CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The banking system in Nigeria is made up of the central, commercial, merchant, development and agricultural bank. These financial houses were established for the central of money, purchase and sale of securities, transfer and clearing and other banking transactions. Hence, banking as a profession has existed for several decades now, but unfortunately there was no generally accepted satisfactory meaning until 1958, when the banking act defined banking as the business of receiving monies, valuables and securities from outside sources. The purchase and sale of securities by bank or granting of loan in respect to maturity or the success of the business, this lead to Hart definition of bank or banker as a person or company carrying on the business of transferring money to assets and receiving monies from customers, subject to the collection of drafts and honouring of cheques drawn upon them from time to time by the customers, to the extent of the amount available on their current accounts.
These banking systems are closely monitored and regulated by the government agents known as Central Bank of Nigeria (CBN), international monetary fund (IMF). This is to ensure that they render services to their customers and also to keep proper account of the business. Owing the need to accountability and effectiveness of the organization, the management personnel of the bank introduced the internal control (audit department). Among other department in the banking business, the management pays more attention to the internal control to enable them plan control the inflow of cash in the organization for efficiency and good management policy.
Under the organizational efficiency, it is important to establish a follow up mechanism so that the performance of the firm will be monitored to know whether staff structure management plans and policies and finance are working accordingly. Therefore it is in the light of the above factors that the management function of controlling becomes very desirable. In order ensure that suitable procedures are maintained, the bank management established the internal audit unit otherwise called the inspectorate division. The inspectorate division is an important organ of the internal control system. Hence, our study examines the purpose, techniques and requirements of good and efficiency inspector and its contribution effective bank management resources based on the circumstances of the union bank of Nigeria Plc.
1.2 STATEMENT OF THE PROBLEM
There is very recurring problem of bank managers granting loans (credit to customer over discretional limit as approved by management without adequate security given and this result in loss of loans. The cases of increase in bad debts resulting from loans issued to customers that have not been recovered and this gives problems to management finance, as part of the organizational income is now issued in report as a provision against bad debts in view of requirement and potential guideline for bank licensed issued by the central bank of Nigeria and (CAMD 1990) company and allied matters decree of 1990 statutory requirement guideline. There is also this problem of poor attention of bank staff to customers, which leads to inadequate fund and poor cash flow of the bank daily transaction.
The problem of disorganized organizational structure and line staff structure, also contribute to the low income in the company. This is because the managers in an organization at times plan on what to do, take decision, execute and as well collect fund from outside bodies or customers and at the end, irregularity will occur in the account book and this will affect the financial report for such firm. Moreover, lack of economic stability and efficiency in operation records of bank transaction made by bank managers contributes to the irregularity in financial books and records. Therefore, these problems are of serious concern to the financial organization management and those who contribute immensely to the enlistment of societal issues. Any effort made towards correction of these problems, should be regarded as one in the right direction.
1.3 PURPOSE OF THE STUDY
The purpose of this study is:
1) To identify and explain how inspection can be of assistance towards achieving effective finance on bank management.
2) To find out whether bank management grant loans over discretional limit as approved by bank management without adequate security give.
3) To determine the number of bad debts resulting fro loans issued to customers that have not been recovered and also, to know whether adequate provision for bad debts is made for such debts.
4) To ensure that financial department and internal check and accounting system are effective in design and operation.
1.4 SIGNIFICANCE OF THE STUDY
It is hoped that the result of this enquiry will be of immense benefit to inspectors of bank, external auditor examiners, the accounting profession, bank management, other operations in banking sector and the state. The implementation as regards to the requirements of effective inspection, it is hoped that it will increase objectivity in reporting and also security in the job.
The recommendation on implementation is expected to remove the general apathy usually associated with inspection reports. It is also hoped that when reports are produced without any based consideration, it will encourage everybody concerned to adhere to policies, standards and procedures as well as promoting the strive towards the collective achievements of the bank objectives.
1.5 THE SCOPE OF THE STUDY
The scope of this study is designed to cover the financial management functions controlling with peculiar references to its assistance in effective bank management. Due to the fact that it is quite impossible to cover all the banks in Nigeria, the researcher concentrated on union bank Nigeria Plc. Further to limit the research to five different branches, which include area office, Ogbete, Ogui, Okpara Avenue and Emene, where we got most of the required information.
The reasons for this action is because of time and financial constraints associated with traveling to all the branches of the bank spread across the country. The time permitted to submit the research work was also one of the reasons that led to areas chosen by the researcher for the study, as time was too short to exhaust in details all materials needed for this research work.
