DETERMINANTS OF AUDIT LITIGATION RISK IN BANKING INDUSTRIES IN NIGERIA
ABSTRACT
This study examines the determinants of audit litigation risk as it affects the banking industries. In a society where companies are seen as deep pockets by clients, shareholders, and customers who have suffered loss in one way or the other during the course of doing business, there is every need to know the factors that bring about audit litigation risk, so that managers/management of banks can quickly nip it in the bud as it arises.      
CHAPTER ONE
INTRODUCTION
1.1     BACKGROUND OF THE STUDY
It is a know fact that when a business is established, the owner and management of that firm work hard, pray fervently of need be and hope that the business grow from strength to and continue till eternity (Going concern concept). But the action or inaction of shareholders and/or invertors to call the management of the firm to order when their tens of agreement is trampled upon, by taking legal action may be a deciding factor in the life of the firm.
Previous studies have shown that filing of lawsuit against banking firm has economic and statistically negative effect on the bank’s share price. One possible interpretation of this result is that lawsuit decrease shareholders and/or investor confidence in the competence or trust worthiness of the firms management. Another possible interpretation is that the cost of ligation or the potential penalties can be expected to a have a direct negative effect on the defendant firm’s future earrings. Kanpoff and Lott (2009), posit that managers try to avoid litigation because of the risk of reputational loss, both for the banking firm, the auditors and the individual manager’s career prospect. Haslem (2007), is of the view that the litigation process shed light on what many managers do not want disclosed.
More specifically, if manager believe that they benefit from the information asymmetry between managements and outside shareholders and/or investor, then the managers will want to avoid litigation since the discovery process may weaken their information, advantage. Haslem is also of the view that banking firms with weak corporate governance are more likely to settle their pending litigation than other firms. While Haslem’s study focuses on managers handling lawsuit after they have been brought the underlying instruction suggests that manager would prefer to avoid litigation in the first place.
Since the risk of audit litigation against a firm has such negative effect on the firm’s value, research is needed to identifying possible predators of audit litigation risk.
1.2    STATEMENT OF THE PROBLEM
The researcher is however inspired to this study because most banking firms in Nigeria are yet to recognize the importance of the determinants of audit litigation risk and it’s effect on the firm’s value.
This study is designed to carryout and in-depth examination on the determinants or audit litigation risk as it affects the auditor, management, and stakeholders of the banking industry. In the course of he examination, answers to the following question would be sought;
i.    What is the impact of audit ligation risk on the total assets of banks
ii.    Will an increase in audit litigation risk lead to a corresponding increase in audit fee?
1.3    OBJECTIVES OF THE STUDY
    The objectives of this study are as followings
i.    To find out the impact of audit litigation risk on the profitability of Nigerian banks
ii.    To ascertain of an increase in audit litigation risk has a negative impact on the total asset of Nigerian banks.                         
iii.     To know if there is a significant relationship between audit fee and bank loss.
1.4    HYPOTHESIS OF THE STUDY
Ho: Audit litigation risk has a negative impact on the profitability of Nigeria banks
Ha: Audit .litigation risk has a positive impact on Nigerian banks.    Ho: Audit litigation risk has a negative impact on the total assets of Nigerian banks. Ha: Audit litigation risk has a positive impact on Nigerian banks.
1.5    SCOPE OF THE STUDY
    This project work is basically concerned with and it litigation risk with specific reference to the banking industry. It examines some strategic decisions firm would take when faced with audit litigation problems. This study covers year 2007 to 2012.
    In this work, there will be attempt to analyze the theories behind audit litigation. This is done to give adequate coverage to the banking industry, thereby unveiling the ideological inclination of management in their pursuit for an audit litigation-free environment.
1.6    SIGNIFICANCE OF THE STUDY
    Scanning through recent written project, there has been an increased trend of students of B.Sc accounting concentrating attention on repeated work. This work therefore, is highly significant   for contributing immensely to the opening of a new era of research work to students and accordingly offers reference and accommodation of such student. From this work further insight would be gained into the effects of audit litigation and the basic determinants of such audit litigation risk. In the same vein, management will be more abreast of the impact or implication of audit litigation risk on the generality of the firm.
    In a society where fraudulent practice has become the order of the day a study into the effect of and the determinants of audit litigation risk especially in the banking industry becomes highly significant to the general public. Finally, it is worthy of note that attempt is made in this work to fatefully and effectively bring the fundament aspects of the topic under proper categorization and heading in other to clearly avoid any mix-up. This creates better understanding to future researchers, students and any person that will be of interest.
 REFERENCES
Karpoff, R. & Loff, S. (2009). Managers attitude towards litigation risk. Journal of forensic accounting 44, 215 – 3330.
Haslem, C.O. (2007). Litigation risk and managers perspective. Journal of financial economic 19, 1472 – 512.

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