The Role Of Auditors In A Depressed Economy (A Case Study Of Selected Banks)

Project and Seminar Material for Accountancy / Accounting

The Role Of Auditors In A Depressed Economy (A Case Study Of Selected Banks)


Abstract


The depress in Nigeria economy and the role of auditors has played to revamp the economy is a concern to all. This particular study therefore studied the whole phenomenon of depress as to the causes procedures for classifying the economy as depressed and them evaluating critically the roles plays by the auditors. After evaluating all these the roles of the auditor was then examined to determine if to date the auditors has lived up to expectation or of he should be held liable for depress.

Depressed economy is therefore a condition where the whole economic system ahs decline in order of magnitude. Developing countries where generally an open economies because of the fall in capacity to import in the third world which was magnified by perverse capital flows the payments problem of developing countries were very server and their import volume was cut on an average peak-to –trough basis.

To achieve the objectives of this study sixty (60) questionnaires were distributed thirty (30) wee satisfactorily collected and used for data analysis in this study. The analytical tools used were chi-square frequencies and simple percentage.

Chapter one this research work starts with a brief introduction and background statement which gives an overviews of the depress economy. The hypotheses used are stated.

In chapter two related texts as regards to depression in economy and the role of auditor are stated.

Chapter three shows the various processes involved in obtaining analyzing and interpreting the necessary data gathered.

In chapter four the analysis of the finding based on the data collected is made.

Chapter five includes the summary of finding of the study which shows that;

  1. The internal auditor and internal audit department of most banks are no independent.
  2. The external auditors of most banks lack a full and proper understanding of the activities of their client and also the inert related ship of those activities and others.

The conclusion stressed on the importance of the auditors to initially appraise these lacking areas in order to improve its liquidity profitability and general financial strength. The regulatory authorities the management and staff of the bank should also be blamed.

Finally in this chapter sir the recommendation which state that under no situation should the auditor allow his independence to be impaired? The management of the banks should recruit honest and qualified staff in order to control fraudulent etc.


Chapter One


1.0 Introduction

In the 60’s especially before the civil war in Nigeria cash crops from Agricultural sectors mining and a few others provide much of the foreign exchange earnings. In this period 70 percent (70%) of the nation’s labour price was on agriculture and this contributed to about 70 percent of the gross domestic product (GDP) this contribution of agriculture to GSP saw a decline in the agricultural sector led the nation into important of food this means a compete reverse in trend of averts.

However the decline is attributable to the over dependence of the economy on oil revenue in the 70’s and early 80’s this was know as the era of oil boom. When the oil gut of the 80’3 hit the world, the revenue according to the government declined sharply and this revenue declining continued despite all efforts made by successive government to diversify the sources of revenue. This era was known as the oil-boom in Nigeria. This oil boom compelled many individuals company. Small-scale industrial large scale and many corporate organizations to either completely close down their operations or reduce their operations to about one- third or less of their capacity.

However, the practice of auditing which has been in existence for years has no positive impact on the economy, there had been several corporate failures, which had been led to reduction in growth (ie depressed economy) in view of the above problem this research focused on the roles of auditors in a depressed economy.


1.2 Statement of Problem

The establishment of audit in organization and financial constitutions was to reduce or remove completely the problems of fraud, to protect the company’s assets, and to check misappropriation and embezzlement of funds. But there have been and there is still problem of fraud, misappropriation and embezzlement of fraud in financial institutions.


1.3 Objective of the Study

  1. To examine the role of auditors in financial institutions
  2. To evaluate the usefulness of Auditors to banks by providing reliable accounting information.
  3. To access the impact of government financial policies and guidelines on the execution of Audit function in financial institution (Banks).
  4. To find out the importance of Auditors in protection of company’s assets, misappropriation of funds and embezzlement of funds.
  5. To make appropriate recommendations that will proffer sound solutions in the weakness of auditing functions in banks.

1.4 Significance of the Study

The significance of this study can be viewed in many ways; it is intended to create awareness in the management of private and public companies, it is hope that firms will see auditorsas those which has much to offer to the organization. Also this research recognizes the fact that depression in an economy will lead to macro economic instability and that probably auditors too have a role to play. It is hoped that this research will identify the variousfactors causing depression that had hitherto been in effectively controlled so that more attention can be paid to them.

The banking management would benefit because their problems will be addressed to a reasonable extent. It will be beneficial to investors, who might not be opportune to critically view some documents either because of lack of time, it will help them to know whether to invest in a particular bank or not. To policy makers and regulators in the banking industry, it will present a scheme, through its analysis can assist them in enunciation policies that will not only positively impact on banks but also to remain relevant in the economy by performing good function in Nigeria economy.

This study, when completed will serve as a reference point and source of secondary data for future researches in the field, it will give them an insight into the role of auditors in depressed economy like ours.


1.5 Research Questions

In order to facilitate this study the researcher will base this study on the following questions:

  1. What is the role of an auditor?
  2. How an auditor does perform this function his function to ensure efficiency in banking industry?
  3. What are the things to be done to enhance good economy in banks and banking industry in general?
  4. Does an auditor duly follow the laid down rules and regulation in auditing a firm?
  5. Are the roles of auditor followed under normal circumstance?
  6. Does an auditor play any vital role in Nigeria Economy?
  7. How far is the economic situation, similar or contrasting in the banks.

