the respondents, the research also used tables, chi-square and percentage as the statically instrument in analyzing the data collected. Finally, roles of external auditor in banking operation will also help to re-define what really are the roles of external auditor and their effect on banking operation. Using the analytical and disciplinary research method, and with  the case study of three selected  banks in Aba which include , first bank of Nigeria, United bank for Africa Plc  (UBA) and that of the intercontinental bank Plc, it was discovered that, though a good and effective of external auditor has been installed in the banking  operation,  so to speak, some of the basic element are  just there  in principle, not in practice bank rule and regulations. For instance, are not strictly adhered to, there are inadequate accounting records, improper supervision, some fragment of  dishonesty among the staff, some of which are naturally disposed towards fraud, and incompetent, and toad  to these, detailed  are not  always punished accordingly to  serve as deterrent  to others. Finally, based  on these discoveries, it was recommended that external auditor and activities  be more closely  supervised and scrutinized to ensure that they follow proper procedure as documented in the g banks handbooks programms and procedures should be designed to employee, and as w ell develop staff that will be competent and honest, elaborate accounting records should be created and the staff should be re-oriented and the incorrigible ones should be discipline accordingly to serve as deterrent to others.

TABLE OF CONTENTS

Chapter one

Introduction                                                          

1.1         Background of the study                                

1.2         Review of the selected  banks                        

1.3         Statement of the problem                              

1.4         Purpose of  the study                                    

1.5         Research question                                         

1.6         Research hypothesis                                     

1.7         Delimitation of the study                               

1.8         Significant of the study                                 

1.9         Definition of terms                                        

Chapter reference

Chapter two

2.1         Literature review                                                    

2.2         An auditor duties, statute and rightic              

2.3         Auditor ethical guide                                     

2.4         The roles of auditor                                      

2.5         Auditor report and concept                                     

2.6         Fraud prevention in bank                               

2.7         Statement of accounting standard and the prudential

 guide.                                                         

2.8         Summary of literature  review                        

Chapter reference

Chapter three

3.1         Introduction

3.2         Area of the design’                                        

3.3         Population of the study                                 

3.4         Sample and sampling techniques                    

3.5          Instruments for data collection                      

3.6         Reliability of instrument                                

3.7         Method /data analysis  techniques                  

          Chapter reference

Chapter four

4.1         Data presented, analysis and interpretation     

4.2         Analysis and interpretation of data and

Questionnaire                                                         

4.3         Testing of hypothesis                                    

4.4         Finding of the finding                                    

4.5         Discussion of the finding                               

4.6         Chapter reference.

Chapter five

5.1         Summary, conclusion, recommendation           

5.2        Restatement of the findings                           

5.3        Summary of the procedure used in the study    

5.4        Summary of the study                                   

5.5        Limitation of the study                                  

5.6        Implication of the study                                

5.7        Conclusion                                                   

5.8        Recommendation                                          

5.9        Chapter reference

Bibliography

Appendix i

Appendix ii

CHAPTER ONE

INTRODUCTION

1.1        BACKGROUND OF THE STUDY

 Ordinarily, an auditor is one to whom the receipt and payment of an organization were read, as is simplified in the Latin verb audira, to hear.  This is so because in the ancient time account and records of business, estate, trust and farms were checked by their owners by their being called out by those who compiles them. Auditing however, as it is known today is an independent examination of the financial record and statement of business organization non-profit making bodies, government parasatatrals etc with a view to reporting on them whether they show a true and fair view.

          The practice was  known to have  been exercised by such ancient civilization as the Egyptians. But infact, the increased complexity of commerce today ha greatly widened the scope of auditor operation and has called for a high degree of skills and discernment likewise, the development of modern accountancy and auditing is also  credited to the great expansion in industry  and commerce, which has taken place since  the industrial revolution. It should be realized that the swift   change in nature has really created an increases in business transaction and investment in limited liability companies, where share holders are not the manager of their capital. This has thus provided the need for the manager to account to the shareholder. On this note the government made provision for accounts of companies to be examined and reported to the persons other than those who manage the business.

          The role of external auditor in banking operation have been investigated in this research works using three selected banks in Aba  as a case study for the study. This is based on the fact that there are numerous banks with branches in Aba and the following are the three selected banks  to be discussed.

i.             FIRST BANK OF NIGERIA

ii.            UNITED BANK FOR AFRICA PLC (UBA)

iii.           INTER CONTINENTAL BANK PLC.

