This research project is designed to bring out the
importance of audit to the effective working of the organization using First
Bank Nigeria Plc Okpara Avenue, Enugu state.
In pursuant to this, data were collected by personal
interview, questionnaires and through researcher’s observation. Secondary data
were collected from journals, publications and related works.
Also, findings showed that all the strategies for
effective working operations are applicable in the case study. It was revealed
that because of the laws guiding auditors, the attitude and perception of
auditors to effective working operation in my case study was adequate.
Finally, based on these findings, various
recommendations were made amongst which include, that for auditor’s work to be
relied upon by other or for the work of auditors not to be subjected to any
loss or damage, they should not accept gifts or packages, have personal relationship
with clients and should carry out their duties in compliance with statutory
TITLE PAGE I
LIST OF TABLES VI
TABLE OF CONTENTS VII
1.0 INTRODUCTION 1
OF STUDY 1-2
OF CASE STUDY 2-6
OF THE PROBLEM 6
OF STUDY 6
OF HYPOTHESIS 7
OF THE STUDY 8-9
AND DELIMITATION OF THE STUDY 8
OF SOME RELEVANT TERMS 9
BACKGROUND OF AUDITING 12-13
OF AUDIT 14-15
OF AUDIT 15-16
2.5 WHO IS
AN AUDITOR 16
GENERAL VIEW OF AUDITING 16-19
OF AUDITING TO THE COMPANY. 19-20
OF AUDITORS 20-21
OF AUDITORS 22
OF AUDITORS 22-24
OF ENGAGEMENT LETTER 24
CONTENTS OF ENGAGEMENT LETTER 25
AND RIGHTS OF AUDITORS 25-27
OF AUDITORS 27-28
OF AUDITORS 28-29
360 FURTHER PROVIDES THAT 29-30
OF THE LAW ON AUDITORS 33
2.11.1 POSITIVE IMPLICATIONS 33
2.11.2 NEGATIVE IMPLICATIONS 33-34
STANDARD OF CARE AND
SKILL IN CARRYING OUT HIS DUTIES 35-36
2.14 THE ROLE
OF AUDITORS INA CORPORATE ORGANISATION 36-37
2.15 WAYS IN WHICH THE LIABILITIES OF AUDITORS CAN BE LIMITED 37-40
RULES TO GUARANTEE INDEPENDENCE OF AUDITORS 41-42
1990 TO GUARANTEE INDEPENDENCE 42
2.18 INVESTIGATIONS 42
2.18.1 STAGES AND PROCEDURES OF AN INVESTIGATION 43-49
AND AUDITING STANDARDS 49-50
2.19.2 THE RELEVANCE OF ACCOUNTING STANDARDS
TO AUDITING 50
2.19.3 ADVANTAGES OF ACCOUNTING STANDARD 51
2.19.4 DISADVANTAGE OF ACCOUNTING STANDARD 51
2.20 AUDITING STANDARD AND GUIDELINES 52
2.20.1 STATEMENT OF AUDITING STANDARDS 52-53
DESIGN AND METHODLOGY 55
3.1 INTRODUCTION 56
3.2 SOURCESOFDATA 56
SOURCES OF DATA COLLECTION 56
SOURCES OF DATA COLLECTION 57
POPULATION OF STUDY 57
SIZE AND SAMPLING TECHNIQUE 58
OF DATA COLLECTION 59
FOR PROCESSING COLLECTED DATA 59
4.0 PRESENTATION AND ANALYSIS OF DATA 60
4.1 A BRIEF INTRODUCTION OF THE CHAPTER 60
RETURNS, RESPONDENTS, CHARACTERISTICS AND CLASSIFICATION. 60
OF RESEARCH QUESTIONS 61-66
4.4 TEST OF HYPOTHESIS
5.0 SUMMARY, CONCLUSION, AND RECOMMENDATION 70
APPENDIX II 75-78
BACKGROUND OF STUDY
Auditing as a discipline or profession arises
primarily because of separation in the ownership as well as the administration
of a business enterprise. The owners of a business that is shareholders pool
their resources together for the purpose of establishing an enterprise, with a
common goal of profit making or otherwise. These shareholders may not be available
for the day to day administration of the, company hence the need to appoint
professional managers, whose main responsibility is to utilize the shareholders
fund effectively. The managers are expected to prepare an account that is, a
quantitative statement stating how the shareholder’s resources were utilized
during a period being referred to as accounting year. This statement is
referred to as stewardship account.
In order to make the owners of the business place
reliance on members of management as regard the true and fair view of the
financial statement, the shareholders will appoint an auditor.
Conclusively, auditing may be seen to have arisen
primarily as a result of separation of ownership from control; however, this
does not connote that independent examination of financial statement may not be
necessary where there is fusion of ownership with control.
was derived from Latin word “AUDIRE” which means to hear. Initially, auditors
are made to listen to income and expenditure of account prepared.
international body by name the Consultative Council of Accounting (CCA) defined
Auditing as “The independent examination of, and expression of opinion on the
financial statement of an enterprise by an appointed auditor in pursuance of
that appointment and in compliance with any relevant statutory obligation”.