1.6 Scope and Limitation of the Study

This study covers the cause of depression in an economy and the extent to which these causes are being addressed. The period under view is restricted to 11 years that is (1993-2004). This period is considered to be very important in the history of our country Nigeria because of a lot of crisis going on in Nigeria which has caused a lot of instability both socially, politically, and economically. During the period of writing this work. The researcher encountered limitations of time. Financial constraints also limits the scopeof research work that can be embarked upon by the researcher.

Also the problem of resistance of some bankers who prefer not to comment, regards to some information as being vital and confidential therefore the researcher was deprived these information, because of this, the researcher could not carry out as much as detailed analysis as she wished.


1.7 Definition of Terms

In carrying out this study, there are certain words, which required the expression of their meaning.

Audit:

It consists of a searching investigation of the accounting records and other evidence supporting these financial statement.

Auditing:

It is the independence examination of the financial statements of an organization with a view to express an opinion as to whether these statement give a true and fair view and comply with the relevant statues Aguolu (1998).

Auditor:

A person whose duty is to conscientiously and objectively examine and inquire into any statement of account and other documents where possible.

Depression:

Is a sever down-turn in economic activity that last for several years. Or feel of sadness that makes you to think there is no hope for the future.

Fraud:

It involves theft, misappropriation or embezzlement of organization fund usually in form of cash or other assets.

Statutary Auditors:

These are audits carried out because the law requires them. Status, which requires audit includes CAC, the building society Act (1962, CAMA 1990) et.


Chapter Five


Summary Conclusion and Recommendations

This chapter consists of the summary, recommendations and conclusion based on findings of this study.


5.1 Summary

This research project studied the role of auditors in a depressed economy, a case study of selected banks in Nigeria.
From the data analysis in chapter four, it can been seen that the key objective of audit department is to appraise, review and report activities assigned to management, prepare account, apprise management and detect frauds that lead to the termination of workers, Also there is need for audit department in every banks to improve in the performance of the bank. The banks books are audited annually and this indicates that the bank’s record and management are free from error and fraud. Based on the past audit conducted, it has improved the bank’s performance and has imposes sanction on workers. Auditing assists in detection of fraud and errors in accounting system. It is also clear form the findings that the Audit department is set up by management and there is really no law backing it up as regards to independence opinion etc. Alsothe caliber of staff in the banks is very essential in achieving the bank’s objective.

It is noted from the findings that government policies, rules and regulations on financial resources affect the execution of auditing functions. And auditors encounter problems such as: Improper keeping of records of accounts, lack of relevant Data, time constraint, non implementation of audit reports and most of auditors do not maintain a close liaison with the external auditors for performing, sharing and executing of statutory audit, this is because the shareholders, management and board of directors place superiority on statutory auditors.

This study is divided into five chapters; chapter one consists of the background of study, statement of problem, objective of study, significance of study, research questions, research methods, limitation and delimitation of study and definition of terms. The review of relevant literature was conducted in chapter two; the researcher explored available literature to discover the existence of problems already researched. Chapter three is the research methodology. The presentation, analysis and interpretation of data was carried out in chapter four, lastly chapter five consists of the summary, recommendation and conclusion based on the findings of this research work.


5.2 Conclusion

A lot of people have talked about our economy being depressed; some have lost a of money while others are careful not to loose much. Accusing fingers have been pointed at different angles but sincerely every body have a role to play, it is noted that auditors did not raise any alarm year after year, they kept their reports and records in their own positive direction from auditors can do. It was discovered from the causes of depressed economy, there is little the auditors can do. It was also discovered from the finding that Government Policies, guidelines and regulations financial matters on the Banks affects the execution of audit function, the Administration hierarchy of the company does not allow the audit to be independent in the execution of his duties but indeed, audit department tried to play its role in the protection of the company’s assets, misappropriation and embezzlement of funds, Also the audits is very useful to external auditors of the company by providing reliable information on the affairs of the banks. The management and government should provide solutions in the aliments discovered against auditing in banking industries.


5.3 Recommendations

Based on the findings of this study, the following recommendations are required to improve the economy as a result of the research project and will also improve the banking sector.

The result of the findings show that government policies, guideline and regulations of financial resources of Banks affect the growth of banking study and that of Audit functions. Here, Government should formulate policies and guidelines that will encourage the service of auditing as integral part of control in banks. The Auditors and external auditors should have access to necessary documents and records that will aid their work limiting the scope of work of the auditor to draw up the financial statements based on the information provided by other department is not good enough.

The auditors should be able to verify the documents from the beginning of the financial year to the end before preparing statement. The auditors should not allow this independence to be impaired. Even if Auditing is a management tool, the audit department of each bank should seek to establish an air of authority and should not jeopardize their independence. The effectiveness of audit department should be maintained by ensuring that qualified staff are employed to work in the department.

There should be a sound control system, if the control system is weak, it will have an adverse effect on the bank thereby affecting the economy, it will bring about fraud and corruption, and purchasing power of naira will go down. The management and board of directors should at all time give due consideration to the Audit report submitted to them. Also special duties should be assigned to staff with the relevant skill and competence. The banking sector should try and adopt the advice, proposal and recommendations put forward by the and External auditors as this will enhance effectiveness and will encourage them to perform their duties diligently.


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