THE IMPACT OF AUDIT COMMITTEE ON INTERNAL CONTROLS OF

BANKS IN NIGERIA
KABIR T. HAMID, PhD
Department of Accounting
Bayero University, Kano-Nigeria
Email:khtahir2004@yahoo.com
Telephone: +234 (0)8028376563
+234 (0)64980629
AUDIT COMMITTEE AND INTERNAL CONTROLS OF BANKS IN NIGERIA
Abstract: The aim of this paper is to assess the impact of the composition of audit committee

on organizational and physical controls of banks in Nigeria. The sample size of the study
comprised of nine banks, which were randomly selected from the population of twenty five
banks that were operating in the Nigerian banking industry, as at December 31st, 2007. The
data generated for the study were analyzed using Kendalls Tau-b correlation coefficient and
descriptive statistics. The finding of the paper shows that some banks have not complied with
the provision of the both SEC and CBN Codes of Corporate Governance in the period under
review, relating to the composition of audit committees. Thus the paper recommends that
banks board of directors and the CBN should ensure that executive directors are not
appointed as members of audit committees of banks in Nigeria.
1.

Introduction
A number of studies have been conducted on the impact of board committees on the quality
of CG and control mechanisms. These studies were conducted in view of the understanding
that board committees continue to assume an important role in the monitoring and
governance of corporations (Uzun, Szewczyk and Varma, 2004). Oversight committees are
intended to protect shareholder interests by providing an objective, independent review of
affairs of a company. Audit committees, in particular, are responsible for overseeing the
financial reporting process, reviewing the adequacy of a companys financial control systems
and ensuring the objectivity of the external audit (Nadler, Behan and Nadler, 2006). Similarly,
on the quality of the audit committee, evidence exists which associates the audit committee
with an important role of detecting and preventing management fraud through handling an
important audit task (Pincus, Rusbarsky and Wong, 1989; and Sommer, 1991). In other
words, an ineffective audit committee may contribute to the existence of management fraud.
Upon examining the relationship between committee structures of boards and the role of
directors, Nicholson and Kiel (2004) found that committee structures with specialized roles
enhance the efficiency and productivity of the board. Similarly, Baysinger and Butler (1985)
have found that board committees provide the means and structure for directors to govern
effectively by handling specialized responsibilities of important corporate concerns. In
separate studies, Uzun, Szewczyk and Varma (2004) examined how various characteristics
and the structure of overseeing committees affect the occurrence of corporate fraud. Their
findings indicate that, a higher degree of independence on the audit committee is associated
with a lower likelihood of corporate fraud. Evidence from the study has shown that fraud may
be prevented by enhancing the quality of external auditors, having in place an effective audit

committee, increasing the number of outsiders on the board of directors, controlling the
average tenure of the CEO, enhancing separation of the position of CEO and board chairman
and increasing insider stock ownership. This finding is consistent with the agency theory
which predicts the establishment of audit committees as a means of reducing agency costs,
where independent directors are perceived as better monitors.
An audit committee therefore is an oversight committee that is charged with the responsibility
of overseeing the financial reporting process, reviewing the adequacy of a companys
financial control systems, ensuring the objectivity of the external audit, and overseeing the
main boards duty to enforce and sustain the effectiveness of the internal control system, by
statutorily reporting to the main board on issues bordering on accounting and reporting
policies; scope and planning of audit; management letter from the auditor and response
thereto; effectiveness of accounting and internal control systems; and appointment,
remuneration, removal of external auditors (S. 359 (6) of CAMA, 1990). The idea behind the
establishment of audit committee is to provide a means by whereby independent directors can
monitor the financial activities of a company as operated by management so as to correct any
inevitable bias on the management, including executive directors. It can therefore be safely
stated that the institution of the audit committee is part of the continuous effort to balance the
interest of the shareholders and the public on the one hand against those of the board and
management on the other.
Although, it is difficult to measure the direct impact of the composition of audit committee on
performance indices, a number of studies (Baysinger and Butler 1985; and Nicholson and
Kiel, 2004) have shown that committee structures with specialized roles enhance the
efficiency and productivity of the board, as well as the means and structure for directors to
govern effectively by handling specialized responsibilities of important corporate concerns.
In this direction, therefore, an effective audit committee should have the ability to influence
the quality of risks assets, as well as minimize loan loss expenses, which are the two proxies
used for physical and organizational control in this study. This is in view of the findings of
Uzun, Szewczyk and Varma (2004) and Nadler, Behan and Nadler (2006), who document that
audit committee serves as an important vehicle for enhancing financial control systems and
ensuring the objectivity of the external audit. Additionally, effective audit committees are
expected to add credence to external audit and the entire system of financial reporting,
thereby enhancing public confidence on a firm, which would consequently enhance its
financial performance (Sommer, 1991).
Despite the existence of studies on the impact of specialized board committees on
governance, control mechanisms, productivity and efficiency (Baysinger and Butler, 1985;
Pincus, Rusbarsky and Wong, 1989; Sommer, 1991; Nicholson and Kiel, 2004; Uzun,
Szewczyk and Varma, 2004; and Nadler, Behan and Nadler, 2006), little or none exist on the
impact of the composition of audit committee on organizational and physical controls (two of
the major components of internal control system) of banks in Nigeria. The aim of this paper
therefore is to assess the impact of the composition of audit committee on organizational and
physical controls of banks in Nigeria. The sample size of the study comprised of nine banks,
which were randomly selected from the population of twenty five banks that were operating
in the Nigerian banking industry, as at December 31 st, 2007. The data generated for the study
from the annual report and accounts of the sampled banks were analyzed using Kendalls
Tau-b correlation coefficient, while the data generated from the administration of the
questionnaire were analyzed using descriptive statistics. In order to achieve the objective of
the study, the paper hypothesized in null form that:

H0.1-

The composition of the audit committee does not have a significant impact on
organizational and physical controls of banks in Nigeria.

This paper is thus organized into five sections. Section one, which is this section is the
introduction. Section two, which is the next section, reviews related literature on the subject
matter of the study; section three discusses the methodological issues of the paper, while
section four present and discusses the results obtained from the data generated for the study.
Finally, section five gave the summary, conclusions and recommendations of the paper.
2.

