Critical Examination of the Roles of Audit Committees, Shareholders, and Financial Reporting Council of Nigeria in Ensuring Quality of Audit in the Nigerian Banking Industry

Abstract

Growth will be stymied in the banking industry where there is no proper evaluation of the financial
performances of the bank by the auditors. The challenge had been that the ability of the auditors
to render quality audits as required is sometimes hampered by fraudulent behaviours by the
auditors leading to poor quality audits and consequent crash of such banking institutions and loss
of investments by stakeholders. The 2009 crisis in the banking industry revealed that poor audit
quality was a great contributing factor. Whilst the bank executives connected with the troubled
banks were prosecuted, the auditors, especially the ‘big four’ were left untouched as no
disciplinary action was taken against them, which is a good incentive for the auditors to continue
to shirk their responsibilities. It is contended that the shareholders and the audit committees if
alive to their respective roles in the banking industry can checkmate the auditors to ensure that
they deliver quality audits as required of them. But both the shareholders and the audit committees
are bugged down by one problem or the other thus putting their effectiveness in doubt in ensuring
quality audit. It is stated that the establishment of the Financial Reporting Council of Nigeria,
which is now tasked with supervising the accounting industry, is a positive development, if and
only if, the Council will discharge its functions effectively, then the days of sacred cows in the
accounting profession and poor-quality audit are over.