Auditors Independence And Qualities Of Audit Work In Nigerian Banking Industry (a Study Of First Bank, Zenith Bank, Diamond Bank And Access Bank Plc)

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       This research was carried out to evaluate the effect of auditors independence on the quality of audit work in Nigerian banking industry. While carrying out this research work these are the areas that this research work concentrated. The first chapter is the introductory part of the research work. This chapter also contains the background of the study, statement of problems, research Question etc.

Data for the study was sourced from two main sources. Which includes

Primary data: Questionnaires and oral interviews was used to collect information from the respondents.

Secondary data : Journals, magazine and other relevant materials relating to the area of my investigation will be review.

Extensive literature review was carried out on direct literature and indirect literature on books, journals and past works.

The research instrument  used in this study includes oral interview and questionnaire.  The questionnaire is structural as to contain both close and open ended question.

Simple tables, pie-charts and percentages were used in treatment of data while chi-square was used in the research work.

Based on the findings, conclusions were drawn and recommendations were also in the last chapter of this work which is the fifth chapter.






Title page-      -      -      -      --    -      -      -      -      -      i

Approval page-      -      -      -      -      --    -      -      -      ii

Dedication      -      -      -      -      -      -      -      -      -      iii

Acknowledgement  -      -      -      -      -      -      -      -      iv

Table of content     -      -      -      -      -      -      -      -      v


1.0      Introduction

1.1      Background of the study

1.2      Statement of problems

1.3      Objective of the study

1.4      Research question

1.5      Hypothesis

1.6      Significant of the study

1.7      Scope and limitation of the study

1.8      Definition of terms



2.0      Review of related literature

2.1      Meaning of the Auditor’s independence

2.2      Need for a realistic theoretical framework

2.3      International perspective of Auditors independence

2.4      The need for Auditor’s Independence

2.5      Risks Affecting Auditor’s independence

2.6      Safeguards for Auditor’s independence

2.7      The objective of Auditor’s independence

2.8      Historical background of the First bank, Zenith bank, Diamond bank and Acces bank plc


3.0      Research design and methodology

3.1    Research design

3.2    Description of respondents

3.3    Sources of data

3.4    Population and determination of sample size

3.5    Method of investigation


4.0      Presentation analysis and interpretation of data

4.1      Analysis of data

4.2      Test of Hypothesis


5.0      Summary of findings, conclusion and recommendation

5.1      Summary of finding

5.2      Conclusion

5.3      Recommendation







The independence of auditors is regarded as key to their credibility as external verifiers of external financial statements. The requirement for external auditors to be independent of their clients when undertaking an audit is enshrined in the International Federation of Accountant's (IFAC) Code of Ethics and in the European Union's Eighth Directive. In the IFAC code, this requirement is translated into various situations where observance of certain rules should ensure independence. Recent bankruptcies of many large corporations with clean auditor‘s reports around the globe have called to question the validity of the financial statements prepared by those corporations. 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 expected to audit the financial statements prepared by the directors of enterprises and express an independent opinion on them‖. Therefore, in accounting practice of today, the independence of the auditor is one of the most important issues because it increases the effectiveness of the audit by ensuring that the auditor plans and carries out the audit objectively. Okolie (2007) maintains that high quality audits enhance the reliability of the financial reporting process and facilitate optimal allocation of capital by investors and other users of the financial statements.

