CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
The
public accountant is an independent practitioner who works on a gee basis for
business management or for individuals wishing to use his services or as member
of an accounting firm. Most public accountants are also external authors.
The commonly known services offered by the public accountant include the
following:
1.
Those that are substantially of auditing nature.
2.
Those who involve primarily accounting.
3.
Those pertaining to taxes.
Most
people perceive the roles of the public accountant as being limited to the
traditional one balance sheet in the process of auditing the financial
statements of companies. The have failed to realize and appreciate that
the public accountants provides services in respect of problems relating to
conceptualization of business ideas, formation, registration and development of
business most importantly on how to do with the collection and presentation of
accounting data. They also undertake routine book-keeping for enterprises
without adequate book-keeping personnel. Very often, the accountant is
consulted with respect to income tax implication of proactive transactions. In
his contribution, Okugi said consultant of his client, the task will be more
cost effective and efficient. Hence, he will be able to make comprehensive
report to avoid as much tax as possible and avoid unnecessary
duplication. C.A. Okafor see the designing of accounting
systems for clients as one of the frequently ignored aspects of public accounts
in Nigeria. The public accountant helps in the planning stage of company
preparing feasibility studies, writing the expected financial flow-making
realistic projections and determining the cost implication of intended
projects. He also co-ordinates and uses the input from other professionals to
compute, analyze and expose the financial implications of the entire line of
action. Nnam added that the accountancy firms perform appraisal
of investor to determine their viability and profitability and to check the
stability of expected cash flow. The public accountant draft the
Articles of Association, memorandum of Association and formulate the internal
policy of the firms. These documents are then filed with the Register of
companies. He can also help in the preparation of budget, business plan and
installs control systems and that generate necessary data from which
information needed by business if processed. In same circumstances, a new or
existing company may rely on the public accountant for recruitment of some
specialized manpower or he can send his staff on recommendation to a new
business for specified period during which the firm is expected to stand on its
own. He also has important roles to play in the diversification and
enhancing of the company’s profitability and stability of income. This is done
through regular, advisory service on the best way to utilize ideal funds. He
should be able to advise on the more profitable lines in the production
process, the services which generate more value added, which services, products
or departments should, which services, products or departments should be
initiated and which should be discontinued. The accountant gathers and analyzes
quantitative information and gives opinion as to which alternative makes
economic sense. The public accountant can also act, as an
insolvency practitioner by examining the company to the whether immediate
liquidation is needed or whether the company still stands a chance to succeed.
He can act as a receiver by taking possession of the assets as charged
to debenture holders and realizing them and which he withdraws from the
company. He can also act as liquidation by selling and collecting (in
case of debts) the assets of the company and pays the proceeds to the
entitled.
1.2 STATEMENT
OF PROBLEM
There are many problems which could eventually lead to bank distress
just as there are many possible causes of death of a human being. Some of the
problems are stated here but they are in no way exhaustive.
i. Bad
management
ii. Inadequate
capital
iii. Risk
asset portfolio
iv. Assets
and liabilities management
v. Boardroom
crisis
vi. Inability
to adopt to changes
vii. Fraud
viii. Planning
etc.
1.3 OBJECTIVE
OF THE STUDY
This research work studies the roles of public accountant in
the formation acquisition and liquidation of companies using First Bank as a
case study. More especially the objective of these study are:
1.
To
find out the extent to which the
company distress is attributable to the negligence, incompetence or other acts
of omissions of the accountants.
2.
To
know the extent to which accountants
report in the failed banks fulfill the intention or the letter of the law
3.
To know if the law should be changed to make
accountants a
criminal for negligence performance of duty or the retention of current civil
liability
4.
To examine if failed banks decree should be amended
to enable prosecution of accountants whose domestic reports to management
differed from their
statutory reports to shareholders of banks which eventually collapsed
1.4 RESEARCH QUESTION
The following research questions were formulated to guide
this study:
1.
To what extent was the company distress
attributable to the negligence, incompetence or other acts of omissions of the
accountants?
2.
To what extent do you consider that
accountants report in the failed banks fulfill the intention or the letter of
the law?
3.
Do you think the law should be changed to
make accountants a
criminal for negligence performance of duty which reduce most loss or
would you prefer that the current civil liability be retained?
4.
Should the failed banks decree be amended to
enable prosecution of
accountants whose domestic reports to management differed from their
statutory reports to shareholders of banks which eventually collapsed?
1.5 SIGNIFICANCE
OF THE STUDY:
The significance of the study is that it will highlight the
importance and consequences of not managing the distressed companies properly.
Some of the benefits that may occur from this research work ae as follows:
Companies will give them a way to face the problems that leads
to liquidation on time, that is to say that it will reveal to them the causes
of bank liquidation which they must guard against.
The masses and accountants will equally benefit from this
study because implementations of findings and recommendation in this study will
automatically leads to improve standard of managing and closing the distressed
companies.
1.6 DEFINITION
OF TERMS:
BANK; This is an organisation that provides various financial
services, and accepting of valuables from their customers.
LIQUIDATING: It is
process of closing a business and selling everything it owns in order to settle
their debtors.
ACCOUNTANT: An accountant is that person who undergo a
training in accounting system.
DISTRESSED: It is a problem caused by not having enough money.