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  • 8/17/2019 Dr. Kabir T. Hamid

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    THE IMPACT OF AUDIT COMMITTEE ON INTERNAL CONTROLS OF

    BANKS IN NIGERIA

    KABIR T. HAMID, PhD

    Department o A!!o"nt#n$

    Ba%ero Un#&er'#t%, Kano(N#$er#a

    Ema#)*+htah#r--/%ahoo.!om

    Te)ephone* 01 2-34-4156761

    01 2-3684-68

    AUDIT COMMITTEE AND INTERNAL CONTROLS OF BANKS IN NIGERIA

    Abstract: The a#m o th#' paper #' to a''e'' the #mpa!t o the !ompo'#t#on o a"9#t !omm#tteeon or$an#:at#ona) an9 ph%'#!a) !ontro)' o ;an+' #n N#$er#a. The 'amp)e '#:e o the 't"9%

    !ompr#'e9 o n#ne ;an+',

    #nan!#a) report#n$ pro!e'', ree

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    !omm#ttee, #n!rea'#n$ the n"m;er o o"t'#9er' on the ;oar9 o 9#re!tor', !ontro))#n$ the

    a&era$e ten"re o the CEO, enhan!#n$ 'eparat#on o the po'#t#on o CEO an9 ;oar9 !ha#rman

    an9 #n!rea'#n$ #n'#9er 'to!+ o

    a"9#t !omm#ttee 'er&e' a' an #mportant &eh#!)e or enhan!#n$ #nan!#a) !ontro) '%'tem' an9

    en'"r#n$ the o;e!t#t% o the e?terna) a"9#t. A99#t#ona))%, ee!t#&e a"9#t !omm#ttee' are

    e?pe!te9 to a99 !re9en!e to e?terna) a"9#t an9 the ent#re '%'tem o #nan!#a) report#n$,

    there;% enhan!#n$ p";)#! !on#9en!e on a #rm,

     ph%'#!a) !ontro)' o ;an+' #n N#$er#a. The 'amp)e '#:e o the 't"9% !ompr#'e9 o n#ne ;an+',

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    H0.1- The !ompo'#t#on o the a"9#t !omm#ttee 9oe' not ha&e a '#$n##!ant #mpa!t on

    or$an#:at#ona) an9 ph%'#!a) !ontro)' o ;an+' #n N#$er#a.

    Th#' paper #' th"' or$an#:e9 #nto #&e 'e!t#on'. Se!t#on one,

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    "n9e'#ra;)e.

    From the a;o&e 9#'!o"r'e, #t #' eent that e A''o!#at#on'. Th"', D#re!tor'> an9 In&e'tor'> A''o!#at#on' an9 the $o&ernment 9o

    not norma))% p)a% a +e% ro)e #n 9e&e)op#n$ nat#ona) $o&ernan!e pra!t#!e' 2Fernan9e:(

    Ro9r#$"e:, Gome:(An'on an9 C"er&o(Gar!#a, --3.

    In mo't )e$a) '%'tem', !o9e' o $oo9 $o&ernan!e ha&e no 'pe!##! )e$a) ;a'#', an9 are not

    )e$a))% ;#n9#n$ 2%meer'!h, --63. Th"', enor!ement #' $enera))% )et to the ;oar9 o 

    9#re!tor' an9 e?terna) mar+et or!e'. It #' on)% #n a e< !o"ntr#e' 2e.$. N#$er#a(#n the !a'e o 

    the CCG or ;an+', German% an9 the Nether)an9' #n E"rope3 that the )a< atta!he' e?p)#!#t

    )e$a) !on'e@"en!e' to the !o9e'. E&en #, !omp)#an!e #ntere't', an9 !omp)#an!e

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    or #n!rea'#n$ n"m;er o non(e?e!"t#&e an9 #n9epen9ent 9#re!tor' the 'p)#tt#n$ o Cha#rman

    an9 CEO ro)e' the !reat#on o ;oar9 !omm#ttee' 2nom#nat#on, rem"nerat#on an9 the a"9#t

    !omm#ttee3 ma9e "p o non(e?e!"t#&e #n9epen9ent 9#re!tor' an9 the 9e&e)opment o an

    e&a)"at#on pro!e9"re or the ;oar9. The #ntro9"!t#on o the'e pra!t#!e' #' !on'#9ere9 a

    ne!e''ar% a!tor #n or9er to a&o#9 $o&ernan!e pro;)em', an9 to #n!rea'e ;oar9 an9 #rm

     perorman!e.

