The Role of External Auditor in Banking Operation (Case Study of Three Selected Banks in Aba)
Chapter One
PURPOSE OF THE STUDY
This study aims to critically look at or examine the banking business In Nigeria and to also identify the roles of external auditors to install on effective and efficient banking operations. It is well known that one of the problems facing banks in Nigeria is the mismanagement of funds, loans, and credits. Based on the problems identified above the objectives of the researcher’s work include the following:
- To educate auditors to lend credence to the accounts of the banks and to ensure compliance with SASIO and IAS30.
- To educate on the necessity of banks to keep in mind the essence of complying with the provisions of the banks and other financial institutions decree, 1991.
- To teach the banks to ensure compliance with the Companies and Allied Matters Act (CVAMA) 1990.
- To highlight the need for appropriate review and report on the accounts and balance sheet for banks by external auditors
CHAPTER TWO
LITERATURE REVIEW
INTRODUCTION
The etymology dictionary explains that the term audit originates from the Latin word audire, which means “to hear.” Audire in ancient Rome referred to the “hearing of accounts,” a process in which one official compared his records with those of another official. As many of the parties interested in the audit findings were illiterate, audits were presented orally. In modern times, auditing has evolved into a technical discipline practiced by professional auditors who provide opinions on whether or not the annual financial statements of an entity comply with set accounting standards (Abbott, Parker and Park, 2000).
Over the years, auditing has retained its significance in public finance and, as such, Supreme Audit Institutions (SAI) receives constitutional recognition in many countries around the world. As watchdogs of public finances, the public auditors act as critical links in enforcing the accountability of executive agencies to national and state legislatures and through them to the general public (Anderson, Francis and Stokes, 1993). The public sector auditor reviews financial management of public sector entities to ensure that transactions have been undertaken with due regard to propriety and regularity.
Recently, several public auditors have also assumed responsibility for assessing value for money considerations in public projects and programs in recent years. However, the role of SAIs as public finance watchdogs is still limited in many developing countries around the world. This state of affairs is the result of several factors, including financial and skill constraints, SAIs’ lack of independence from the executive, and poor communication between the SAI and the legislature and civil society organizations (Carey, Craswell and Simnett, 2000).
Although, public budgeting processes have traditionally excluded civil society organizations, in the last 10 years or so, civil society organizations in many developing countries have built effective capacities to analyze and influence public budgets. Generally, however, civil society engagement in public budgeting has focused on examining the executive budget presented to the legislature and monitoring the subsequent implementation of the budget. There has been much less civil society engagement with the auditing of expenditures after a budget has been implemented and there has thus been limited interaction between civil society organizations and SAIs.
In recent years the importance of good corporate governance has received significant public and regulatory attention. A crucial part of an entity’s corporate governance is its external audit function (Nestor, 2004). In association with this, there has also been significant public concern about the level of fraud within organizations.
Banks play a central role in the economy. They hold the savings of the public provide a means of payment for goods and services and finance the development of business and trade. To perform these functions securely and efficiently, individual banks must command the confidence of the public and those with whom they do business. The stability of the banking system, both nationally and internationally, has therefore come to be recognized as a matter of general public interest. This public interest is reflected in the way banks in almost all countries, unlike most other commercial enterprises, are subject to prudential supervision by central banks or specific official agencies.
CHAPTER THREE
RESEARCH METHODOLOGY
Area of Study
Aba is a major urban settlement and commercial centre in a region that is surrounded by small villages and towns. The indigenous people of Aba are the Ngwa. Aba is well known for its craftsmen and also the most populous city in the South Eastern Nigeria. As of 2016, Aba had an estimated population of 2,534,265. Thus it is the area of the study.
Research Design
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the descriptive survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled.
Population of the study
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This research was carried out on the role of external auditor in banking operation using three selected banks in Aba as case study first bank of Nigeria. The selected banks in Aba include;
First Bank of Nigeria
United bank for Africa Plc (UBA) and
The intercontinental bank Plc
Therefor a sum of 120 staff of the selected banks form the population of the study. To this effect, the research selected 40 staff from each of the above mentioned Banks to determine the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
DATA PRESENTATION
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS:
Introduction
This chapter summarizes the findings into the “the role of external auditor in banking operation using three selected banks in Aba as case study”. The chapter consists of summary of the study, conclusions, and recommendations.
Summary of the Study
In this study, our focus was to 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. The study specifically was aimed at educating auditors lend credence to the accounts of the banks and to ensure compliance with SASIO and IAS30; 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; teach the banks to ensure compliance with the companies and allied matters Act (CVAMA) 1990; highlight the need for appropriate review and report upon the accounts and balance sheet for banks by external auditors.
The study adopted the survey research design and randomly enrolled participants in the study. A total of 60 responses were validated from the enrolled participants where all respondent are active staff of the 3 selected banks in Aba.
Conclusions
Based on the finding of this study, the following conclusions were made:
- Banks makesprovision for the external auditors whose it appoints to audit the financial statement prepared by the banks.
- Banks have been able to curtail inadequate financial report through the assistance of external auditors.
- Banks does not accurately provide all the necessary book of records for verification and investigation if it becomes very necessary.
- The presence and investigative activities of auditors have enabled bank to check their fraudulent practices.
- Inefficiency in cash and financial management have resulted into deficiency in the entire banks financial management andin the entire banks financial system control.
- 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?
- Banks have been keeping to the requirement of CAMA 1990 with regards to preparing their annual financial report and statement
- Fraudulent practice have not declined in the bank since 2000.
- Banks employsthe services of external auditors to audit and investigate their financial statement, report and record
Recommendations
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.
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