Bank consolidation is a global phenomenon. In the U.S. alone, over 8,000 bank mergers occurred from 1980 through 1998, while the largest acquisitions, accounting for one-half of the total consolidated assets for the 19-year period, occurred from 1995 through 1998 (Rhoades, 2000). Countries in Europe and elsewhere have experienced consolidation as well.
A recent study by the Group of Ten found a high level of merger and acquisition activity in the 1990s among financial firms in 13 countries studied (Australia, Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, Switzerland, U.K., and the U.S.), with a noticeable acceleration in consolidation activity from 1997 through 1999. Of the 7,304 financial mergers documented in the study, nearly 61 percent involved banks. This consolidation activity created a number of large, complex financial institutions, and the number of banking firms declined in almost every country during the decade (Group of Ten Report, 2001).
The on-going global financial crisis had its origins in the US sub-prime mortgage market in 2006-2007, but has since spread to virtually every financial market around the world. The most important aspect of this crisis that sharply distinguishes it from previous crises is the rapidity and degree to which both the liquidity and credit quality of several asset classes have deteriorated. While clearly both liquidity and credit risk are key determinants of asset prices, in general, it is important to quantify their relative effects and, particularly, how much they changed during the crisis. It is also relevant to ask if there are interactions between these factors, and whether these relationships changed substantially in magnitude and quality from prior periods.
Audit constitutes a solution of the issue of information asymmetry between the leaders and the shareholders or between the leaders and the other third contracting parties. As a mechanism of governance, it has for main role to reduce transaction and agency costs and to reassure the shareholders and third party contractors concerning the reliability of the financial information communicated.
Nevertheless, the quality of audit is not uniform and especially not directly apparent. The audit process is very complex and hardly orbservable by third parties and the audit report (the result of an audit) is so standardised in its content and format that it offers a only few possibilities for differentiation. Audit failures are often only known when there are published by press (Wooten, 2003). So,it is difficult to know the number of audit failures not published by the press.