    2.1.2 Corporate Governance (Cg) In The Nigeria Banking Industry

    In the N#$er#an !orporate )an9'!ape, there are a n"m;er o CG pro'#on' that e&er% !ompan%

    #' re@"#re9 to a;#9e ;%. #th re$ar9 to the ;an+#n$ 'e!tor, )#'te9 ;an+' m"'t !omp)%

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    2.1.3 tatutory !rovisions "n The Co#position "f $udit Co##ittee "f Banks

     In Nigeria

    Pro'#on' re)at#n$ to the !ompo'#t#on o a"9#t !omm#ttee or ;an+' #n N#$er#a are !onta#ne9

    #n the Compan#e' an9 A))#e9 Matter' A!t. 2CAMA3 =88-, the Se!"r#t#e' an9 E?!han$eComm#''#on 2SEC3 Co9e o Corporate Go&ernan!e, --1 an9 the Centra) Ban+ o N#$er#a

    Co9e o Corporate Go&ernan!e or Ban+' --6 (po't !on'o)#9at#on( 2#)'on', --5 an9

    Ham#9, --43. Compan#e' an9 A))#e9 Matter' A!t =88- S. 178 23 proe' that the a"9#t

    !omm#ttee 'ha)) !on'#'t o an e@"a) n"m;er o 9#re!tor' an9 repre'entat#&e' o 'hareho)9er'

    o the !ompan% 2'";e!t to a ma?#m"m n"m;er o '#? mem;er'3.

    The SEC Co9e, --1 't#p")ate' #n re)at#on to the !ompo'#t#on o a"9#t !omm#ttee that #t

    'ho")9 ;e e'ta;)#'he9 #n a!!or9an!e

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    On #t' o

  • 8/17/2019 Dr. Kabir T. Hamid

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    Ho

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    them a#)e9

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    In e< o the a;o&e 9#'!o"r'e, the re'ear!her emp)o%e9 a t

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    On the other han9, the pr#mar% 9ata or the 't"9%

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    3i$ure I: 4attern o! the Co)position o! Audit

    Co))ittee #CAC% o! the 'a)p&ed ans

    -.--

    -.-

    -.-

    -.6-

    -.4-

    =.--

    =.-

    = 1 7 6 5 4

    T#me Frame o the St"9%

    Rat#n$ o CAC

    CAC

    =.--- .78- .717. .-6= .-47

    4 4 4

    .78- =.--- .51

    .-6= . .=-7

    4 4 4

    .717 .51 =.---

    .-47 .=-7 .

    4 4 4

    Corre)at#on Coe#!#entS#$. 2(ta#)e93

     N

    Corre)at#on Coe#!#ent

    S#$. 2(ta#)e93

     N

    Corre)at#on Coe#!#ent

    S#$. 2(ta#)e93

     N

    CAC

    PhC

    OC

    Ken9a))' ta";

    CAC PhC OC

     'ource: %eve&oped 'y the $uthor fro# the atings on Ta'&e III in the $ppendi.

    F#$"re I 'ho

  • 8/17/2019 Dr. Kabir T. Hamid

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    8 6. 6. 6.

    8.5 8.5 8=.8

    4 7. 7. 85.1

    .5 .5 =--.-

    =4 =--.- =--.-

    Stron$)% A$ree

    A$ree

    Un9e!#9e9

    D#'a$ree

    Tota)

    a)#9

    Fre@"en!% Per!enta)#9 Per!ent

    C"m")at#&ePer!ent

      So"r!e* Generate9 ;% the A"thor rom Q"e't#onna#re Re'pon'e "'#n$ SPSS 2&er'#on ==.--3

    Ta;)e 'ho

    Th#' #n9#n$ '"pport' the e'ta;)#'hment o the a"9#t !omm#ttee a' a mean' o atten"at#n$

    a$en!% !o't',

    or$an#:at#ona) an9 ph%'#!a) !ontro)' o ;an+' #n N#$er#a, an9 the a!!eptan!e o the a)ternat#&e

    h%pothe'#'

  • 8/17/2019 Dr. Kabir T. Hamid

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    Ba'e9 on the )#terat"re 9ata ana)%'#' pre'ente9 #n 'e!t#on o"r a;o&e, the o))o' Perorman!e. or+'hop Paper Or$an#:e9 ;% the A'#an

    =

  • 8/17/2019 Dr. Kabir T. Hamid

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    De&e)opment Ban+ In't#t"te.

    .Aren', A. an9 ame', K. 2=8883, A"9#t#n$* An Inte$rate9 Approa!h. Ne< er'e%, USA*

    Prent#!e Ha)).