HISTORY OF CASE STUDY
HISTORY OF FIRST BANK OF NIGERIA
PLC for over a century has distinguished itself as a leading banking
institution and contributor to the economic advancement and development of
Nigeria. FBN Plc remains one Africa’s most diversified financial service
in 1894 by a shipping magnate from Liverpool, Sir Alfred Jones, the Bank
commenced a small operation in the office of Elder Dempster and Company in
was incorporated as a limited liability company on March 31, 1894 with Head
Office in Liverpool. It started business under the corporate name of the Bank
for British West Africa (BBWA) with a paid-up capital of 12,000 Pound Sterling,
after absorbing its predecessor, the African Banking Corporation which was
established earlier in 1892. This signaled the pre-eminent position which the
Bank was to establish in the banking industry in West Africa. In the early
years of operations, the Bank recorded an impressive growth and worked closely
with the Colonial Government in performing the traditional functions of a
Central Bank, such as issue of specie in West Africa sub-region.
justify its West African coverage, a branch was opened in Accra, Gold Coast
(now Ghana) in 1896 and another in Freetown, Sierra Leone in 1898. These marked
the genesis of the Bank’s international banking operations. The second branch
of the Bank in Nigeria was in the old Calabar in 1900 and two years later,
services were extended to Northern Nigeria.
408 business locations as at 31/03/2007, the Bank has one of the largest
domestic sales networks in Nigeria, all on-line real times. As a market leader
in financial services sector, First Bank pioneered initiatives in international
money transfer, Master card, Inter-switch, and the ATM Consortium. It is the
industry leader in terms of value and volume of ATM transactions in the
Bank has (9) local subsidiaries and a full-fledged subsidiary in the United
Kingdom, as well as representative office in South Africa. The Bank’s growth
strategy is hinged on continued network expansion, product development, merger
and acquisition and growth of its international footprint. In line with the
imperatives of industry consolidation, the Bank in 2005/2006 financial year,
acquired its investment banking subsidiary, FBN (Merchant Bankers) limited, and
MBC International Bank Plc. Furthermore, the Bank is currently exploring
alliance with key prospects in the industry with a view of creating the largest
bank in West Africa and one of the largest on the continent.
got listed on the Nigerian Stock Exchange (NSE) in March 1971 and has won the
NSE’s Annual President’s Merit Award for the best Financial report in the
banking industry, twelve times.
reposition and to take advantage of opportunities in the changing environment,
the Bank embarked on several restructuring iniatives. In 1957, it changed its
name from Bank of British West Africa to Bank of West African. In 1969, the
Bank was incorporated locally as the Standard Bank of Nigeria Limited in line
with Companies Decree of 1968.
in the name of the Bank also occurred in 1979 and 1991, to First Bank of
Nigeria Ltd and FBN Plc, respectively. In 1985, the Bank introduced a
decentralized structure with five regional administrations. This was configured
in 1992 to enhance the Bank’s operational efficiency. In 1996, the Bank
introduced the FBN century 11 project to revolutionalize its operations in line
with the dynamics of the environment.
the last decade, by playing key roles in Federal government privatization and
commercialization scheme, First Bank has led the financing of private
investments in infrastructure development in Nigerian economy.
Business of the Bank is operated along 2 main Market Segments/strategic,
Business Units (SBUs): corporate Banking and regional directorate (Lagos and
West, North and South). These are defined with broad limits to facilitate and
give direction to market activities within the bank.
years, the Bank has experienced phenomenal growth. With a share capital of
N55.6M in 1980, the Bank share capital grew to N1,016M as at March 2002. The
Banks total asset base was N266.4billion while its deposit base stood at
N168.2billion as at March 2002. Market capitalization stood at N47.604billion
i.e. N23.44k/shareas at 31 March 2002. It has remained the most profitable
banking franchise in Nigeria with the group profit after tax of N20.4billion in
the financial year ended March 31 2007. Underpinning this success is the Bank’s
strategy, with its focus on the critical imperatives of modernization and
was rated number one among Nigerian banks in Corporate Governance practice in
2003 and 2005 by Johnston Irving consulting, in collaboration with ICRA Pty
limited (an associate of Moody’s Investor, USA). In addition, the Bank was
awarded the “Best Bank in Nigeria”, “Best Trade Finance Bank in Nigeria” and
“best foreign exchange Bank in Nigeria” for three consecutive years 2004, 2005
and 2006 by US Global Finance Magazine, to mention a few of the awards won by
line with the Bank’s vision “to be the clear leader and Nigeria’s bank of first
choice”, its mission “to remain true to our name by providing the best
financial services possible” and its brand essence, “dependably dynamic”, the
Bank has continued to transform itself as it forges ahead in its second century
of providing qualitative banking services to the nation and maintaining
leadership in a consolidated and more dynamic industry.
