Corporate Failure in the Banking Sector: The Role of External Auditors

Abstract

The aim of the study was to establish the role of external auditors in corporate failure in the banking sector. The study discovered that the auditing gaps within banks are tangibility and empathy services. It was also revealed that remuneration, training of external auditors, lot of variety in their job, level of logistics, loyalty rate of external auditors, motivational package and improved salary and opinion counts in the organisation were the factors influencing the effectiveness of external auditors. Lastly, unethical behavior has a positive relationship with corporate failure which was statistically significant at confident interval of 0.05 with a predictive power of 83.7 percent chance of predicting corporate failure which was moderate. It was recommended that the Bank should take steps to train and promote external auditors towards acquiring the necessary skills and experience to commission the corporate failure audit. Additionally, assistance also could be sought from other Supreme Audit Institutions in other countries with a similar government arrangement. Alternatively, assistance from private audit firms that have developed expertise in the public sector audit can be sought to assist them to make the audit function more meaningful and constructive. This will help fill the empathic gap of clients. With the current trend towards the harmonization of auditing standards and guidelines, further research into the usefulness and adequacy of auditing standards and guidelines is worthwhile.

Keywords: Corporate failure, auditing, corporate corruption, assurance, effectiveness

DOI: 10.7176/RJFA/11-4-03

Publication date: February 29^th 2020