Determinants Of Perceptions Of External Auditors Independence In Ethiopian Private Audit Firms

Auditor independence is fundamental to public confidence in audit reporting and the auditingrnprofession. The users of audit reports must have confidence in the integrity and objectivity ofrnauditors. Without definite auditors’ independence audit profession has little value. This studyrnexamines factors affecting auditors’ independence in Ethiopian private audit firms. Surveyrnresearch design was employed in carrying out the study. Data were collected using Likert- ratedrnquestionnaire; which was administered to 78 auditors in 26 Audit firms in Ethiopia. All auditrnfirms of grade A and B in Ethiopian were covered for the study. Analysis was carried out usingrndescriptive statistics and, regression analysis while hypotheses formulated were tested by fittingrnthe regression equation for significance. The results revealed that level of competition in thernaudit services market, tenure of an audit firm serving the needs of a given client and size of auditrnfees received by audit firm in relation to total percentage of audit revenue do have negative andrnsignificant effect on auditors independence and the provision of non-audit service has positivernsignificant effect on auditors’ independence. Size of audit firms and existence of audit committeerndo not have significant effect on auditor independence for this study. Client related factors andrnindustry situation do have significant effect on auditor’s independence. The mainrnrecommendation is that auditors should remain strictly independent in mind and in appearance.rnKey words: Auditors, independence, Ethiopia, audit firm, tenure, AudiAuditor independence is fundamental to public confidence in audit reporting and the auditingrnprofession. The users of audit reports must have confidence in the integrity and objectivity ofrnauditors. Without definite auditors’ independence audit profession has little value. This studyrnexamines factors affecting auditors’ independence in Ethiopian private audit firms. Surveyrnresearch design was employed in carrying out the study. Data were collected using Likert- ratedrnquestionnaire; which was administered to 78 auditors in 26 Audit firms in Ethiopia. All auditrnfirms of grade A and B in Ethiopian were covered for the study. Analysis was carried out usingrndescriptive statistics and, regression analysis while hypotheses formulated were tested by fittingrnthe regression equation for significance. The results revealed that level of competition in thernaudit services market, tenure of an audit firm serving the needs of a given client and size of auditrnfees received by audit firm in relation to total percentage of audit revenue do have negative andrnsignificant effect on auditors independence and the provision of non-audit service has positivernsignificant effect on auditors’ independence. Size of audit firms and existence of audit committeerndo not have significant effect on auditor independence for this study. Client related factors andrnindustry situation do have significant effect on auditor’s independence. The mainrnrecommendation is that auditors should remain strictly independent in mind and in appearance.rnKey words: Auditors, independence, Ethiopia, audit firm, tenure, Audit market, audit fees, Nonrnaudit services and Audit committeet market, audit fees, Nonrnaudit services and Audit committee

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