Literature Review
2.1

The Concept Of Corporate Governance (Cg)

There is no generally accepted definition of Corporate Governance (CG) which enjoys

consensus of opinion in all settings and countries of the world. The concept is thus defined
and understood differently in different parts of the world, depending on the relative power of
owners, managers and providers of capital. In other words, a number of scholars have
viewed CG differently from their own perspectives (Cai, Keasey and Short, 2006). For
example, Maher and Anderson (1999) and Craig (2005) view CG from two contrasting
angles: the shareholder and the stakeholder model. CG in its narrowest sense (i.e. shareholder
model) is used to describe the formal system of stewardship of the board to the shareholders.
In contrast, in its widest sense (i.e. stakeholder model) CG is used to describe the network of
relationships between an organization and its various stakeholders.

Similarly, the Cadbury Committee (1992) as cited in Alexandra, Reed and Lajoux (2005)
defines CG as the system by which companies are directed and controlled. The nature of CG,
therefore, going by this definition consists of two dimensions: direction and control. The
direction side of CG emphasizes the responsibility of the board to attend to strategic
positioning and planning in order to enhance the performance and sustainability of the
company. The control side of the definition, on the other hand, emphasizes the responsibility
of the board to oversee the executive management of the company in the execution of the
plans and strategies. Even though it is believed that the definition has appropriately captured
the functions of CG, it fails to consider the structures, the systems and relationships through
which the direction and control functions take place.
Sanda, Mikailu and Tukur (2005) on their own part see CG as the ways in which all parties
interested in the well being of the firm attempt to ensure that managers and other insiders take
necessary measures to safeguard the interest of all stakeholders. However, the major
weakness of this definition is its identification of the function of CG with the management
alone without incorporating the board, which is an important player in CG. On its part, the
Basel Committee (1998) views CG from a banking perspective, as the manner in which the
business and affairs of a bank are governed by the board of directors and senior management,
which provides the structure through which the objectives of the bank are set and the means
of attaining those objectives and monitoring performance. Although this definition has
captured the essential components of CG, it has a weakness of attempting to make a
distinction between CG in banks and CG in other organizations, because such a distinction is
2

undesirable.

From the above discourse, it is evident that views differ on the content and boundaries of CG.
For some, the essence is the exercise of power by shareholders or stakeholders, while for
others it is the formal structure of relationships that involves the control and direction of
companies. However, what is clear from the above definitions is that in directing and
controlling the affairs of a company, the board has to ensure that it takes due care of the
interests of the various stakeholders of the company. The typical arrangements and processes
that constitute a CG system such as board composition and functioning, risk management and
auditing are all merely the means to ensure that the corporation act in a manner that is fair,
accountable, responsible and transparent to all stakeholders. Conclusively, what is evident
from the various definitions reviewed is that CG is the set of structures, processes, cultures
and systems through which objectives are set, and the means of attaining the objectives and
monitoring performance are determined and companies are directed and controlled. The four
(4) components of CG as suggested by Klapper and Love (2002) are Board Composition
(BC), Board Size (BS), Power Separation (PS) and the Composition of Audit Committee
(CAC).
2.1.1 Codes of Corporate Governance

Codes of good governance are a set of best practices recommendations regarding boards
issued to address deficiencies in a countrys governance systems by recommending a set of
norms aimed at improving transparency and accountability among top managers and
directors. The codes of good governance were issued mainly by the stock market or by
Managers Associations. Thus, Directors and Investors Associations and the government do
not normally play a key role in developing national governance practices (FernandezRodriguez, Gomez-Anson and Cuervo-Garcia, 2004).
In most legal systems, codes of good governance have no specific legal basis, and are not
legally binding (Wymeersch, 2006). Thus, enforcement is generally left to the board of
directors and external market forces. It is only in a few countries (e.g. Nigeria-in the case of
the CCG for banks, Germany and the Netherlands in Europe) that the law attaches explicit
legal consequences to the codes. Even if, compliance with code recommendations is
traditionally voluntary (i.e. based on the comply or explain rule), empirical evidence shows
that publicly quoted companies tend to comply with the codes more than non-quoted firms
(Conyon and Mallin, 1997; and Gregory and Simmelkjaer, 2002). Consequently, FernandezRodriguez et al., (2004) study, suggests that the market reacts positively to announcements of
compliance with the codes.
The content of codes has been strongly influenced by corporate governance studies and
practices. This is because, they touch fundamental governance issues such as fairness to all
shareholders, accountability by directors and managers, transparency in financial and nonfinancial reporting, the composition and structure of boards, the responsibility for
stakeholders interests, and compliance with the law (Gregory and Simmelkjaer, 2002). Since,
the core of codes of good governance lies in the recommendations on the board of directors.
However, following the dominant agency theory (Jensen, 1983b) governance codes
encourage the board of directors to play an active and independent role in controlling the
behavior of top management. In particular, scholars and practitioners (Lorsch and Maclver,
1989; Demb and Neubauer, 1992; and Conger, Lawler III and Finegold, 2001) recommend

for increasing number of non-executive and independent directors; the splitting of Chairman
and CEO roles; the creation of board committees (nomination, remuneration and the audit
committee) made up of non-executive independent directors; and the development of an
evaluation procedure for the board. The introduction of these practices is considered a
necessary factor in order to avoid governance problems, and to increase board and firm
performance.
2.1.2