    7.Ba%'#n$er, B.D. an9 B"t)er, H.N. 2=8473, Corporate Go&ernan!e an9 the Boar9 o 

    D#re!tor'* Perorman!e Ee!t' o Chan$e' #n Boar9 Compo'#t#on. o"rna) o La<

    E!onom#!' an9 Or$an#:at#on. =2Fa))3* =-=(=.6.Ba'e) Comm#ttee on Ban+#n$ S"per'#on 2=8843, Frame

  • 8/17/2019 Dr. Kabir T. Hamid

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    Go&ernan!e* An Internat#ona) Ree

    =6

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     N#$er#a Po't Con'o)#9at#on. N#$er#an E!onom#! S"mm#t Gro"p 2NESG3

    E!onom#! In9#!ator'. Apr#)("ne, o). =, No.

    7.oo), E. 2=8473, A"9#t#n$ To9a%. Lon9on, UK* Prent#!e Ha)) Lt9.

    A44/+I8

    Tab&e I: L#'t o Ban+' ho'e L#!en!e'

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    - Pr#me Mer!hant Ban+ Lt9. an"ar% =6, =884

    = Pro$re'' Ban+ N#$. PLC. an"ar% =6, =884

    Rep";)#! Ban+ Lt9. "ne 8, =887

    1 R#m' Mer!hant Ban+ Lt9. De!em;er , ---

    Ro%a) Mer!hant Ban+ Lt9. an"ar% =6, =884

    '9+o. +a)e o! an ate o! Revocation o! Licence

    7 Sa&annah Ban+ o N#$er#a PLC. Fe;r"ar% =7, --

    6 So!#ete Genera)e Ban+ Lt9. an"ar% =6, --6

    5 Tra9e Ban+ PLC. an"ar% =6, --6

    4 Tr#"mph Ban+ Lt9. an"ar% =6, --6

    8 Un#te9 Commer!#a) Ban+ Lt9. Septem;er 4, =88

    7- #!tor% Mer!hant Ban+ Lt9. an"ar% =6, =884

    L#@"#9at#on '"'pen9e9 9"e to )#t#$at#on'

    'ource: NDIC Ann"a) Report an9 Statement o A!!o"nt', --6

    A44/+I8

    Tab&e II: The 4opu&ation o! the 'tud(

    '9+

    o

    +a)e o! an ans that er$ed to !or) the +ew an  

    urin$ the 2006 Conso&idation /ercise

    =. A!!e'' Ban+ N#$er#a

    PLC

    A!!e'' Ban+, Mar#na Ban+ an9 Cap#ta) Ban+ 

    Internat#ona)

    . Ar#;an+ N#$er#a PLC Ar#;an+ PLC an9 Ar#;an+ 2Mer!hant Ban+er'31. D#amon9 Ban+ N#$er#a

    PLC

    D#amon9 Ban+, L#on Ban+ an9 Ar#!an

    Internat#ona) Ban+ 

    . E!o;an+ N#$er#a PLC E!o;an+ PLC

    7. E@"#tor#a) Tr"'t Ban+  

    PLC

    E@"#tor#a) Tr"'t Ban+ 2ETB3 an9 De&!om

    6. F#9e)#t% Ban+ PLC F#9e)#t% Ban+, FSB an9 Mann% Ban+  

    5. F#r't Ban+ o N#$er#a

    PLC

    FBN PLC, FBN Mer!hant Ban+er' an9 MBC

    Internat#ona)

    4. F#r't C#t% Mon"ment

    Ban+ PLC

    FCMB, Co(operat#&e De&e)opment Ban+, N#$er#a(

    Amer#!a Ban+ an9 M#9a'

    8. F#r't In)an9 Ban+ PLC In)an9 Ban+, F#r't At)ant#! Ban+, IMB an9 NUB=-. G"arant% Tr"'t Ban+ 

    PLC

    G"arant% Tr"'t Ban+ PLC

    ==. IBTC Chartere9 Ban+ 

    PLC

    IBTC, Re$ent an9 Chartere9 Ban+'

    =. Inter!ont#nenta) Ban+ 

    PLC

    G)o;a), E@"#t%, Gate

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    =6. S+%e Ban+ PLC Pr"9ent Ban+, Bon9 Ban+, Cooperat#&e Ban+,

    Re)#an!e Ban+ an9 EIB Internat#ona) Ban+ 

    =5. Spr#n$ Ban+ PLC G"ar9#an E?pre'' Ban+, Ome$a Ban+, Tran'

    Internat#ona) Ban+, C#t#:en' Ban+, Fo"nta#n Tr"'t

    Ban+ an9 ACB Internat#ona) Ban+ 

    =4. Stan;#! Ban+ Lt9. Stan;#! Ban+ Lt9.=8. Stan9ar9 Chartere9 Ban+ 

     N#$er#a Lt9.