1.2        REVIEW OF THE SELECTED BANKS

First Bank traces its ancestry banks to the first major financial Instruction founded in Nigeria, hence the name. The current chairman is Dr. Ayoola Oba Otudeko, OFR. The bank is the largest retail lender in the nation, while most bank gather funds from consumers and loan it out to large corporations and multinationals, first banks has  created  a small market for some of its retail clients.

At the end o August 2006, the bank had assets totaling 650billion Nigeria or $5billiopn dollars. The bank was  also the most highly capitalized stock on the Nigeria stock exchange, and had about 10 billion outstanding shares. It has a subsidiary in the United Kingdom, FBN  bank (UK), which has a branch in Paris. The  bank also has representative offices in south Africa and China. The company was named the best in Nigeria by   Global Finance magazine in September 2006.

The first  auditors are Akintola Williams Deloitte and Touche  (Chartered Accountant) and KPMG  Audit (Chartered  Accountants) .

The firm has solid Short and Long term ratings from Fitch  and the Global Credit Rating  Company partly due to its low exposure to non-performing loans. The firms compliance with financial laws has also strengthened with the Economic financial crimes commission giving it a strong rating.

       Due to spaces, I may see this is all I have about first Bank.

          In terms of (UBA) which means United Bank for Frica Plc is the product of the merge of Nigeria’s third (3rd) and firth (5th) largest banks, namely the old UBA and the erstwhile standard trust bank Plc (STB) respectively, and a subsequent acquisition of the erstwhile continental Trust Bank Limited (CTB). The Union emerged as the first successful corporate combination in the history of Nigerian Banking.

          Today the United bank for Africa Plc is one of the Africa’s lading financial Institution offering Universal banking to more than 7 million customer across 750 branches in 14 African countries with presence in new York, London and Paris which assets  in excess of $19 bn ,UBA  is your partner for banking services for Africans and African related businesses globally.

          Lastly, Intercontinental bank Plc which established as a merchant bank in February under the name, Nigeria Intercontinental Merchant Bank Limited. Commenced  business with paid up ordinary  share capital of N12 million. In five years it become the most profitable merchant bank in Nigeria.

1989, September 1, The first subsidiary, Intercontinental securities Limited (INTERSEC) and investment company was s et up in 2000 converted to Universal Banking, 2002 became a publicly quoted company listed on the Nigerian Stock  Exchange with IPO of 288, 995,000 ordinary share, which was fully subscribed.

2004 Public offer of 2.75 million ordinary shared in December, in its quest to exceed the new N25 billion shareholders funds as prescribed by the CBN. Subsidiary by 136% and reaffirming investors  confidence in the banks. While 2005 was the merging  with three other  banks. Equity, Gateway and Global in  October, 2005.

1.3        STATEMENT OF THE PROBLEM.

Both Internal and External auditor are there to contract and maintain of the financial balance and upbringing of the organization. It is task for this researcher work to investigate on the position effects and influence of the auditors. Emphatically, the external auditors have over financial organization like the banks.

          Auditing has been the basic means to contract the financial system any organization. despite the practice, the organization still present fruadful financial statement and report  to the public and certainly there has been persistent fraudulent practice in the banks, which at the end gets the banks distressed.

          However, It could be questioned, how could this situation persist while auditing practices  had been inexistence in carrying out his research work. Some problems have attracted special  attention. These are as  follows:

i.             Should auditors be changed in two year or should they remain as already established, that as been appointed annually by the banks.

ii.            What has been the reason for consistent fraudulent practices in the banks.

iii.           What are the actual roles the external auditor play in bank to enhance te growth of the banks and for the bank to keep  to standard as required by BOFIO and CAMA.

iv.           To what extent should external auditor dive into the financial and managerial systems of the banks?

1.5     PURPOSE OF THE STUDY

The aim of this study is to critically look or examine the banking business In Nigeria and to also identify the roles of the external auditors to install on effective and efficient in banking operation. It is well known that one of the problem facing banks in Nigeria is mismanagement of fund, loan and credits. Based on the problems identified above the objectives of the researcher work includes the following:

i.             To educate auditors lend credence to the accounts of the banks and to ensure compliance with SASIO and IAS30.

ii.            To educate on the necessity of banks to keep in mind the essence to comply with the provisions of the banks and other financial institutions decree, 1991.

iii.           To teach the banks to ensure compliance with the companies and allied matters Act (CVAMA) 1990.

iv.           To highlight the need for appropriate review and report upon the accounts and balance sheet for banks by external auditors.