Corporate Governance (Cg) In The Nigeria Banking Industry

In the Nigerian corporate landscape, there are a number of CG provisions that every company
is required to abide by. With regard to the banking sector, listed banks must comply with the
provisions of the Companies and Allied Matters Act (CAMA) 1990, the Banks and Other
Financial Institutions Act (BOFIA) 1991, the Investment and Securities Act (ISA) of 1999,
the Nigerian Deposit Insurance Corporation (NDIC) Act of 1988, the CBN Act of 1991, the
various prudential guidelines issued by the CBN, the listing requirements of the Nigerian
Stock Exchange (NSE) and the Securities and Exchange Commission (SEC) Rules and SEC
Code of Corporate Governance, 2003. In 2006, the Central of Bank of Nigeria (CBN)
produced the Code of CG (CCG) for banks in Nigerias post-consolidation era which banks
must also abide by (Wilson, 2007). Similarly, accounts are to be prepared in accordance with
the Statement of Accounting Standards (SASs) and are to comply with the requirements of
the relevant company laws. Each of these statutes imposes strict requirements on a bank to
establish or identify, document, test, and monitor the internal control processes. The main
regulators for listed banks are the CBN, the Nigerian Deposit Insurance Corporation (NDIC),
the Securities and Exchange Commission (SEC), the Corporate Affairs Commission (CAC)
and the National Insurance Commission (NIC) of Nigeria (Hamid, 2008).
The SEC Code of Corporate Governance 2003 for Publicly Listed Firms in Nigeria, produced
by the Atedo Peterside led committee, precedes the CBN CCG 2006. The Code made
provisions for best practices to be followed by publicly quoted companies registered in
Nigeria. It is meant to exercise power over the direction of the enterprise; the supervision of
executive actions; the transparency and accountability in governance of the companies within
the regulatory framework and market; and for other purposes connected therewith. Similarly,
the Code made provisions covering the responsibilities of the board of directors and its
composition; the positions of the Board chairman and Chief Executive Officer; proceedings
and frequency of meetings; Board duties, the positions of the Executive Directors and NonExecutive Directors; compensation of Board members, reporting and control, shareholders
rights and privileges. Others are institutional shareholders; the audit committee, its
composition, qualification and experience of its members, its terms of reference and conduct
of meetings. Thus, it is clear that the component of CG that enjoys greater coverage by the
Code is the Audit Committee (Hamid, 2008).
Finally, the CG statutes have imposed some duties on directors of banks that operate in
Nigeria. For example, directors are held responsible for the preparation of financial
statements which give a true and fair view of the state of affairs of the bank at the end of each
financial year in compliance with the provisions of CAMA 1990 and BOFIA 1991. In doing
so, they are to ensure that: adequate internal control procedures are instituted to safeguard the
assets, prevent and detect fraud and other irregularities; proper accounting records are
maintained; applicable accounting standards are adhered to; suitable accounting policies are
adopted and consistently applied; judgments and estimates made are reasonable and prudent
and the financial statements are prepared on the going concern basis, unless it is inappropriate
to presume that the bank will continue in business.

2.1.3

Statutory Provisions On The Composition Of Audit Committee Of Banks

In Nigeria

Provisions relating to the composition of audit committee for banks in Nigeria are contained
in the Companies and Allied Matters Act. (CAMA) 1990, the Securities and Exchange
Commission (SEC) Code of Corporate Governance, 2003 and the Central Bank of Nigeria
Code of Corporate Governance for Banks 2006 -post consolidation- (Wilsons, 2007 and
Hamid, 2008). Companies and Allied Matters Act 1990 S. 359 (4) provides that the audit
committee shall consist of an equal number of directors and representatives of shareholders
of the company (subject to a maximum number of six members).
The SEC Code, 2003 stipulates in relation to the composition of audit committee that it
should be established in accordance with CAMA S. 359 (3 and 4), with not more than one
Executive Director, with the key responsibility of raising the standard of CG and with NED
as chairman to be nominated by the committee members; and that the audit committee should
meet at least 3 times in a year, and has the responsibility to review the financial reporting
process, the system of ICS and management of financial risks, the audit process and the
companys process for monitoring compliance with laws and regulations. On the Other hand,
the Code of Corporate Governance (CCG) for banks in Nigeria 2006, Post Consolidation,
issued by the CBN, aims at providing the best practices in the Nigerian banking industry,
provides that the audit committee should composed of non-executive directors and
shareholders of equal number subject to maximum of six members and that Board Chairman
serving simultaneously as chairman/member of any of the board committees is against the
concept of independence and sound CG practice, and should be discontinued (CBN, 2006).
However, what is clear from the literature review is that while CAMA is silent on the type of
directors to be appointed into audit committee, SEC Code was categorical that not more than
one executive director is to be appointed and the CBN Code forbids the appointment of
executive directors into audit committees.
2.2 The Concept Of Internal Control System (Ics)

Internal Control System has been defined in different ways by different persons and
institutions. However, what the accounting literature has shown is that there is some
consensus among scholars on the components of ICS. The Committee of Sponsoring
Organization -COSO (1992) describes ICS as a process affected by an entity's board of
directors, management and other personnel, which is designed to provide reasonable
assurance regarding the effectiveness and efficiency of operations, reliability of financial
reporting and compliance with management policies. This definition echoes certain
fundamental concepts, for example, ICS is a process, a means to an end and not an end in
itself. Furthermore, ICS is affected by people and not only policy manuals; ICS may be
expected only to provide reasonable, not absolute, assurance to an entitys management and
board; and finally, ICS is meant to facilitate the achievement of effectiveness and efficiency
of operations and compliance with laid down policies. This definition of ICS by COSO has
some weaknesses in view of its neglect to incorporate some important components of ICS,
like physical control, accounting control and personnel control.

On its own part, the IAG 6, as cited in Woolf (1985) and Dandago (1999), defines ICS as the
whole system of controls, financial and otherwise, established by the management in order to
carry on the business of the enterprise in an orderly and efficient manner, ensure adherence to
management policies, safeguard the assets and secure as far as possible the completeness and
accuracy of the records. From this definition, it is clear that ICS comprises the entire control
measures which the management puts in place to make sure that all aspects of the
organization are effectively monitored and managed for the achievement of organizational
objectives. In other words, ICS refers to any combination of measures, policies and
procedures that the management of an organization adopts in order to ensure that the assets of
such organization are duly protected, and that all operations are carried on in the most
efficient manner. Accounting literature has shown that the definition of ICS by IAG 6 has
enjoyed some degree of acceptability more than any other definition. As a result, various
authors have made attempts to define ICS in their own ways, but with a similar focus with
AIGs definition (Woolf, 1985; Agbelusi, 1986; COSO, 1992; and Hamid, 2004).
However, it is clear from the various definitions of ICS that it has three major objectives,
namely operational objectives, informational objectives and compliance objectives.
Operational objectives of ICS pertain to the effectiveness and efficiency of the organization
in using its assets and other resources, and in protecting itself from loss. The internal control
process seeks to ensure that personnel throughout the organization are working to achieve its
objectives without unintended or excessive cost or placing other interests (such as an
employees, vendors or customers interest before those of the organization). Similarly, the
informational objectives of ICS focus on the preparation of timely and reliable financial
statements for the various stakeholders of the organization to be used in taking informed
decisions. Lastly, the compliance objective of ICS seeks to ensure that that the business of the
organization is conducted in compliance with applicable laws and regulations, supervisory
requirements and internal policies and procedures.
In varying degrees, ICS is the responsibility of everyone in an organization. Although the
board and senior management are held responsible for ensuring the effectiveness of the
system, an essential element of a sound ICS is the recognition by every employee of the need
to carry out his or her responsibilities effectively, and with integrity and to communicate to
the appropriate level of management any problems that may arise in operations, instances of
non-compliance with laid down policies and procedures. In this regard, management has a
responsibility to introduce appropriate controls to prevent or at least substantially reduce the
incidence, not only of mistakes but also of irregularities and intentional errors and fraud
(Woolf, 1985; and Hamid, 2004).
On the other hand, the IC environment comprises the overall attitude, awareness and actions
of directors and management regarding the workings of control mechanisms in the entity
(Arens and James, 1999; and Millichamp, 2000). The control environment encompasses the
management style and the corporate culture and values shared by the whole organization. In
contrast, control activities are those policies and procedures in addition to the control
environment and the information system that management establishes to provide reasonable
assurance that their objectives are achieved (Sabari, 2003).
However, there are certain basic components that are essential in any ICS. These components
are called controls and they are the backbone of the ICS. Although different authors have
attempted to itemize the components of ICS, they sometimes differ in their itemization.