 The immediate role of audit independence is to serve the audit, and the objective of the audit is to improve the reliability of information used for investment and credit decisions. Ultimately, the purpose of audit independence e is to improve the cost-effectiveness of the capital markets. Materiality has to be considered within this context, and an auditor's interest should be considered material if it presents a risk of impaired objectivity with a likelihood so high and an impairment of such a dimension that the interest reasonably can be assumed to affect the outcome of the audit. The appearance-of-independence concept should not be included in any conceptual framework unless the relationship of that concept to both the objective of independence and desirable concepts of independence is determined and spelled out. The root question in evaluating audit independence is whether an interest creates an unacceptable risk of material bias. In answering that question, a decision will have to be made as to whether it should be based on a reasonable or prudent person concept, regulators' judgment, or investor opinion. Another question that has to be answered is whether the objective of audit independence is served by applying regulatory prohibitions to parties that cannot influence the audit. The authors have developed a set of eight principles that should be part of the conceptual framework. There has never been a conceptual framework for audit independence before--not even an official definition of the term. Audit independence has been guided by detailed rules, common sense, and conservatism. The public has been protected. But the rules have not had the benefit of clear concepts and consistently applied principles. It is hard to believe this of independence, because no other single idea has so much signified what the auditing profession means in the world. It is time to give it fresh thought, to rise above the clutter of detail and think through what audit independence should mean in any circumstance, what is necessary to analyze and evaluate whether the properties of independence are present, and what is the objective of the whole exercise. There is reason for hope. The Independence Standards Board (ISB) has put the conceptual framework for audit independence in its sights. Planning decisions have been made, and a project director has been engaged. The first step will be to develop a discussion memorandum. Here are our versions of the objective, the definition, and the principles of audit independence, as well as several of the conceptual issues that will have to be resolved in order to develop the framework.

The nature of the auditor‘s work requires him to be independent from the influence of any party so that he can objectively form an opinion on the financial statements examined by him and not tossed by wind from either the owners of the resources or the managers of such resources (Okolie, 2006: 11-15). The foregoing discussions show that the independence of an auditor is fundamental when the issue of accountability is concerned and is influenced by many factors within and outside the control of the auditor himself. In addition, most literature appears to concentrate on the developed countries and the Asian countries. In Nigeria, much evidence from literature dwells more on private sector audit. Very few literatures exist, particularly about audit in the public sector. That is why this study is concentrating on auditor’s independent and quality of audit work in Nigerian banking industry with a particular reference to selected banks in Nigeria which includes: Zenith bank Plc, Access bank Plc, First bank Nig. Plc and Diamond bank plc. 


The directors of banks are empowered to appoint, reappoint, and remove their external auditors and they are also to fix the external auditor‘s fees using the guidelines of the Auditor-General as an aid. The problem so created is that the directors are officers of the organization, who also have the responsibility of managing the funds, budgeting, spending including awarding of contracts and the preparation of financial statements. The same people who are therefore placed in a position to render stewardship accounts are now given the power to hire and fire‘ external auditors who would audit the accounts of their own activities. This runs counter to the ideal principles of public accountability.

Auditors in Nigeria are saddled with the responsibility of examining the financial statements of organizations for the purpose of ascertaining their truth and fairness. The auditing profession in Nigeria is regulated by a combination of three regulatory documents. The Companies and Allied Matters Act (CAMA), No. 1 of 1990 serves as the supreme regulator; while the Nigerian Standards on Auditing (NSAs) and Rules of Professional Conduct released by ICAN and ANAN for the members in practice. The main objective of these regulatory documents is to provide guidelines for the practice of auditing in Nigeria.

Although CAMA provides extensive provisions on the practice of auditing in Nigeria, it fails to specifically address the issue of auditor’s independence. However, it contains only guidelines as to the manner at which the auditors should be appointed, how they should function and to whom they should report to. The other two regulatory documents also do not capture explicitly what auditor’s independence means but rather require auditors to be independent and be seen acting as such. However, they provide detailed list of issues that surrounds the auditor’s independence.  

The main thrust of ethical standards in auditing is to ensure and uphold the auditor’s independence (Jackling et al, 2007; Dearman and Beard, 2005). Independence has become an emotive word, a banner standing for freedom, integrity and all that is good. According to Aderibigbe (2005), the word independence has two distinct meanings. Firstly, it falls within a family of words implying an absence of relationship like unrelated, disconnected, isolated, remote and insular. Perhaps this is the reason why, in the olden days, auditors were often required to hold shares in their client companies so as not to be too independent. Secondly, independence falls within a family of words implying freedom from the exercise of powers; for example, free, unhindered, emancipated and free from dominance or influence, The independence of auditors in Nigeria has been frequently cautioned. The way at which Nigerian auditors secure their audit assignments and the rate at which they lobby for auditing job put their independence in jeopardy. Even though recognized professional accounting bodies in Nigeria, like ICAN and ANAN, are trying very hard to ensure best practice in the auditing profession via the enforcement of professional code of conduct for their members, the strict observance of such codes is still questionable.

