The objective of this research work is to
check the distress in the banking sectors, the duty of the accountants and
auditors to make sure that it does not occur.
The method of research used is both primary
and secondary that is, the primary method will be in-form of interviews and
administration of questionnaires while secondary will be using literature etc.
The limitation to be faced while carrying out
this project is lack of money, time and data constrain.
At the end of the research I believed that
there will be a way to solve this issue of distress in the banking sectors
Table of contents
Background to the study
Statement of problem
Objectives of the study
Significance of the study
Scope of the study
Limitation of the study
Definition of term
Statement of hypothesis
Distress in the Nigerian banking sector
Emergence of distress banks in Nigeria
Implication of distress for the economy
Causes of bank distress in Nigeria
Who is an auditor
What is auditing
The role of auditor in distress and failed banks
The role of auditing/function of the external auditor
2.10 The duties of the accounting/auditor
2.11 Auditor liability in relation to
distressed and failed bank
2.12 Letter to the management
Area of study
Source of data and information
Mode of data collection analysis
Analysis of data
Presentation, analysis and interpretation of data
Questionnaires administration and analysis of responses
Test of hypothesis
Summary, conclusion and recommendation
TO THE STUDY
Distress in the Nigerian banking sectors is a
problem that bank has in this recent time.
This seems as if the regulatory authorities appeared to be fighting a
losing battle to sanitize the system.
Ebtiodaghe (1996) observed that banking
distress occurs when customers were unable the loss of their deposits and consequent
breakdown of their contractual obligation.
The central bank fails to meet its capitalization requirements, has a
weak deposit base and is afflicted by mismanagement. Aderiu (1997) said that distress in banks I
based on the banks examination rating system with the word “CAMEL” that is
C=capital adequate, A = Asset quality, Management competence, E = earning
strength, L = Liquidity sufficiency. The above mentioned is the aggregate areas
that really qualifies a bank to be branded “ healthy or sick”.
A bank is considered healthy by the CBN if it
maintains six criteria for instance capital paid up capital, sound management
i.e bank meeting up with CBN rules, satisfy customers and shareholders
interest, minimum liquidity of 30% not less than 10% of its liquid assets to be
in treasury bill and certificates. In a
situation where a bank defaults in one or few of the above criteria and fails
to rectify its default position within a month, it is indeed qualified to be classified
Where banks is unable to service its fixed
costs, meet it debts obligations to its stakeholders has a net cash greater
than its capital and can no longer operate profitably, the bank is deemed to
have failed. Thus a failed banks is a bank which is unable to meet its obligations
to its stakeholders as at when due arising from weakness in its financial,
operational and managerial conditions.
The failed bank decree also defined “failed
bank” as a bank whose license has been taken over by the CBN. Due to the inability of the regulatory
authorities to bring back some of these distressed bank which failed
eventually, the only way left in order
to sustain public confidence and stability of the system is to revoke their
licensed put them on liquidation.
Regrettably this has been the fate of some
distressed banks in the country. Almost
36 banks are on distress.