Abstract
The
project examines the relationship between external audit and audit committee in
the Nigeria Banking Industry. The study main objective is to strengthen the
relationship between external audit and audit committee in banks with reference
to zenith bank plc. However, the work of an external audit can ensure
credibility and transformation in the banking industry and evaluate the
operation of internal control system. The primary source of data collection was
used in gathering data from respondents. A structure questionnaire was designed
by the researcher and validity by two experts from the statistics department
was used to obtain data Chi-Square (X2) was used to test hypotheses
formulated. It was discovered that there is positive relationship between
external audit and audit committee by extension will enhance the growth of
banking industry. The study concludes that banks should established internal
control system that will enhance their growth; the external auditor has to laid down effective processes and procedure
that should be followed by every member of bank. Based on the findings the
study recommends amongst others seminars and workshop for customers and staff
of the banks, the auditor should ensure good relationship with the audit
committee in the banking system.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgments iv
Abstract v
Table of Contents vi
Chapter
One: Introduction 1
1.1
Background to the Study 1
1.2
Statement of Problem 3
1.3
Research Questions 4
1.4 Objectives of the Study 4
1.5
Statement of Hypotheses 5
1.6 Significance of the Study 6
1.7 Scope
of the Study 7
1.8
Limitations of the Study 7
1.9
Definition of Terms 8
Chapter
Two: Review of Related Literature 9
2.1
Introduction 9
2.2
Objective of External Auditor 10
2.3
Auditing Committee Requirement in line
with
Company
Allied Matter Act 1990 CAMA 11
2.4
The Scope of Practice 13
2.5 Audit
Committee in Banking Operation 14
2.6
Importance of Audit Committee 17
2.7
Relationship between External Audit and
Audit
Committee 18
2.8
Internal Control System in Banking
Operation 20
2.9
The Necessary Function of External Audit
21
2.10 The Role and Function of Audit Committee 22
2.11
What are the Benefits of an External
Audit? 24
2.12
Duties and Responsibilities of Audit
Committee 28
2.13 External Auditor Liability to Third Parties 33
2.14 Corporate Governance 35
2.15 Role of the Board 36
2.16 Board Committee 37
2.17 Audit Committee of the Bank 38
2.18 Board Credit Committee 40
Chapter
Three: Research
Method and Design 42
3.1
Introduction 42
3.2 Research design 42
3.3
Description of the Population of the
Study 42
3.4 Sample Size 43
3.5
Sampling Techniques 43
3.6
Method of Data Collection 44
3.7
Method of data Presentation 45
3.8 Method of Data Analysis 45
Chapter
Four: Data Presentation,
Analysis
and
Interpretation 47
4.1
Introduction 47
4.2
Presentation of Data 47
4.3 Data Analysis 47
4.4
Testing of Hypothesis 65
Chapter
Five: Summary of Findings, Conclusion
and Recommendations 69
5.1
Introduction 69
5.2 Summary of Findings 69
5.3
Conclusion 70
5.4
Recommendation 71
References 73
Appendix A 75
Appendix B 76
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Banks
play a vital role in economic development of a nation. Time continued strength
and stability of the banking system, is a matter of general concern as they
hold the savings of the public, provide means of payment for goods and service
and financial development of business and trade of a country.
However,
auditing financial statement of banks has been a long time in practice. The
auditing of accounting records of bank by an external auditor and audit committee
become very important.
Therefore
to perform these challenging functions severally and effectively the banking
industries must command the confidence of the public and those with whom they
do business. The public interest is reflected in the ways banks in all
countries are subjected to supervision of financial soundness by central bank
and other financial agencies.
Banks
financial statements are subject to examination by external auditor and auditor
committee whose opinion lead to credibility to such statement. And thereby
assist in promoting confidence in banking system in Nigeria. It is therefore
importance to nullify that the relationship and importance of external auditor
and audit committee cannot be overemphasized to maintain this credibility.
