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THE ROLE AND NEEDS OF EXTERNAL AUDITOR IN BANKING OPERATION

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.

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.

1.2 REVIEW OF THE SELECTED BANKS 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.

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.

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.

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 passed 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.

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.

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