However, it is clear from the literature is that there are basically eight components of ICS,
namely organizational control, segregation of duties, physical control, personnel control,
supervisory control, management control, authorization & approval and arithmetic &
accounting control (Dandago, 1999; and Sabari, 2003).
This paper is only concerned with two of these components of ICS, which are physical and
organizational controls. Organizational control focuses on the need to have an organizational
chart with clearly defined responsibilities, putting each function specified by the chart under
the custody of a specific person, who is seen as the responsible officer. Physical control is
concerned with the procedures and security measures designed to ensure that access to assets
(both current and fixed) is limited only to the authorized persons. This control is specifically
important in the case of valuable, portable, exchangeable or desirable assets (Mohammed,
1984; and Woolf, 1985).
2.3 The Nigerian Banking Industry

The genesis of banking can be traced back to as early as 2000 BC in Babylon, when a
functional system of banking was established. Bankers and banks were given different names
in different places. It is speculated that the word bank must have been coined from Banco
San Giorgio, which was established in Genoa in 1407. The bank of Amsterdam, basically
established in 1609 to cater for the banking needs of Amsterdam businessmen, was a pioneer
of modern banking by its introduction of a certificate of deposit and receiving all forms of
coins. The roles of Goldsmiths in Britain and the effect of the gold rush of 1848 in the United
States were also significant in the evolution of modern banking (Olalusi, 1997).
In the late nineteenth century, there were a lot of trading activities along the Nigerian costal
areas. Therefore, banking evolved to support these activities. In August 1891, the Chairman
of Elder Dempster Company initiated the setting up of a branch of African Banking
Corporation. The purpose of this was to boost the British shipping business operated by the
company. The bank was given the privilege of importing silver coins from Britain for use in
Nigeria as from January, 1892. Elder Dempster Company took over the bank on payment of
1000 pounds sterling and the bank became incorporated on 1st March 1893 as the Bank of
British West Africa (BBWA). The bank was biased in favour of Elder Dempster Company, so
there were a lot of agitations by British traders. This development led to the establishment of
a second bank in 1899 known as Anglo African Bank, which later became bank of Nigeria.
The BBWA was merged with the new bank (i.e. the Bank of Nigeria) in 1912 (Ndekwu,
1994).
In 1917, another bank known as the Colonial Bank was set-up. This bank, which later became
Barclays Bank Nigeria Limited (and is now known as the Union Bank (Nigeria) PLC). This
bank posed a formidable competition for BBWA. In 1948, the British and French Bank was
established. Later in 1961, it changed its name to United Bank for Africa Limited, now PLC.
In fact, the First Bank, Union Bank and United Bank for Africa (UBA) are the three largest
banks in Nigeria today, among the twenty five banks comprising the Nigerian banking
industry (Ndekwu, 1994; and Olalusi, 1997). During the period 1929 to 1952, a number of
indigenous banks were established. The Agbonmagbe Bank Ltd. (now known as Wema Bank)
was set-up in 1938, followed by African Continental Bank (ACB), which was set-up in 1948.
During the period, February 1951 and May 1952, 18 indigenous banks were registered. All of

them failed without any exception within a short period. The failure was attributed to lack of
banking expertise and non-prudent lending policies (Ndekwu, 1994; and Olalusi, 1997).
From independence in 1960 to 1985, there were a total of 40 banks in Nigeria, made up of 12
merchant banks and 28 commercial banks. Due to deregulation, however, the number of
operating banks in the country increased phenomenally from 40 in 1985 to 66 in 1988, 100 in
1990 and 120 in 1992. Equally, the banks braches increased from 1316 in 1985 to 1698 in
1988, 1944 in 1990 and 2027 in 1992. Thus within a period of 7 years (1985 to 1992) the
Nigerian banking industry witnessed a growth that has not been recorded in the first 25 years
of the country as an independent nation (Bulama, 1999). However, by December 2002, there
were a total of 90 licensed banks, 282 community banks, 74 primary mortgage institutions
and 6 development banks (Hamid, 2004).
The recent banking sector reforms commenced with the announcement of a 13-point reform
agenda by the CBN on July 6, 2004. A major element of the reform programme was the
requirement for banks to achieve a minimum shareholders fund of N25 billion by the end of
December, 2005. Banks were specifically required to achieve this through fresh capital
injection or through merger/acquisition arrangements with other banks (CBN, 2005). At the
expiration of the deadline on 31st December 2005, twenty-five (25) banks emerged from
seventy-five (75) banks out of the eighty-nine (89) banks that existed at the end of December
2004. Fourteen (14) banks, which had negative shareholders fund and, therefore, insolvent
had their licences revoked by the CBN. As at the end of December 2007 there were a total of
25 banks, 1,287 other financial institutions, comprising of 750 Community Banks, 7
Microfinance Banks, 112 Finance Companies, 91 Primary Mortgage Institutions, 322
Bureaus De-Change and 5 Development Finance Institutions operating in the country (CBN,
2007).
3.