1.6     RESEARCH QUESTIONS:

In view of this research work, specific questions are pertinently identified to aid the accomplishment of the intended aim. These include:

i.             Does the banks make provision for the external auditors whose it appoints to audit the financial statement prepared by the banks.

ii.            Has the management of the bank with the help of the external auditor endeavored to curtail the inadequate in financial report

iii.           Do banks accurately provide all the necessary book of records for verification and investigation if it becomes very necessary?

iv.           Has the presence and investigative activities of auditors enabled bank to check their fraudulent practices.

v.            Has inefficiency in cash and financial management resulted into deficiency in the entire banks financial management resulted into deficiency in the entire banks financial system control.

vi.           Do banks adhere to the requirement establishment by bank and other financial institution decree 1991 and also that of the companies and allied Matters Act 1990.

vii.         Have the banks been keeping to the requirement of CAMA 1990 with regards to preparing their annual financial report and statement.

1.7        HYPOTHESES

In view of the problems and questions already mentioned and the  objectives and the significance set to be achieved in this research work, the hypotheses for this study my be formulated for acceptance or rejection as follows:

Given that Ho = Null Hypotheses and

                Hi = Alternative Hypothesis.

i. Ho = Fraudulent practice have not declined in the bank since       2000.

    Hi = Fraudulent practice have declined in the band since  2000

ii. Ho: = banks do not employ the service of external auditors to audit and investigate their financial statement, report and record.  Council library documentations  were made use of  also  Abia Poly library and other textbooks were made use of it in this research work. The work deals on the history, nature, roles, and essentials of external auditors in banking business in Nigeria.

1.8        SIGNIFICANCE OF THE STUDY

To appreciate the general significance of this research work, one will have to put  into consideration the roles of the external audit  in bank and that of the internal auditor. In considering this, the importance of this study are assed by the need  to ascertain tat bank keep up to the requirement of the banks and other  financial institution degree, 1991. other importance include the following:

i.             The government regulations on banks are being acknowledged by the external auditors, however, making sure that they are  continuously put to effect by banks.

ii.            Also  the  auditors roles ins established in the view to assessing in general the financial background of the  banks aiming at  putting to a stop the issues of distress.

iii.           It creates room f or possible assessment of the banks financial reports enabling the entire public to receive what  they bargained for this is a true and fair reviewed re[ort.

iv.           The investors are opportuned to understand the financial reporting nature of banks thus knowledgeable detecting true and fair viewed report which might be measures to them in their business with banks.

v.            The project will provide for any student carrying out a similar topic or further research work  on this subject a solid foundation for the realization of his or her researcher purposes of works.

vi.           This study is also in partial fulfillment of the requirement for the award of Higher national Diploma (HND) Degree in Accountancy to the research.

1.9        DEFINITION OF TERMS

This aspect of the research work is of utmost importance to enable the user of the research finding to appreciate thoroughly the research work in its entirety. The following are the definition of some terms used in the project work.

v  Banking Business: According to BOFIO, it is a business of receiving deposit, a current account, savings account or other similar account paying or collecting cheques drawn by or paid by customers, provision of financial or such other business as the Government (or  the central bank of Nigeria) may order published in the Gazzette designated as banking business .

v  Accounting Polices: Accounting Polices encompasses the principle base connections, rate and procedures adopted by management in preparing and presenting financial statement. They are  the specific accounting bases followed, for items considered to be material in the determination of profit or loss for the period and stating matters in the financial partition.

v  An Audit: It is an Independent examination of the financial records and statement of business organization non-profit masking bodies, government parastatals etc with a view  to reporting on them whether they show a true and fair view.

v  Internal Check: Is the part of internal control system which deals with the organization and preparation of the book-keeping and other  clerical  duties  in such a way as to  ensure  that  no single task is executed from its  inception to its  completion by only one person and the  work of each clerk engaged  upon a task is subject to an independent check  in the course of another’s duties.

v  Substantive Test: the auditing standard and Guideline   in internal control defines  substantive  test a s “those test  of transaction and balances and other procedures such as analytical reviews, which seek to provide audit evidence as to  the completeness, accuracy and validity of the information contained in the accounting  records.

v  Vouching: Vouching is the examination of the documentary evidences put forward to support the entries in a  clients accounting records. A voucher is any document, which forms ten basis for an entry in the accounting records.

v   Fraud: Fraud is referred to those acts, which include the sue of deception to obtain an illegal or unjust financial advantages  and is also an intentional mis-statement in or Omission of accounts or disclosure from an entity’s accounting records of financial statement.

v  Chi-square Test (X2):  This is a text  statistic used to  test  whether an  observed series of value differ  significantly from what was expected. It is employed for testing more than two population properties.

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