AUDITOR AND LAW’’CONCEPT AND IMPLICATIONS (A CASE STUDY OF FIRST BANK NIGERIA PLC. OKPARA AVENUE, ENUGU STA
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
1.1 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.
Auditing was derived from Latin word “AUDIRE” which means to
hear. Initially, auditors are made to listen to income and expenditure of
An 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”.
1.2 HISTORY OF
FIRST BANK OF NIGERIA
FBN 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 solution provider.
Founded 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 Lagos.
It 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
To 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.
With 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 country.
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
FBN 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.
To 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.
Changes 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.
In 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
The 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.
Over 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 growth.
FBN 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 the Bank.
In 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
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.
1.4 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:-
a. To protect the interest of non-active shareholders from
the excessive, exaggeration, ineptitude, inefficiency, deceit and dishonesty of
b. To ensure that the Directors account to the non-active
shareholders on their stewardship through the financial statement required by
c. To 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.
From 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
This does not mean that any auditing job did not reveal the
above, they can only be discovered where they exist.
1.4 STATEMENT OF
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.
OF THE STUDY
This 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
More 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.
1.7 SCOPE AND
DELIMITATION OF THE STUDY
The law of auditing, its concept and implications is a wide
topic covering all the laws of auditing in the whole world.
As far as this project is concerned, the auditor and the
laws, its concept and implications will be dealt with in the project work.
Apart 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.
Section 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
More so, most of our concentration here shall be only on the
auditors and the law governing auditor, its concepts and implications.
However, we shall be careful not to neglect the ICAN rule
that guaranteed the independence of auditor in a corporate organization.
Meanwhile, to give the demand quality, we shall highlight
the role of auditor, his duties and right governed by Act in Nigeria.
OF SOME RELEVANT TERMS
To 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 enterprises.
AUDIT PLAN:- An audit plan is a statement setting out the
audit objectives and the strategies to be adopted in achieving the objectives.
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 1005
Kola Olowookere (2001). Fundamentals of Auditing. Gavima,
Adeniyi A. Adeniji (2004). Auditing and Investigations.
El-toda Ventures Limited.
Companies and Allied Matters Act (CAMA) (1990). Federal
Government Press, Lagos.