METHODOLOGY
The study used both ex-post facto and survey research designs. Documentary data is utilized
from the annual reports and accounts of the nine sampled banks. The data generated for the
study from the annual report and accounts of the sampled banks were analyzed using
Kendalls Tau-b correlation coefficient, while the data generated from the administration of
the questionnaire were analyzed using descriptive statistics. The population of the study
comprised all the twenty five (25) banks, operating in the Nigerian banking industry as at
December 31, 2007. These banks are listed on table II in the appendix.
Availability of data is an important factor of consideration in a study of this nature. However,
as can be seen from table II in the appendix, during the 2005 banking sector consolidation in
Nigeria, a number of banks merged together with a view to meeting the deadline for the N25
billion minimum capital requirement. This has therefore posed a problem in obtaining the
requisite data on the some of the banks for the period covered by the study i.e. 2000-2007. In
other words, because the 2005 banking sector consolidation has changed the structures and
names of some of the banks, it was not possible for the researcher to obtain comparable data
for the time frame of the study on all the banks that make up the study population. For
instance, table II in the appendix shows that the Unity Bank of today is a product of a merger
of nine former banks. The merger has changed the structures and the name of the bank,
thereby making it unsuitable for inclusion in the study sample.
8

In view of the above discourse, the researcher employed a two-point filter to eliminate the
banks that are thought unsuitable for the study. These filters are: (i) scaling the hurdle of the
2005 banking sector consolidation exercise without structural changes affecting the name of a
bank, and (ii) listing on the Nigerian Stock Exchange (NSE). The reason for this filtering is
not far fetched as may have been seen from the explanations above. The first filter is applied
to ensure the availability of comparable data from 2000-2007, while the second is applied
with a view to ensuring easy accessibility to annual reports and accounts. Consequently, upon
the application of these filters, the population of the study is reduced to fifteen (15) banks as
follows: Access Bank Nigeria PLC, Afribank Nigeria PLC, Diamond Bank Nigeria PLC,
Ecobank Nigeria PLC, Equitorial Trust Bank PLC, Fidelity Bank PLC, First Bank of Nigeria
PLC, First City Monument Bank PLC, Guaranty Trust Bank PLC, Intercontinental Bank
PLC, Oceanic Bank International PLC, Union Bank of Nigeria PLC, United Bank for Africa
PLC, Wema Bank PLC and Zenith Bank PLC.
In other words, the fifteen (15) banks that formed the new population of the study were
arranged serially based on shareholders fund, from the highest to the lowest, and then any
two digits, each with a value less than 15 were circled on the table of random numbers,
thereby selecting 9 numbers from 1 to 15. The sample was then drawn from the population by
selecting the banks with the random digits circled on the table of the random numbers. In this
way every element of the population was given an equal and independent chance of being
included in the sample. The sample size of the study comprised of Afribank Nigeria PLC,
Ecobank Nigeria PLC, First Bank of Nigeria PLC, Guaranty Trust Bank PLC,
Intercontinental Bank PLC, Oceanic Bank International PLC, Union Bank of Nigeria PLC,
United Bank for Africa PLC and Wema Bank PLC.
The sources of data for this study comprised of both the documentary and primary data. The
documentary data was generated from the annual reports and accounts of the nine sampled
banks for the study, on the Composition of Audit Committee (CAC) and the proxies of
physical and management controls of the sampled banks. The data obtained on the status of
members of the audit committees of the nine sampled banks for the period of the study were
ranked using a dichotomous scale of 0-1 to determine the appropriateness or otherwise of the
composition of the committee, using (1) for inappropriateness, and (0) for inappropriateness.
1 is assigned if there are at least two non-executive directors on the audit committee,
otherwise 0 is assigned. This procedure is consistent with the technique used by Musa (2006)
who used the same scale to measure corporate governance variables of board size, board
composition, power separation and the composition of audit committee. The accounting and
finance literature also provides evidence of studies (Wallace, Nasser and Mora, 1994; and
Kantudu, 2006) that use qualitative dichotomous scale of 0-1 to measure the presence or
absence of certain qualities of research variables. The result of this rating is presented on
table III in the appendix.
Similarly, for the purpose of this study, quantitative technique is used to measure
Management Control (MC) and Physical Control (PhC) from the data in the annual report and
accounts of the nine sampled banks. While physical control is proxied by the quality of risk
assets, management control is proxied by the ratio of loan loss expenses to interest margin.
The ratios computed are presented on tables IV and V in the appendix. This is measure
technique is supported by attempts made by Ali, Ahmed and Henry, (2004); and Jeffrey, Ge
and Mcvay (2005) to measure similar research variables.

On the other hand, the primary data for the study was generated through the administration of
questionnaire on two hundred and twenty five respondents (225), twenty five from each of
the nine sampled banks, comprising of twenty (22) management staff and three (3) board
members. The questionnaire was administered both in hard and soft copies, using twenty
three (23) research assistants and networks, most of whom are staff of the sampled banks.
Using a Likert scale of 1-5 (5= Strongly Agree, 4=Agree, 3=Undecided, 2= Disagree, and 1=
Strongly disagree) the respondents were asked to rate the relationship between the
composition of audit committee and the quality of risks assets on one hand and with the ratio
of loan loss expenses to interest margin, on the other hand. The results obtained from the
ratings were analyzed using simple descriptive statistics to support the test of the hypothesis
of the study (as presented on tables 2, 3 and 4 in the body of the paper).
The study used Kendalls Tau_b (Coefficient of Concordance) in testing the hypothesis of the
paper. Kendall Tau_b (denoted T) is found relevant, because it is similar to Spearman rank
order correlation (rs), (which ranked and relate dependent and independent variables, to
ascertain impact and/or relationship). The only difference is that Kendall Tau_b as against
Spearman rank order correlation (rs) uses data measured at interval/ratio level (Osuala, 2005).
Kendall Tau_b is used because the data generated for the study from the annual report and
accounts of the sampled banks is measured at interval/ratio level. Kendall Tau_b (denoted T)
is given by:
T = 1- 6d2
N3-N
Whre: d2 =The sum of all the subjects squared rank differences.
N = The number of paired ranks
N3 = N cubed, or N x N x N
3.1
Decision Rule
1. Reject Ho at 95 level of confidence (alpha- 0.05) if the computed value of T is greater
than the critical (tabulated) T value.
2. Accept Ho at 95 level of confidence (alpha- 0.05) if the computed value of T is less than
the critical (tabulated) T value.
4.

Results And Discussions

This section discusses the Kendall's Tau-b correlation results on the impact of the
Composition of Audit Committee (CAC), on organizational and physical controls of banks in
Nigeria. The result obtained from the analysis was used to test the hypothesis of the study
which is stated in null form as:
The Composition of Audit Committee (CAC) does not have a significant impact on
organizational and physical controls of banks in Nigeria
Figure I below shows the pattern of the Composition of Audit Committee (CAC) of the
sampled banks, in the period under review, as developed by the author from table III in the
appendix.

