CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The public accountant is an independent practitioner who works on a gee basis for business management or for individuals wishing to use his services or as member of an accounting firm. Most public accountants are also external authors. The commonly known services offered by the public accountant include the following:
1. Those that are substantially of auditing nature.
2. Those who involve primarily accounting.
3. Those pertaining to taxes.
Most people perceive the roles of the public accountant as being limited to the traditional one balance sheet in the process of auditing the financial statements of companies. The have failed to realize and appreciate that the public accountants provides services in respect of problems relating to conceptualization of business ideas, formation, registration and development of business most importantly on how to do with the collection and presentation of accounting data. They also undertake routine book-keeping for enterprises without adequate book-keeping personnel. Very often, the accountant is consulted with respect to income tax implication of proactive transactions. In his contribution, Okugi said consultant of his client, the task will be more cost effective and efficient. Hence, he will be able to make comprehensive report to avoid as much tax as possible and avoid unnecessary duplication. C.A. Okafor see the designing of accounting systems for clients as one of the frequently ignored aspects of public accounts in Nigeria. The public accountant helps in the planning stage of company preparing feasibility studies, writing the expected financial flow-making realistic projections and determining the cost implication of intended projects. He also co-ordinates and uses the input from other professionals to compute, analyze and expose the financial implications of the entire line of action. Nnam added that the accountancy firms perform appraisal of investor to determine their viability and profitability and to check the stability of expected cash flow. The public accountant draft the Articles of Association, memorandum of Association and formulate the internal policy of the firms. These documents are then filed with the Register of companies. He can also help in the preparation of budget, business plan and installs control systems and that generate necessary data from which information needed by business if processed. In same circumstances, a new or existing company may rely on the public accountant for recruitment of some specialized manpower or he can send his staff on recommendation to a new business for specified period during which the firm is expected to stand on its own. He also has important roles to play in the diversification and enhancing of the company’s profitability and stability of income. This is done through regular, advisory service on the best way to utilize ideal funds. He should be able to advise on the more profitable lines in the production process, the services which generate more value added, which services, products or departments should, which services, products or departments should be initiated and which should be discontinued. The accountant gathers and analyzes quantitative information and gives opinion as to which alternative makes economic sense. The public accountant can also act, as an insolvency practitioner by examining the company to the whether immediate liquidation is needed or whether the company still stands a chance to succeed. He can act as a receiver by taking possession of the assets as charged to debenture holders and realizing them and which he withdraws from the company. He can also act as liquidation by selling and collecting (in case of debts) the assets of the company and pays the proceeds to the entitled.
1.2 STATEMENT OF PROBLEM
There are many problems which could eventually lead to bank distress just as there are many possible causes of death of a human being. Some of the problems are stated here but they are in no way exhaustive.
i. Bad management
ii. Inadequate capital
iii. Risk asset portfolio
iv. Assets and liabilities management
v. Boardroom crisis
vi. Inability to adopt to changes
vii. Fraud
viii. Planning etc.
1.3 OBJECTIVE OF THE STUDY
This research work studies the roles of public accountant in the formation acquisition and liquidation of companies using First Bank as a case study. More especially the objective of these study are:
1. To find out the extent to which the company distress is attributable to the negligence, incompetence or other acts of omissions of the accountants.
2. To know the extent to which accountants report in the failed banks fulfill the intention or the letter of the law
3. To know if the law should be changed to make accountants a
criminal for negligence performance of duty or the retention of current civil liability
4. To examine if failed banks decree should be amended to enable prosecution of accountants whose domestic reports to management differed from their
statutory reports to shareholders of banks which eventually collapsed
1.4 RESEARCH QUESTION
The following research questions were formulated to guide this study:
1. To what extent was the company distress attributable to the negligence, incompetence or other acts of omissions of the accountants?
2. To what extent do you consider that accountants report in the failed banks fulfill the intention or the letter of the law?
3. Do you think the law should be changed to make accountants a
criminal for negligence performance of duty which reduce most loss or
would you prefer that the current civil liability be retained?
4. Should the failed banks decree be amended to enable prosecution of
accountants whose domestic reports to management differed from their
statutory reports to shareholders of banks which eventually collapsed?
1.5 SIGNIFICANCE OF THE STUDY:
The significance of the study is that it will highlight the importance and consequences of not managing the distressed companies properly. Some of the benefits that may occur from this research work ae as follows:
Companies will give them a way to face the problems that leads to liquidation on time, that is to say that it will reveal to them the causes of bank liquidation which they must guard against.
The masses and accountants will equally benefit from this study because implementations of findings and recommendation in this study will automatically leads to improve standard of managing and closing the distressed companies.
1.6 DEFINITION OF TERMS:
BANK; This is an organisation that provides various financial services, and accepting of valuables from their customers.
LIQUIDATING: It is process of closing a business and selling everything it owns in order to settle their debtors.
ACCOUNTANT: An accountant is that person who undergo a training in accounting system.
DISTRESSED: It is a problem caused by not having enough money.