CHAPTER ONE

INTRUDUCTION

1.1            
BACKGROUND OF STUDY

       A farmer, who plants corps, expects
result, similarly to student who sits for examination expects results. The same
5 also true of an investor.

For the farmer, the result might be
communicated to him in the form of a bumper harvest. It result sheet or a
report card would usually sufficed for a student. However, in the of an
investor, the result is communicated through the financial reports.

   
Financial reports are law to be prepared by every limited liability
company; these limited liability companies abound in virtually all sector of
the economy.

  
Every company shall cause accounting records to be kept. The accounting
records shall be sufficient to show and explain the transactions of the company
and shall be such as to disclose with reasonable accuracy, at anytime the
financial position of the company.

  
In the banking industry, financial reports are of great interest to the
general public because the banks directly or indirectly interact with people.

   
This public interest has caused companies (including banks) to accept
social as well as economic, financial and legal responsibilities and has
created a consequence, a growing need for the communication of information to
account for the results which are of considerable interest a wide range of
individuals and organizations.

  
So, it becomes very imperative for reliable information to be circulated
to interested parties which can enable them to acquire an essential knowledge
of the way is which companies particularly the bank are performing in relation
to the public interest. This fact is further educated by the recommendation of
the working party set up in Britain
by the Accounting standard committee in October 1974 under the chairmanship of
Derek booth man which took a study of the scope and aims of publisher financial
statements.

  
The committee recommended that:

      “The fundamental objectives of corporate
report are to communicate economic measurement of the reporting entity useful
to those having reasonable right to such information”

    
It is not an over statement when one says that the banking industry is
the flume on which the national   economy
rotates. This mammoth, impact upon a country economy therefore makes it a
public affair is everybody in the country has a right to know what such
organizations are doing, more so all information, necessary to explain the
organization’s activities fully should be provided in the annual reports.

          One
of the most significant aspects of the information system of business
enterprises in an economy is that which deals with the communicate of financial
data, especially in describing business profitability and financial position.
This information is important because it attempts to partial the economic
resources of the enterprises and the financial results, which have been achieved
by its management when those resources have been put to use. It attempts to
reveal how effective management has been in resources utilization as well as
the financial reward available to compensate for risk taken by various
suppliers of capital.

1.2     STATEMENT
OF THE PROBLEM

         The genuineness or other wise of
financial reports has attracted diverse opinions from different quarters, such
opinions can come from the general public, tax authorities, shareholders,
creditors with long or short term interest, financial analyst and potential
investors.

          They
argue that the financial reports do not usually give an accurate data about the
actionties of such business concerns, for example, the idea of stating assets
at their historical cost do not favour most investors as they argue that
inflation is not usually taken care of, though the real value of such assets
might have been eroded.

          Again
since the financial reports prepared by managements, the shareholders and
others argue that there would usually be some elements of bi as on the part of
management in the disclosure of management’s financial ineptitude.

          But
in any case the management claims that some inherent problems would usually
affect the accuracy of such reports. It is therefore the intention of this
researcher to delve into the matter to enable him establish a relationship
between financial reporting and performance evaluate in a bank.

1.3     OBJECTIVES
OF THE STUDY

          Companies
including those in the banking industry have had to face the onerous task of
presenting a credible and generally acceptable financial statement in their
annual reports, to the various people to whom they own such obligations. The
purpose of the study is:

a.                 
To determine the various financial reports used by
banks.

b.                
To ascertain the problems of using financial reports
to assess performance of banks.

c.                 
To examine the use of historical cost convention
adopted by banks in stating this balance sheet items on investors.

d.                
To determine of there’s a relationship between
financial reporting and performance evaluation of a bank.

e.                 
To offer recommendations and solutions on the best way
financial reports could use in assessing bank performance.

