AUDIT QUALITY IN THE NIGERIAN-BANKING SECTOR: IMPLICATIONS OF THE 2006 CODE OF CORPORATE GOVERNANCE FOR BANKS IN NIGERIA

ABSTRACT
Corporate governance encompasses the legal and regulatory framework governing the actions of firms, organizations, institutions, their internal policies and controls established by the institutions themselves. The objective of corporate governance is to ensure that the board and management act in the best interest of all stakeholders. This study aimed at determining the influence of audit quality in Access bank, Diamond bank, Ecobank, First bank, FCMB, GTB, Skybank, Stanbic Bank, Union Bank, United Bank for Africa and Zenith Bank with reference to 2006 code of corporate governance. The study made use of ex- post facto research design. A sample of eleven banks were selected from a population of 22 banks quoted on the Nigerian Stock Exchange using judgmental sampling technique. Data was collected through secondary source from published annual financial reports (2007 – 2014), which was analysed using the Standard Ordinary Least Squared Regression Model. The study revealed that Ownership concentration of Nigerian banks in the post-corporate governance code has a positive but a non-significant effect on banks audit quality for Nigerian banks( = 0.330; = 0.145 > 0.05).There was a positive and significant effect of bank executive duality on the bank audit quality banks ( = 0.0.598;  = 0.000 < 0.05) Nigerian banks in the post-corporate governance period has a positive and significant effect on board Size of Nigerian bank banks(  = 0.449;  = 0.0.0.0463 < 0.05) () in the post-corporate governance period there was a positive and significant effect on banks’ audit quality. The composition of Nigerian banks’ boards in the post-corporate governance period has a negative and insignificant effect on banks’ audit quality (  = 0.3368; = 0.2196 > 0.05.). Composition of the audit committee in Nigerian banks in the post-corporate governance period has a positive but non-significant effect on banks’ audit quality(  = 0.3049;  = 0.6197 > 0.05). It was recommended that Proponents of large board size believe it provides an increased pool of expertise because larger boards are likely to have more knowledge and skills at their disposal, also are capable of reducing the dominance of an overbearing CEO, and hence put the necessary checks and balances.


CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The financial distress, which has affected most of the Nigerian banks prior to the 2004/2005 bank consolidation exercise, has pushed up the demand for high quality corporate governance. Adeyemi (2006) pointed out that the need for a strong, reliable, and viable banking system is underscored by the fact that the industry is one of the few sectors in which the shareholders fund is only a small proportion of the liabilities of an enterprise. It is, therefore, not surprising that the banking sector is one of the most regulated sectors in any economy as is the case in Nigeria. Banking reforms have been an ongoing phenomenon around the world right from the 1980s, but it was more intensified in recent time because of the impact of globalization, which is precipitated by continuous integration of the world market and economies (Adegbagu & Olokoye 2008). Banking reforms involve several elements that are unique to each country based on historical, economic, and institutional imperatives.


In Nigeria, the reforms in the banking sector preceded against the backdrop of banking crisis due to highly undercapitalization of deposit taking banks; weakness in the regulatory and supervisory framework; weak management practices; and the tolerance of deficiencies in the corporate governance behaviour of banks (Uchendu 2005). Banking sector reforms and recapitalization have resulted from deliberate policy response to correct perceived or impending banking sector crisis and subsequent failures. A banking crisis can be triggered by weakness in banking system characterized by persistent illiquidity, insolvency, undercapitalization, high level of non-performing loans and weak corporate governance, among others. Similarly, highly open economies like Nigeria, with weak financial infrastructure, can be vulnerable to banking crises emanating from other countries through infectivity (Adegbagu & Olokoye 2008). Banking sector reforms in Nigeria are driven by the need to deepen the financial sector and reposition the Nigeria economy for growth; to become integrated into the global financial structural design and evolve a banking sector that is consistent with regional integration requirements and international best practices. It also aimed at addressing issues such as governance, risk management and operational inefficiencies, the centre of the reforms is around firming up capitalization (Ajayi 2005).

Capitalization has been an important component of reforms in the Nigerian banking industry, owing to the view that a bank with a strong capital base has the ability to absolve losses arising from non performing liabilities, improve its revenue, and attain cost-efficiency. Attaining capitalization requirements may be achieved through consolidation of existing banks or raising additional funds through the capital market. An early view of bank consolidation was that it makes banking more cost efficient because larger banks can eliminate excess capacity in areas like data processing, personnel, marketing, or overlapping branch networks (Somoye 2008). Consolidation is viewed as the reduction in the number of banks and other deposit taking institutions with a simultaneous increase in size and concentration of the consolidated entities in the sector (Bank of International Settlement, 2001). Irrespective of the cause, however, bank consolidation is implemented to strengthen the banking system, embrace globalization, improve healthy competition, exploit economies of scale, adopt advanced technologies, raise efficiency, and improve profitability (Adegbagu & Olokoye 2008). Ultimately, the goal is to strengthen the intermediation role of banks and to ensure that they are able to perform their developmental role of enhancing economic growth, which subsequently leads to improved overall economic performance and societal welfare they conclude. The government policy-promoted bank consolidation rather than market mechanism has been the process adopted by most developing or emerging economies and the time lag of the bank consolidation varies from nation to nation (Somoye, 2008). For example, what was termed “government guided” merger was a unique banking sector reform implemented in 2002 by the Central Bank of Malaysia BNM (Bank Negara Malaysia) guiding 54 depository institutions to form 10 large banks (Rubi, Mohamed & Michael, 2007). This was partly a response to the banking crises perpetrated by the 1997-1998 Asian financial crises, they noted. Bank of International Settlement (2001) also noted that in Japan during the banking crises of the 1990’s, government funds were deployed to support reconstruction and consolidation in the banking sector....

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Item Type: Postgraduate Material  |  Attribute: 127 pages  |  Chapters: 1-5
Format: MS Word  |  Price: N3,000  |  Delivery: Within 30Mins.
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