CHAPTER ONE1.0 INTRODUCTION1.1 BACKGROUND OF STUDYAuditing was derived from Latin word ÒAUDIREÓ which means to hear. Initially, auditors are made to listen to income and expenditure of account prepared.An international body by name the Consultative Council of Accounting (CCA) defined Auditing as ÒThe 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 obligationÓ.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 shareholderÕs 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.

1.2 HISTORY OF CASE STUDYHISTORY OF FIRST BANK OF NIGERIAFBN 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 AfricaÕs 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 sub-region.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 BankÕs 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 BankÕs 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 continent.FBN got listed on the Nigerian Stock Exchange (NSE) in March 1971 and has won the NSEÕs Annual PresidentÕs 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 BankÕs 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 economy.

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 BankÕs strategy, with its focus on the critical imperatives of modernization and growth.

RATINGFBN 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 MoodyÕs Investor, USA). In addition, the Bank was awarded the ÒBest Bank in NigeriaÓ, ÒBest Trade Finance Bank in NigeriaÓ and Òbest foreign exchange Bank in NigeriaÓ 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 BankÕs vision Òto be the clear leader and NigeriaÕs bank of first choiceÓ, its mission Òto remain true to our name by providing the best financial services possibleÓ and its brand essence, Òdependably dynamicÓ, 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 PROBLEMThe 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 STUDYThe 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 the directors.b. To ensure that the Directors account to the non-active shareholders on their stewardship through the financial statement required by law.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 fraudulent manipulation.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 HYPOTHESISThe hypothesis of this research work will be stated asH0: 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.

1.6 SIGNIFICANCE OF THE STUDYThis 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 directorÕs performance as agent of the shareholders and to solve conflict of interest.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 STUDYThe 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 entityÕs 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 implications.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.

1.8 DEFINITION OF SOME RELEVANT TERMSTo 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 auditorÕs 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 ÒirregularityÓ 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 1990IAPS 1005:- International Auditing practice statement 1005