10

Figure I: Pattern of the Composition of Audit CAC

Committee (CAC) of the Sampled Banks

1.20
1.00
0.80
0.60
0.40
0.20
0.00

Rating of CAC

Time Frame of the Study

Source: Developed by the Author from the Ratings on Table III in the Appendix.
Figure I shows the fluctuations in the pattern of the composition of audit committee of the
sampled banks, in the period under review. As can be seen from the figure, the pattern
stabilized from 2002 to 2005 and fluctuates in periods before and after that. The figure also
shows that optimality is rarely attained in the composition of audit committees of most banks
in the sample. This means that, in the period under review there have been a number of banks
that had up to three executive directors in their audit committees, thereby preventing the
inclusion of even a single non-executive director in the committee.
Table 1 below shows the Kendall's Tau-b result that is used in testing the hypothesis of the
study.
Table 4.1

: The Impact of the Composition of Audit Committee on

Organizational and Physical Controls of Banks in Nigeria

Kendall's tau_b CAC

PhC

OC

Correlation Coefficient
Sig. (2-tailed)
N
Correlation Coefficient
Sig. (2-tailed)
N
Correlation Coefficient
Sig. (2-tailed)
N

CAC
1.000
.
8
.590
.061
8
.535
.085
8

PhC
.590
.061
8
1.000
.
8
.473
.105
8

OC
.535
.085
8
.473
.105
8
1.000
.
8

Source: Generated by the Author from the Data Collected Using SPSS (version 11.00)
Table 1 above (which is developed from the ranking/data presented on table III, IV and V in

11

the appendix) shows the results of Kendall's Tau-b correlation coefficients on the impact of
the Composition of Audit Committee (CAC) on organizational and physical controls of banks
in Nigeria. The table shows the Kendall's Tau-b correlation coefficient for CAC and
organizational control to be 0.535 with a p-value of 0.085, implying that CAC and
organizational controls are significantly positively correlated. This position is further
explained by the results obtained from the analysis of the primary data as shown in Tables 2
and 3 below:
Table 4.2

: The Impact of the CAC on Organizational and Physical

Controls of Banks in Nigeria
Organizational
Control

Valid
Missing

148
0
4.49
5.00
5
.829
.687

Mean
Median
Mode
Std. Deviation
Variance

Physical
Control

148
0
4.51
5.00
5
.724
.524

Source: Generated by the Author from Questionnaire Response using SPSS

In order to triangulate the results obtained from the analyses of the data, the results of the
primary are presented along side the secondary data. The responses received from the
questionnaire were on the level of the respondents agreement or disagreement on the impact
of the composition of audit committee on physical and organizational controls, on a fivepoint Likert scale. As can be seen from table 2 out of the two hundred and twenty (225)
questionnaire administered, only one hundred and forty eight (148) were completed and
returned by the respondents, representing 66 per cent of the total number of questionnaire
administered. Detail of the questionnaire returned shows that out of the twenty seven (27)
administered on board members, only fourteen (14), representing 52 per cent were completed
and returned. Similarly, out of the one hundred and ninety eight (198) questionnaire
administered on the management staff, only one hundred and thirty four (134), representing
68 per cent, were completed and returned. The analysis that follows is therefore made on the
number of the questionnaire completed and returned by the respondents.
Table 4.3: The Impact of the CAC on Organizational Control

Valid

Strongly Agree
Agree
Undecided
Strongly Disagree
Total

Frequency
92
44
8
4
148

Percent
62.2
29.7
5.4
2.7
100.0

12

Valid Percent
62.2
29.7
5.4
2.7
100.0

Cumulative
Percent
62.2
91.9
97.3
100.0

Source: Generated by the Author from Questionnaire Response using SPSS (version 11.00)
Table 2 shows the modal and median response as 5, which means that the Composition of
Audit Committee (CAC) has a strong impact on organizational control of banks in Nigeria.
This position is further clarified by table 3 which show that 91.9 per cent as the respondents
view indicating that the Composition of Audit Committee (CAC) has an impact on
organizational control of banks in Nigeria. This result conforms to the findings of Uzun,
Szewczyk and Varma (2004) who document that a higher degree of independence on the
audit committee is associated with a higher control thus lower likelihood of corporate fraud.
This finding supports the establishment of the audit committee as a means of attenuating
agency costs, where independent directors are perceived as better monitors. One the other
hand, Table 1 shows the Kendall's Tau-b correlation coefficient for the second variable, that
is, CAC and physical control as 0.590 with a p-value of 0.061, implying that the CAC and
physical control are significantly positively correlated. This position is further supported by
the results obtained from the analysis of the primary data as shown in Tables 2 (above) and 4
(below):
Table 4.4:

Valid

The Impact of the CAC on Physical Control

Strongly Agree
Agree
Undecided
Disagree
Total

Frequency
92
44
8
4
148

Percent
62.2
29.7
5.4
2.7
100.0

Valid Percent
62.2
29.7
5.4
2.7
100.0

Cumulative
Percent
62.2
91.9
97.3
100.0

Source: Generated by the Author from Questionnaire Response using SPSS (version 11.00)
Table 2 shows scale 5, (i.e. strongly agree), as both the median and the modal response, on
the impact of the Composition of Audit Committee (CAC) on physical control of banks in
Nigeria. This position is further clarified by table 4 which show that 91.9 per cent as the
respondents view indicating that the Composition of Audit Committee (CAC) has an impact
on physical control of banks in Nigeria. This result is consistent with the findings of Uzun,
Szewczyk and Varma (2004), which indicates that a higher degree of independence on the
audit committee is associated with a higher control, thus, lower likelihood of corporate fraud.
These results provide the basis for the rejection of the null hypothesis of the study, which
states that the composition of audit committee does not have an significant impact on
organizational and physical controls of banks in Nigeria, and the acceptance of the alternative
hypothesis which states the composition of audit committee has asignificany impact on
organizational and physical controls of banks in Nigeria. What this finding implies is that, the
composition of audit committee is an important CG structure which affects the quality of
control mechanisms that are instituted to safeguard operations in the Nigerian banking
industry.
5.