The development therefore appears to put the auditor‘s investigative and reporting independence in jeopardy and this may defeat the purpose of public audit and erode the independence and hence, the objectivity of report of the auditors. It is therefore doubtful if the independence of the auditor will have any significant impact on the accountability and quality of independent auditor in Nigerian banking industry.





The main objective of this study is to evaluate the effect of auditors independence on the quality of audit work in Nigerian banking industry.

The specific objectives are:

1.  To determine the effect of appointment of connected persons as auditors on quality control.

2.  To ascertain the effect of high audit fees on quality of audit work.

3.  To assess the Impact of continuous audit work on quality of audit work.

4.  To determine the effect of auditors independence on the quality of audit work in Nigerian banking industry.  

5.  To evaluate the relationship between auditor’s independent and quality of audit work in Nigerian banks.


The following research questions were formulated by the researcher:

1.  What are the effects of appointment of connected persons as auditors on quality control?

2.  What are the effects of high audit fees on quality of audit work in Nigerian banking system?

3.  What are the Impacts of continuous audit work on quality of audit work?

4.  To what extent does the independence of auditors affect the quality of audit work in Nigerian banking industry?

5.  Is there any relationship between auditor’s independent and quality of audit work in Nigerian banks?



Ho: There is no significant effect of appointment of connected persons as auditors on quality control.

H1: There is significant effect of appointment of connected persons as auditors on quality control.


Ho: High audit fees has no significant effect on the quality of audit work in Nigerian banking system.

H1: High audit fees has a significant effect on the quality of audit work in Nigerian banking system.


Ho: Continuous audit work has no significant impact on the quality of audit work.

H1: Continuous audit work has a significant impact on the quality of audit work.


Ho: The independence of auditor does not have any effect on the quality of audit work in Nigerian banking industry.

H1: The independence of auditor has a significant effect on the quality of audit work in Nigerian banking industry



       This study is intended to examine auditor’s independent and quality of audit work in Nigerian banking industry.

       It is important to point out that on completion of this work by the researcher, it would be of immense significance to the following:

RESEARCHERS:  Other researchers on the same or similar topic would find this work helpful as it will form a base of review of related literature and also a stepping-shine for future researchers.

ECONOMY: This work will help to improve the national output and thereby national income.  This is because of improvement in the efficiency and effectiveness of the operations as well as the over all success of companies, which will be achieved through adequate utilization and management of this research work.

CORPORATION: The standard of corporations will be increased as a result of the knowledge acquired from this research work.

MANAGEMENT: This efficiency of the management would be recognized as a result of their knowledge on the roles of auditing.

SHAREHOLDERS: The wealth of the shareholders will be maximized due to efficiency of management.


The study will be based on “auditor’s independent and quality of audit work in Nigerian banking industry”.  The researcher will restrict her work to selected bank in Enugu metropolis.

Any other reference to materials, place, items, activities, periods is just for purpose of clarity and vivid understanding of the topic and not within the scope.

The following constraints faced the researcher and limited his efforts in elaborating the research work. 

FINANCE: The researcher is a full time student and has been discouraged from traveling to or visiting all the companies in Onitsha to collect data for her study due to lack of fund.  She has therefore chosen very few companies because of proximity and ease of contact to the management.

TIME: This project work has just few weeks time.

LIMIT: It would have been desired for a longer time to exhaust the topic and extend the coverage but it was not possible.  A minimum of six months could have been appreciated.

PRESSURE OF ACADEMIC WORK:  The researcher have been hindered by pressure of academic work from achieving the extensive research this work should have deserved.

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Auditors Independence And Qualities Of Audit Work In Nigerian Banking Industry