    Stan9ar9 Chartere9 Ban+ N#$er#a L#m#te9

    -. Ster)#n$ Ban+ PLC Ma$n"m Tr"'t Ban+, NBM Ban+, NAL Ban+,

    INMB an9 Tr"'t Ban+ o Ar#!a

    =. Un#on Ban+ o N#$er#a

    PLC

    Un#on Ban+, Un#on Mer!hant Ban+, Broa9 Ban+ 

    an9 Un#&er'a) Tr"'t Ban+ 

    . Un#te9 Ban+ or Ar#!a

    PLC

    UBA, Stan9ar9 Tr"'t Ban+ an9 Commer!#a) Tr"'t

    Ban+ 

    1. Un#t% Ban+ PLC Ne< Ar#!a Ban+, Trop#!a) Commer!#a) Ban+,

    Pa!##! Ban+, Centre(Po#nt Ban+, F#r't Inter'tate

    Ban+, So!#ete Ban!a#re, NNB Internat#ona) Ban+,

    Ban+ o the North an9 Inter!#t% Ban+ 

    . ema Ban+ PLC ema Ban+ an9 Nat#ona) Ban+  

    7. en#th Ban+ PLC en#th Internat#ona) Ban+ PLC

    'ource: "enerated b( the Author !ro) +IC Annua& Report and Accounts, 200;

    A44/+I8

    Tab&e III: Rat#n$ o the Compo'#t#on o A"9#t Comm#ttee' 2CAC3 o the Samp)e9Ban+'

    ear 

     Name o Ban+ ---

    --

    =

    --

    --

    1

    --

    --

    7

    --

    6

    --

    5

    Ar#;an+ N#$er#a PLC = - = - - - = -

    E!o;an+ N#$er#a PLC = = = = = = = =

    F#r't Ban+ o N#$er#a PLC = = = = = = = =

    G"arant% Tr"'t Ban+ PLC = = = = = = = =

    Inter!ont#nenta) Ban+ PLC - - - - - - = =

    O!ean#! Ban+ PLC = = = = = = = =

    Un#on Ban+ o N#$er#a PLC = = = = = = = =

    Un#te9 Ban+ or Ar#!a PLC -- - = = = = =

    ema Ban+ PLC - - - - - - = =

    Mean -.65 -.76 -.65 -.65 -.65 -.65 =.-- -.48

    'ource: Comp"te9 ;% the A"thor rom the Ann"a) A!!o"nt' o the Samp)e9 Ban+',

    ---(--5

    =8

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    CAC #' a 9#!hotomo"' &ar#a;)e, = a''#$ne9 # there are at )ea't t

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    - -

    E!o;an+ N#$er#a PLC -.-7- -.-- -.-6

    6

    -.-= -.--

    -.6- -.-1

    8

     NA

    F#r't Ban+ o N#$er#a PLC

    -.--

    -.=5 -.=4

    4

    -.==6 -.-7

    8

    -.-57 -.-8

    5

    -.-8

    G"arant% Tr"'t Ban+ PLC -.=78 -.=- -.-6

    4

    -.=-4 -.=6

    1

    -.=6 -.=1

    -.-18

    Inter!ont#nenta) Ban+ PLC -.167 -.47 -.4

    -

    -.74= NA -.611 -.64

    7

    -.=-1

    O!ean#! Ban+ PLC -.-44 -.-4 -.--

    -

    -.-= -.-6

    6

    -.-5- -.-6

    -

    -.-88

    Un#on Ban+ o N#$. PLC NA -.==- -.-8

    1

    -.-51 -.-5

    =

    -.-51 -.-5

    -.-51

    Un#te9 Ban+ or Ar#!a PLC -.-6 -.- -.-6

    8

    -.== -.-7

    -

    -.--1 -.-8

    -

    -.-6

    ema Ban+ PLC -.41 -.=1 -.== -.-6 -.18

    -.= -.8=5

    -.676

    Mean -.=46 -.=14

    -.=

    7 -.=

    -.-5

    -.=44

    -.

    5 -.17-

    'ource: Comp"te9 ;% the A"thor rom the Ann"a) Report' an9 A!!o"nt' o the Samp)e9

    Ban+' rom ---(--5

    The #n9e? o OC #' o;ta#ne9 ;% 9##n$ )oan )o'' e?pen'e' ;% #ntere't mar$#n.

    In -- an9 --6 Ar#;an+ ha9 no )oan )o'' e?pen'e', #n'tea9 re!o&er#e'