Summary, Conclusion And Recommendations

13

Based on the literature data analysis presented in section four above, the following major
findings are made:
First, in the period under review there have been a number of banks in the Nigeria banking
industry that had up to three executive directors in their audit committees, thereby preventing
the inclusion of a single non-executive director in the committee. The situation is not good
for the effectiveness of control mechanisms that are instituted safeguard operations, and it
violates the provision of SEC code of corporate governance, 2003 (which restrict the
appointment of executive director to one in an audit committee) and the CBN code of
corporate governance for banks, 2006 (which forbids the appointment of executive directors
into audit committees). Second, the paper finds that the Composition of Audit Committee
(CAC) has a significant impact on organizational and physical controls of banks in Nigeria.
What this finding implies is that, the composition of audit committee is an important CG
structure which affects the quality of control mechanisms that are instituted to safeguard
operations in the Nigerian banking industry.
The paper concludes that unrestricted appointment of executive directors on audit
committees, decreased the monitoring provided by the committee and it effectiveness in
checking management scandal and sustaining the effective of accounting and control systems.
Thus, a higher degree of independence on the audit committee is associated with a higher
control thus lower likelihood of abuse of office, as there is no way someone who is part of
management can investigate his own affairs and then fairly report to members.
Finally, it is recommended that since the primary role of the audit committee is to ensure the
integrity of the audit process and financial reporting and to maintain a sound risk
management and internal control system, as stipulated in S. 359 (6) of CAMA, 1990, the
CBN and shareholders of banks operating in Nigeria should support the establishment of the
audit committee as a means of attenuating agency costs. This can be done by ensuring that all
banks in Nigeria comply with the provision of CBN code of corporate governance, which
shall be seen to have clearly identified the type of directors to be appointed as members of the
audit committee as contained in S. 359 (4) of CAMA 1990, and shall take precedence over
the provision of SEC code of corporate governance, 2003. Finally, there is the need for
Securities and Exchange Commission (SEC), the Central Bank of Nigeria (CBN) and the
Corporate Affairs Commission (CAC) to ensure that the discrepancies relating to directors
appointed as members of audit committee for banks in Nigeria as contained in Nigerias
statutes are brought into harmony with one another, through initiating amendments in the
respective laws.
6.

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APPENDIX
Table I: List of Banks Whose Licences were Revoked by the CBN from 1994 to
2006
Date of Revocation of
S/No. Name of Bank
Licence
1
Abacus Merchant Bank Ltd.
January 16, 1998
2
ABC Merchant Bank Ltd.
January 16, 1998
3
African Express Bank Ltd.
January 16, 2006
4
Allied Bank PLC.
January 16, 1998
5
AllStates Trust Bank PLC.
January 16, 2006
6
Alpha Merchant Bank PLC.
September 8, 1994
7
Amicable Bank of Nigeria PLC.
January 16, 1998
8
Assurance Bank of Nigeria PLC.
January 16, 2006
9
Century Merchant Bank Ltd.
January 16, 1998
10
City Express Bank Ltd.
January 16, 2006
11
Commerce Bank PLC.
January 16, 1998
12
Commercial Trust Bank Ltd.
January 16, 1998
13
Continental Merchant Bank PLC.
January 16, 1998
14
Co-operative & Commerce Bank PLC.
January 16, 1998
15
Credite Bank Nig. Ltd.
January 16, 1998
16
Crown Merchant Bank Ltd.
January 16, 1998
17
Eagle Bank PLC.
January 16, 2006
18
Financial Merchant Bank Ltd.
January 21, 1994
19
Fortune International Bank PLC.
January 16, 2006
20
Great Merchant Bank Ltd.
January 16, 1998
21
Group Merchant Bank Ltd.
January 16, 1998
22
Gulf Bank PLC.
January 16, 2006
23
Hallmark Bank PLC.
January 16, 2006
24
Highland Bank of Nigeria PLC.
January 16, 1998
25
ICON Ltd. (Merchant Bankers)
January 16, 1998
26
Ivory Merchant Bank Ltd.
December 22, 2000
27
Kapital Merchant Bank Ltd.
January 21, 1994
28
Lead Bank PLC.
January 16, 2006
29
Liberty Bank Ltd.*
January 16, 2006
30
Lobi Bank of Nig. Ltd.
January 16, 1998
31
Mercantile Bank of Nig. PLC.
January 16, 1998
32
Merchant Bank of Africa Ltd.
January 16, 1998
33
Metropolitant Bank Ltd.
January 16, 2006
34
Nigeria Merchant Bank Ltd.
January 16, 1998
35
North-South Bank Nig. PLC.
January 16, 1998
36
Pan African Bank Ltd.
January 16, 1998
37
Peak Merchant Bank Ltd.*
February 28, 2003
38
Pinacle Commercial Bank Ltd.
January 16, 1998
39
Premier Commercial Bank Ltd.
December 22, 2000
17

40
41
42
43
44

Prime Merchant Bank Ltd.

Progress Bank Nig. PLC.
Republic Bank Ltd.
Rims Merchant Bank Ltd.
Royal Merchant Bank Ltd.

S/No.
45
46
47
48
49
50

Name of Bank
Savannah Bank of Nigeria PLC.*
Societe Generale Bank Ltd.*
Trade Bank PLC.
Triumph Bank Ltd.*
United Commercial Bank Ltd.
Victory Merchant Bank Ltd.

January 16, 1998

January 16, 1998
June 29, 1995
December 22, 2000
January 16, 1998
Date of Revocation of
Licence
February 15, 2002
January 16, 2006
January 16, 2006
January 16, 2006
September 8, 1994
January 16, 1998

* Liquidation suspended due to litigations

Source: NDIC Annual Report and Statement of Accounts, 2006

APPENDIX
Table II: The Population of the Study
S/N Name of Bank
Banks that Merged to form the New Bank
o
During the 2005 Consolidation Exercise
1.
Access Bank Nigeria Access Bank, Marina Bank and Capital Bank
PLC
International
2.
Afribank Nigeria PLC
Afribank PLC and Afribank (Merchant Bankers)
3.
Diamond Bank Nigeria Diamond Bank, Lion Bank and African
PLC
International Bank
4.
Ecobank Nigeria PLC
Ecobank PLC
5.
Equitorial Trust Bank Equitorial Trust Bank (ETB) and Devcom
PLC
6.
Fidelity Bank PLC
Fidelity Bank, FSB and Manny Bank
7.
First Bank of Nigeria FBN PLC, FBN Merchant Bankers and MBC
PLC
International
8.
First City Monument FCMB, Co-operative Development Bank, NigeriaBank PLC
America Bank and Midas
9.
First Inland Bank PLC
Inland Bank, First Atlantic Bank, IMB and NUB
10. Guaranty Trust Bank Guaranty Trust Bank PLC
PLC
11. IBTC Chartered Bank IBTC, Regent and Chartered Banks
PLC
12. Intercontinental
Bank Global, Equity, Gateway and Intercontinental
PLC
13. Nigerian
International Nigerian International Bank Limited
Bank Ltd.
14. Oceanic
Bank Oceanic Bank and International Trust Bank
International PLC
15. Bank PHB PLC
Platinum Bank and Habib Bank

18

16.

