1.0 CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

One of the most crucial characteristics of the accounting profession is independence. Investors rely on management's disclosures about the company's financial situation. It is the responsibility of managers to maintain the company's growth and profitability. Therefore, managers have their own objectives and interests in mind independent of investors, which is to always present the company in a positive light.

In order for the investors to decide whether or not they will keep investing in the firm, they are interested in learning the company's actual financial situation. As a result, a middleman (the auditor) is employed to shield the investors from the management' self-interest. Investors' trust in the auditor is based on the auditor's credibility, which is determined by how accurately the intermediary has verified management' financial statement representations. Auditor independence must therefore always be maintained, at least on the surface. Since managers are in charge of recruiting and firing the auditors with their own authority, this becomes challenging. This makes it possible for the auditors to get influenced by conflicts of interest and potentially lose their independence.

Through the objective investigation, evaluation, and reporting on the sufficiency of internal control, auditing ensures the efficacy, correct, and economical use of resources in the organisation. The independence of the audit function is essential to its efficiency. Internal auditors' organisational and personal independence, as well as their neutrality, make it easier for them to carry out their tasks correctly and efficiently. Additionally, there are modifications to globalisation generally, which have a substantial impact on how the global economy develops. The external business environment is changing, which puts pressure on the company to develop high competitiveness in order to reap the benefits of globalisation.

Before making a financial decision, investors from different nations might research and evaluate the pertinent data to invest in other nations that offer higher returns. The financial statement is also one of the crucial pieces of information. An audit is absolutely important for the financial statement to be trusted, as is the auditor's independence, as well as the organization's responsibility and openness.

 According to Saputra (2015), Auditing is the gathering and assessment of informational evidence to ascertain and document the degree of concordance between statements and predetermined standards. As cited by Okafor (2012), In order to generate an opinion about and report the extent to which a claim complies with a certain set of standards, an audit is a systematic process by which a competent, independent individual objectively gathers and examines evidence regarding statements about an entity or event.

 Also, Izedonmi(2000) In accordance with the auditor's term of involvement as well as other pertinent statutory and professional regulations, auditing is defined as the independent examination of a company's financial statements by a designated individual known as an auditor in order to express a professional opinion regarding if those financial statements show a true and fair view of the financial period. An independent party's review of a company's financial report is known as an audit.

The modern separation of firm ownership and management has increased the requirement for accountability, which has changed the role of audit as stakeholders' expectations have changed. A accurate and fair perspective of an organization's financial report is provided by an audit, which is independent from other areas of the company and caters to the relationship of accountability. While "value relevance" refers to the auditors' capacity and duty to give a reasonable assurance that financial statements are accurate and free of serious misstatement caused by fraud, error, or both..

Another common definition of auditing was "a review of a statement of accounts prepared by the appointed officer of an organisation or by some other persons ”(Okolo,2001). In other words, when performing an audit, an auditor's objectivity must be unquestionable. As a result, an audit must be conducted with honesty, objectivity, and a spirit of mental independence.

. According to Arens &Loebbecke (1997), In order to assess and report on the degree of connection between quantifiable information and predetermined criteria, a competent, independent individual gathers evidence about quantifiable information relating to a certain economic organisation. The purposes of audits are divided into three categories: financial statements audits, compliance audits, and performance audits.

The credibility of auditors as exterior verifiers of external financial statements is widely thought to depend on their independence. The International Federation of Accountants' (IFAC) Code of Ethics and the Eighth Directive of the European Union both stipulate that external auditors must be independent of their clients when conducting an audit. . The International Federation of Accountants' code translates this requirement into various instances where adherence to particular rules ought to ensure independence. Recent worldwide bankruptcy of numerous significant firms with unblemished audit reports has raised concerns about the reliability of the financial statements that those corporations had created. The case of Enron in the United States, Parmalat in Italy and Cadbury in Nigeria are clear examples.

According to Okolie (2007) Statutory auditors are required to examine and provide an independent opinion on the financial statements that company directors have prepared. Therefore, in today's accounting practise, the auditor's independence is one of the most crucial problems since it ensures that the auditor planned and conducts the audit objectively, which boosts the audit's efficiency.

 Okolie (2007) asserts that thorough audits improve the accuracy of the financial reporting process and help investors and other users of the financial statements allocate capital in the best possible way. The nature of the auditor's job necessitates that he be free from any outside influence in order to develop an objective judgement on the financial statements that he examines without being swayed by either the owners of the resources or their management (Okolie, 2006).

