Determinants Of External Audit Quality Evidence From Manufacturing Share Companies In Addis Ababa Ethiopia.

Audit quality is a very debatable topic in the area of auditing for the last decades following thernaccounting scandals experienced in the West. One of the issues that gained momentum has beenrnto analyze the external audit quality and the various determinant factors those influence it.rnThe purpose of this study is to investigate the determinants of external audit quality proxied byrndiscretionary (abnormal) accrual based on audit firm specific and company related attributesrnthat are considered vital by regulatory and professional bodies to properly monitor the externalrnaudit profession and to maintain trust among the various stakeholders in Ethiopianrnmanufacturing share companies. In light of this objective the study adopted quantitative methodrnof research approaches to test a series of research hypothesis. Specifically, the study usedrndocumentary analysis of companies’ audited financial statements and personal inquiry withrnaudit directors/officials of audit firms and company managers. Then companies were selectedrnbased on simple random sampling method to avoid biases and represent firms withinrnmanufacturing share companies under consideration. Consequently, the study selected a samplernof eighteen (18) companies for the period of five years (2011-2015) with the total of 90rnobservations. The results of panel least square regression analysis show that certified auditrnprofessionals’ and joint provision of audit and non-audit services have statistically significantrnand positive relationship with manufacturing share companies’ external audit quality. On thernother hand, size of independent non-executive board members and duality of chief executivernofficers has a negative and statistically significant relationship with large manufacturing shares’rnexternal audit quality. However, the relationship for audit firm size, audit firm industryrnspecialization and audit firm tenure were found to be statistically insignificant. Therefore, this isrna clear that all large manufacturing share companies in Ethiopia should maintain boardrnindependence and keep in mind audit firm characteristics while hiring of an audit firm for theirrnaudit servicesrnKeywords: external audit quality, audit-firm specific attributes, corporate governance attributes,rnearning management, discretionary (abnormal) accrual.

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