Skye Bank PLC

Prudent Bank, Bond Bank, Cooperative Bank,

Reliance Bank and EIB International Bank
17. Spring Bank PLC
Guardian Express Bank, Omega Bank, Trans
International Bank, Citizens Bank, Fountain Trust
Bank and ACB International Bank
18. Stanbic Bank Ltd.
Stanbic Bank Ltd.
19. Standard Chartered Bank Standard Chartered Bank Nigeria Limited
Nigeria Ltd.
20. Sterling Bank PLC
Magnum Trust Bank, NBM Bank, NAL Bank,
INMB and Trust Bank of Africa
21. Union Bank of Nigeria Union Bank, Union Merchant Bank, Broad Bank
PLC
and Universal Trust Bank
22. United Bank for Africa UBA, Standard Trust Bank and Commercial Trust
PLC
Bank
23. Unity Bank PLC
New Africa Bank, Tropical Commercial Bank,
Pacific Bank, Centre-Point Bank, First Interstate
Bank, Societe Bancaire, NNB International Bank,
Bank of the North and Intercity Bank
24. Wema Bank PLC
Wema Bank and National Bank
25. Zenith Bank PLC
Zenith International Bank PLC
Source: Generated by the Author from NDIC Annual Report and Accounts, 2007

APPENDIX
Table III: Rating of the Composition of Audit Committees (CAC) of the Sampled
Banks
Year
Name of Bank
Afribank Nigeria PLC

200
2000 1
1
0

200
2

200
3

200
4

200
5

200
6

200
7

Ecobank Nigeria PLC

First Bank of Nigeria PLC

Guaranty Trust Bank PLC

0 0

Intercontinental Bank PLC

Oceanic Bank PLC

Union Bank of Nigeria PLC

United Bank for Africa PLC

Wema Bank PLC

Mean
0.67 0.56 0.67 0.67 0.67 0.67 1.00 0.89
Source: Computed by the Author from the Annual Accounts of the Sampled Banks,
2000-2007

19

*CAC is a dichotomous variable, 1 assigned if there are at least two non-executive

directors on the audit committee, otherwise 0.

APPENDIX
Table IV: Index of Physical Control (PhC) of the Sampled Banks
Year
Name of Bank
Afribank Nigeria PLC

2000
0.69

2001
0.72

2002
0.77

2003
0.76

2004
0.71

2005
0.69

2006
0.77

2007
0.86

Ecobank Nigeria PLC

0.66

0.68

0.70

0.82

0.81

0.84

0.97

NA

First Bank of Nigeria PLC

0.69

0.70

0.49

0.31

0.48

0.67

0.90

0.97

Guaranty Trust Bank PLC

0.96

0.97

0.98

0.97

0.98

0.98

0.97

0.98

Intercontinental Bank PLC

0.93

0.81

0.77

0.93

NA

0.94

0.94

0.95

Oceanic Bank PLC

Union Bank of Nig. PLC

0.64
NA

0.84
0.72

0.90
0.65

0.94
0.67

0.98
0.71

0.95
0.69

0.96
0.71

0.97
0.75

United Bank for Africa PLC

0.78

0.83

0.97

0.93

0.97

0.86

0.96

0.91

Wema Bank PLC

0.98

0.97

0.97

0.95

0.95

0.82

0.66

0.98

Mean

0.79

0.80

0.80

0.81

0.82

0.83

0.87

0.92

Source: Computed by the Author from the Annual Reports and Accounts of the Sampled Banks from 2000-20

*The index of PhC is obtained by dividing performing risk assets by total risk assets.
* Intercontinental Bank PLC changed its accounting year in 2004, consequently no financial statement
produced in that year.
* No financial statement was produced by Union Bank in 2000 as a result of change of accounting year.

APPENDIX
Table V: Index of Organizational Control (OC) of the Sampled Banks
Year
Name of Bank
Afribank Nigeria PLC

2000
0.452

2001
0.080

20

2002
0.02

2003
0.006

2004
0.00

2005 2006
0.212 0.00

2007
0.133

2
Ecobank Nigeria PLC

0.050

0.040

Guaranty Trust Bank PLC

0.200
0.159

0.104

Intercontinental Bank PLC

0.365

0.485

Oceanic Bank PLC

0.088

0.084

Union Bank of Nig. PLC

NA

0.110

United Bank for Africa PLC

0.064

0.024

Wema Bank PLC

0.283

0.123

0.06
6
0.18
8
0.06
8
0.48
0
0.00
0
0.09
3
0.06
9
0.211

0.138

0.12
5

First Bank of Nigeria PLC

Mean

0.217

0.186

0
0.021
0.116
0.108
0.581
0.012
0.073
0.211
0.206
0.142

0.00
4
0.05
9
0.16
3
NA
0.06
6
0.07
1
0.05
0
0.23
9
0.07
4

0
0.260 0.03
9
0.075 0.09
7
0.126 0.13
2
0.633 0.68
5
0.070 0.06
0
0.073 0.07
2
0.003 0.09
0
0.214 0.91
7
0.22
0.188 7

NA
0.049
0.039
0.103
0.099
0.073
0.046
0.656
0.350

Source: Computed by the Author from the Annual Reports and Accounts of the Sampled
Banks from 2000-2007
*The index of OC is obtained by dividing loan loss expenses by interest margin.
* In 2004 and 2006 Afribank had no loan loss expenses, instead recoveries were made by the bank.
* Intercontinental Bank PLC changed its accounting year in 2004, consequently no financial statement was
produced in that year.
* No financial statement was produced by Union Bank in 2000 as a result of change of accounting year.
* In 2002 Oceanic Bank had no loan loss expenses, instead recoveries were made by the bank.

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