The
external auditor and audit committee are reamers to audit with reasonable
skills and for an auditor are professional. Opinion by waiter (1972), “The
auditor must be able to show that in the covers of his duty or work has reached
an acceptable level of performance that is making sure that audit are properly
planned audit are supervised and performed by auditors of appropriate
experience relevant test and desired and properly applied in sufficient dept
and conclusions are soundly based on relevant and properly documented.
1.2 Statement of the Problem
There
are various problems faced by inventors, depositors and other interest group in
forming a decision about the financial institution.
The
statement of problem of the study are; the insensitivity on management to
report made by the auditor regarding to the financial statement of bank; whether the auditor have the ability to
report objectively and independently; and if there any opportunity which
results from fraud, which may exist or are there any need or means to detect
some common type of fraudulent activities that will continue to cause a loss to
the banking industry.
However,
this study will investigate into some areas where external auditor and audit
committee exist in banking operation in Nigeria and its relationship. For a
successful evaluation of external audit and audit committee which exist within
an organization. The above listed question would be analyzed for the completion
of this research work.
1.3
Research Questions
The following are the questions to be considered in
the research work;
·
How has the external audit and audit
committee has been able to ensure a better relationship and importance in a
bank?
·
Does external audit committee aid
credibility in financial statement of the bank?
·
How is financial statement audited?
·
What are the various factor offering
external auditors and audit committee in their ability to report objectively
and independently?
1.4
Objectives of the Study
The following are the main objectives of this
research study;
·
To ascertain how the external audit and
audit committee has been able to ensure a better relationship and importance in
a bank.
·
To find out if external audit committee
has aid credibility in financial statement of the bank.
·
To find out how financial statement are
audited.
·
To identify the various factor offering
external auditors and audit committee in their ability to report objectively
and independently.
1.5
Statement of Hypotheses
Hypothesis
is a tentative statement that could be proved right or wrong. According to
Obaze and Onosu (2009) cited Tejumaiye (2003) hypothesis are statement
concerning two or more variable to find out their relationship.
However
hypothesis can either be null or alternative. The Null Hypothesis (HO)
should be listed in the alternative form for the purpose of this study; both
null and alternative hypothesis will be formulated.
Hypothesis
One
HO: The external audit and audit committee has
not been able to ensure a better relationship and importance in a banks.
HI: The external audit and
audit committee has been able to ensure a better relationship and importance in
a banks.
Hypothesis
Two
HO:
The external audit and audit committee
has not aid credibility in financial statement of banks.
HI: The external audit
committee has aid credibility in financial statement of the banks.
1.6
Significance
of the Study
Financial
institution from the bank and other entire business and economic development of
any economy. It is expected that an update study on how it financial statement
are audited should be of benefit to management depositors, investors and the
general public as well.
Also
it will be of great importance to all who use bank as a means of keeping
valuable items.
However the following are the significance of the study
·
It will help to ascertain the relevance
and reliability of the financial statement of bank.
·
It will enable us to have proper records
and the report on the information of the financial statement are correct and of
acceptable integrity
·
It will help the public to know the
external relationship to banking industry.
·
Most significantly, it will enable the
banking industry to control fraud, over stating of cash, misappropriation of
funds etc in banking industry.
1.7 Scope of the Study
The
research is aimed at investigating the external audit and the audit committee
their relationship and importance to the banking industry. Its time frame is
between 2008 and 2012 and it was mainly investigated in Benin City, Edo State.
1.8 Limitations of the Study
The
limitations of the study are those practical problem hindrance or constraint
that limited against the study. In the process of carryout the study, many
difficulties and constraints were encountered.
·
Lack of response from the people who are
under investigation.
·
Reluctance on the part of some officer to
provide official information
·
Time and money are other constraints.
1.9
Definition of Terms
The
following terms are used in the research work which definition are given below
External:
It is a process involving a concerning connected with or situation on the
outside the organization.
Committee:
A group of people who are chosen usually by a larger group to make decision
about a particular issue.
Banking: The activity or business of
bank.
Industry:
Activities involved in providing a particular service to people.
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