The discussion above demonstrates how an auditor's independence is crucial when it comes to the question of accountability and how it is impacted by numerous circumstances both under the auditor's control and outside of it. Additionally, it seems that the majority of writing focuses on Asia and wealthy nations. It the study centers on  Auditor Independence; A Penacea For Accountability And Transparency For Selected Deposit Money Banks In Nigeria.

1.2 STATEMENT OF THE PROBLEM

Transparency and accountability in businesses are becoming more and more relevant, but also less and less studied. Despite the fact that there is already corporate legislation, including a legal framework and standards that control business actions, organizational failures have been partially attributed to a lack of or insufficient openness and accountability encased in strong corporate governance practices.. To the best of our knowledge, there is a dearth of literature in Nigeria that deals extensively with transparency and accountability in financial institutions. Similarly, to the best of our knowledge, there hasn't been any empirical research done on the elements that promote transparency and accountability through Audit independence in Banks in Nigeria.. In the light the study centers on  auditor independence; a panacea for accountability and transparency for selected deposit money banks in Nigeria

1.3 Objectives of the Study

The objectives of this study are broadly classified into two general objective and specific objectives. The general objective is auditor independence; a panacea for accountability and transparency for selected deposit money banks in Nigeria. However, the specific objectives of the study include:

1.       To find out if audit committee enhances transparency and accountability in corporate organizations.

2.       To determine if board independence enhances transparency and accountability in corporate organizations.

3.       To ascertain if ownership concentration enhances transparency and accountability in corporate organizations.

1.4 RESEARCH QUESTIONS

1.     Do audit committee enhance transparency and accountability in corporate organizations?.

2.     Does board independence enhance transparency and accountability in corporate organizations?

3.     How does ownership concentration enhance transparency and accountability in corporate organizations?

1.5 Research Hypotheses

In this study, the null hypothesis are used and stated as follows:

1.     H0: audit committee does not enhance transparency and accountability in corporate organizations.

2.     H0: Board independence does not enhance transparency and accountability in corporate organizations.

3.     H0: Ownership concentration does not enhance transparency and accountability in corporate organizations.

1.6   Scope the study

This study focuses on enhancing transparency and accountability in corporate organizations. The study further examines the variables that enhance the transparency and accountability in the Nigerian banking industry. The quoted banks whose operations are based in Benin metropolis are examined via structured questionnaire with a view to making inferences.

1.7 Significance of the Study

The subject matter of this becomes relevant drawing from present day financial crises rocking firms in developed countries and in developing countries such as Nigeria.

Firstly, the results of this study will be of interest to corporate regulators such as the federal government and central bank of Nigeria. This is because regulation aimed at making businesses or corporate organizations more transparent and accountable will have benefits to ordinary investors who rely on company management’s corporate governance and financial disclosures and will aid the overall development of the Nigeria economy.

Secondly, the audit profession will be interested in the research results simply because evidence that corporate organizations are not transparent and accountable could suggest that auditors need to me more vigilant.

Thirdly, the findings of this study will be beneficial for company management who seek to attract external investment.

Very little academic research has been done on this subject matter in Nigeria. Thus, this study will enrich the literature on the corporate reporting practices, transparency and accountability of firms, thereby adding to the body of knowledge.

Lastly future, researchers definitely will find the outcome of the study useful in terms of reference materials.

1.8 Limitations of the Study

This study is limited by such factors as:

Respondents’ response:  Some of the respondents may resent giving out useful information on the subject matter. There is the problem of generalizing the outcome of the study to non-banking industry in that the factors that may enhance transparency and accountability could differ markedly.

1.9 OPERATIONAL DEFINITION OF TERMS

AUDITOR: auditor is a person or a firm appointed by a company to execute an audit. To act as an auditor, a person should be certified by the regulatory authority of accounting and auditing or possess certain specified qualifications

INDEPENDENCE: Independence is a condition of a nation, country, or state, in which residents and population, or some portion thereof, exercise self-government, and usually sovereignty, over its territory

TRANSPARENCY: Transparency is the quality of being easily seen through, while transparency in a business or governance context refers to being open and honest.

Accountability: Accountability, in terms of ethics and governance, is equated with answerability, blameworthiness, liability, and the expectation of account-giving