1.4                        
RESEARCH QUESTIONS

a.                              
What impact has financial reporting on bank performance
with respect to the financial position of the bank?

b.                            
How does financial statement assess the bank
performance?

c.                             
Does financial reports disclosed financial impetitude
of bank mangers to the shareholders?

d.                            
What are the problems associated in using financial
reports to assess bank performance?

e.                             
How do we know a reliable financial report?

f.                              
Has financial statement of banks influence your
investment decision?

1.5              RESEARCH
HYPOTHESIS

         Base on the statement of problem and
objections of this research work the following general hypothesis are
formulated:

Ho     Investment
decision, base entirely on the financial statement will not lead to poor and
lazy decisions.

Hi      Investment
decision based entirely on the financial statements will lead to poor and lazy
decisions.

Ho     The
efficiency of financial reports is great affected by inflationary trends in the
economy.

Hi      The
efficiency of financial reports is not greatly affected by inflationary trends
in the economy.

Ho     Financial
report are not a true in director of banks performance.

Hi      financial
reports are a true in director of banks performance.

1.6              SIGNIFICANCE
OF THE STUDY

    
The banking industry is a very important sector of the economy. This is
because banks can determine the direction of growth or development of the
economy trough the financial service rendered by banks. The financial services
which includes, funds mobilization, safekeeping and custodianship, funds
transfer, foreign exchange transaction equipment leasing, extension of loans
and advances, investment in securities, bill discounting etc.

       Investment key sector of the national
economy of which the banking industry is one becomes a goal-getters priority.
Owing to this, it becomes necessary that financial reports presented by banks
satisfy the need of the users of the reports.

    
Specially, at the end of this study, we shall   have been able to establish:

1.                
Whether or not the financial reports affects
investment in the banking industry.

2.                
Whether or not the annual financial report currently
reflect the inflationary effects.

3.                
Whether or not banks follow rigid accounting
practices.

   
The emphasis of this research is not to discuss the determinants of
performance, but to establish a relationship between financial reporting and
performance so that potential investors is in banking industry may clearly
define the stand.

1.7            
SCOPE AND LIMITEDATION OF THE STUDY

    The
aim of the study is to examine, the use of financial reporting in assessing
banks performance, however it will be restricted to investigations carried out
on union bank of Nigerian Plc.

   
To enable the research have a broad view, the study will not be based on
one branch. A study of some selected branches of the bank will also be carried
out.

   
But in any case, the following among others are the numerous constraint,
while are envisaged;

LITERATURE:      The dearth of related books and journals
will no doubt affect the quality of the research.

TIME:     The greatest employer of man, which is
time was not in my favour through I manage it considering the time allocated to
my studies, fellowship and the project.

FINANCE:    The research work generally involves money
but considering my stand as a student. I was limited by financial in achieving
my gim of have a population rather I found my self in using sample size, even
visit to my case of study.

RESPONSE RATE:        The information to be analyzed in the
study will be limited to those who would 
respond voluntarily to the questionnaire.

PAUCITY OF INDUSTRY:  At the course of my research I come to
release that many banks dose not have any form inter-relationships which make
things difficult for me in using one set of information generated as touching
planning and control in UBN to generalize issues.  That leads me into more research, which will
continue even after this profit.

1.8              DEFINITION
OF TERMS

AUDITING:     The objective examination of financial
statements initially prepared by management by a third party other than the
prepared or used with the goal of establishing the fairness of representations
made therein and reporting on same a guides to interested users.

ATTEST:    To assume responsibility for the fairness and dependability for
the fairness and dependability of financial statements.

BANKRUPT:       Inability of person to meet his liabilities as they mature.

FRAUD:     Misrepresentation by a person to be untrue or made with reckless
indifference as whether the fact in true with the intention of deceiving the
other party and with the result that the other party is injured.

FINANCIAL STATEMENTS:   This
covers balance sheets, income statement or profit and loss accounts notes and
other statement and explanatory materials.

GOING CONCERN:      Continuing in operation for the foresable
future with the assumption that the enterprise has neither the intention nor
the

LIQUIDATION:   Process of winding up of a company thereby brings to an end its
corporate existence.

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