1.3 STATEMENT OF THE PROBLEM
The focus of this study is on auditors who do not want
to carry out their duties in compliance with statutory requirement thus making
their audits to be less reliable by others.
OBJECTIVES OF STUDY
The objective of auditing is easily discernible from a
careful consideration of the objective of the statutory provision for audit of
limited liability Companies, which is provide in Nigeria by the Companies and
Allied Matters Act (CAMA). This established the basic framework which the
auditor of an organization is specifically assigned for. This include:-
protect the interest of non-active shareholders from the excessive, exaggeration, ineptitude, inefficiency,
deceit and dishonesty of the directors.
ensure that the Directors account to the non-active shareholders on their stewardship through the financial
statement required by law.
strengthen the profession by the imposition of the statutory requirement that qualified auditor shall
be appointed by the shareholders at
annual general meeting and that such auditor shall report on the account being laid before the
company in general meeting.
the foregoing, it can be seen that the purpose of auditing is not to discover fraud
as some people think. A proper audit may reveal discrepancies, mistakes,
loopholes in the system and sometimes fraudulent manipulation.
does not mean that any auditing job did not reveal the above, they can only be
discovered where they exist.
STATEMENT OF HYPOTHESIS
The hypothesis of this research work will be stated as
H0: The effective nature of the law does not in any
way guarantees/curtail the excesses of the auditors in the profession.
H1: The effective nature of the law guarantee/curtail
the excesses the auditors in profession.
SIGNIFICANCE OF THE STUDY
study shall be of good importance in contributing efforts of the audit to the
effective working of the organization. It shall also disclose how the auditors
cope with the achievement of its principal objective such as to detect errors,
frauds and disclose hidden information, evaluation of the director’s
performance as agent of the shareholders and to solve conflict of interest.
so, this study shall make us familiar with these constraints which would be
eliminated or minimized so as to enhance the better performances and the
contribution of auditors to the recommendation. It also serve as a base of
better advise to the companies of the country on how to improve the quality of
the services rendered by the auditor.
SCOPE AND DELIMITATION OF THE STUDY
law of auditing, its concept and implications is a wide topic covering all the
laws of auditing in the whole world.
far as this project is concerned, the auditor and the laws, its concept and
implications will be dealt with in the project work.
from those laws and regulations that relates directly to the preparation of the
financial statements, we shall also deal with the laws and regulations that provide
a legal framework for the conduct of the entity and that are central to the
entity’s ability to conduct its business.
359 of CAMA 1990 requires auditors to make report to the members on the
accounts examined by them. It shall therefore be appropriate to focus this
project on pertinent provision of the Act which is required of the auditors,
that is, status, his responsibilities, the law and its implications.
so, most of our concentration here shall be only on the auditors and the law
governing auditor, its concepts and implications.
we shall be careful not to neglect the ICAN rule that guaranteed the
independence of auditor in a corporate organization.
to give the demand quality, we shall highlight the role of auditor, his duties
and right governed by Act in Nigeria.
DEFINITION OF SOME RELEVANT TERMS
facilitate an easy understanding of the contents, it is relevant to define some
of the terms in auditing.
AUDIT:- An audit is an independent examination of, and
expression of opinion on the financial statements of an enterprise by an
appointed auditor in pursuance of that appointment and in compliance with any
relevant statutory laws and regulations.
AUDITING:- Auditing could be defined as a service
activities demanding by society (the demand having it not in some things called
the agency theory) with the expressed aim of adding to the perceived
credibility of the published financial statement of limited liability
AUDIT PLAN:- An audit plan is a statement setting out
the audit objectives and the strategies to be adopted in achieving the
AUDIT PROGRAME:- An audit programme is the list of
work an auditor does on the occasion of his audit.
LETTER OF ENGAGEMENT:- This clearly defines the extent
of the auditor’s responsibilities and also minimize the areas of
misunderstanding between the client and the auditor.
AUDIT WORKING PAPER:- This can be described as
schedule, analysis, transcripts or memoranda prepared by an auditor in the
course of his examination of the books and records of a client company to serve
as the record and basis of his report.
FRAUD:- Fraud can be interpreted as an intentional
misrepresentation of financial statements by one or more individuals among
management, employees, or third party.
ERROR:- Error is an unintentional mistake in financial
statement such as mathematical or clerical mistake, genuine oversight,
unintentional, misapplication of accounting policy.
IRREGULARITY:- The word “irregularity” is however used
to refer to intentional distortions of financial statement, for whatever
purpose and to misappropriations of assets, whether or not accompanied by
distortion of financial statement e.g. change in valuation of stock.
CAMA 1990:- Companies and Allied Matters 1990
IAPS 1005:- International Auditing practice statement