CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The origin of auditing is as a result of the separation of ownership from control. It is instituted to protect the interest of the owners by ensuring that financial statements are justifiable. Because of the separation of the ownership from control, it becomes necessary of those managers entrusted with owner’s financial reports (stewardship reports) to be accountable to their employers. Auditing to some certain extent has been in existence for a long time as far as man is required to account for transaction. The term “AUDIT” comes from a Latin word, “Audirea” which means “To Hear”. It derived this name when in ancient times, the accounts of an estate are checked by having them called out by those who are compared with those authority and owners. That is, the king and his representatives who listen.
The need for auditing over the years has gained acceptance due to the increasing volume of work and business activities and because the business are not being run by the owners (shareholders) but by managers, this usually create credibility gap that must be filled by an independent third party usually referred to as AUDITOR. Kwama Gyasi (2000) in his book titled ‘An International Guide to Auditing” defined auditing as the “Independent examination and investigation of the evidence from which a financial statement has been prepared with a view to enable independent examiner to report whether in his position and according to the best of the function and explanation obtained by him, the statement is properly drawn and gives a true and fair view of what it proposed to show and not to report on what respect he is not satisfied. Audit is in two forms: namely, Internal Auditing and External Auditing. Both are very crucial to the well-being of an organization and for effective control and administration. Internal auditing in particular has however grown in importance especially in the banking requiring banks in Nigeria to set up an Internal Audit Department from where internal audit functions are carried out. It is pertinent to note that the inspection division of bank is functionally synonymous to the Internal Audit Department of any organization or company. As such, the two words, “Internal auditing and Inspection” will be used interchangeably. A definition of an understanding of the meaning of internal auditing will serve as a good starting point for the discussion. It is practically difficult for an internal auditor to possess any reasonable degree of independence in mind and attitude because of the management influences on the terms, reference and scope of work. Infact, one area of interest to the external auditor is assessing the degree of independence enjoyed by the internal auditor. To achieve this independence, the following must be put into consideration:
1. They should have an unrestricted access to records, assets and personnel.
2. Freedom to report to higher management and where it exists in audit committee.
3. They should have non-audit work.
4. They should work with an objective frame of mind.
5. There should be no conflicts of interest or any restriction placed on their work First Bank Of Nigeria PLC is a leading institution in Nigeria with over a hundred years of banking experience, industry and resilience behind it. In 1894, Alfred Jones, a shipping magnate from Liverpool founded the bank which commenced business then as a small industry in the office of Elder Dempster company in Lagos. The bank grew rapidly in the early year asking in close co-operation with the colonial Government in performing the theoretical roles of a Central Bank. Such issues as in special West African sub-region. In 1876, a branch was opened in Accra, Gold Coast (now Ghana while another was established in Freetown, Sierra Leone in 1896. This marked a milestone in the bank’s international banking operation. Thereby, justifying the West African Operational coverage. The second branch in Nigeria was opened in the Old Calabar in 1900 and two years later, service had extended to Northern Nigeria with a branch network of 291 in 1951, spread throughout the federation including London. The bank has the largest number of branches in the industry. The bank has experienced phenomenal growth. It had over the year experienced growth in capital base and staff strength. When the bank began operation in 1894, it has only six staff comprising three European and three African. Today, the bank is virtually full. In Nigeria, the bank’s determination has been to identify with the apparition of the country in the march toward national development. As a a result of these, the bank had continually adjusted its organizational structure and corporate entity.