Auditor monitoring and audit quality: a perspective of board members and top executives in the financial services sector in Uganda
No Thumbnail Available
Date
2013
Journal Title
Journal ISSN
Volume Title
Publisher
University of Dar es Salaam
Abstract
The study addressed the extent to which dimensions of auditor monitoring (i.e. Board of Directors’ Effectiveness, Audit Committee Effectiveness and Regulatory Monitoring) have influenced audit quality in the financial services sector in Uganda. It also examined the interaction effects of auditor type and auditor tenure in the association of these elements with audit quality. The study was motivated by a continued questioning of audit quality that heightened with recent financial reporting scandals. Prior studies have been archival and inconclusive and point to lack of a universally acceptable definition or operationalisation of the concept of audit quality. This study used a mixed methodology approach involving a sequential triangulation of qualitative and quantitative methods, and cross-sectional data. The first phase of the study was mainly qualitative and involved 106 audit practitioners, 31 credit analysts and 13 corporate governance practitioners in the financial services sector in Uganda. Phase Two of the study was quantitative with 183 respondents from 61 financial services firms in Uganda. Phase One data was analyzed using NVivo8©, while Phase Two tested clearly formulated hypotheses and the data analysis included exploratory factor analysis, correlations, regression tests and testing for interaction effects. The results show that within financial services firms in Uganda audit fees, ability of the auditor to constrain discretionary accruals and the extent of compliance with accounting standards, legal and regulatory requirements are valid and reliable measures of audit quality. It was also established that dimensions of auditor monitoring (Board of Directors’ Effectiveness, Audit Committee Effectiveness and Auditor Regulatory Monitoring) are significant predictors of audit quality. The predictive power of the constructs in order of importance is: Board of Directors’ Effectiveness, Audit Committee Effectiveness and Auditor Regulatory Monitoring. The regression model predicts 59.7 % of the variance in audit quality in financial services firms in Uganda. It was also established that there is no significant difference in perceived audit quality between reports from big four audit firms and small and medium practices. The study also showed that the longer an audit firm remained engaged by a financial services company, the higher the audit quality. The interactions of Board of Directors’ Effectiveness with Auditor Type as well as with Auditor Tenure were found to boost audit quality. The main conclusion of the study is that audit quality can be improved by enhancing auditor monitoring, taking into account the interaction effects of auditor type and auditor tenure on the relationship between Board of Directors’ Effectiveness and Audit Quality. It is therefore recommended that to improve audit quality, issues illuminated by this study that make Boards of Directors, Audit Committees as well as auditor regulation effective are critical when setting up such structures. Managers in paying audit fees should demand a commensurate level of audit effort and service quality from external auditors, and to hold audit planning meetings with auditors to ensure that audit quality issues are incorporated at that stage. The regulator of external audit firms in Uganda should incorporate the indicators of audit quality in their audit firms’ inspection tool.
Description
Available in print form
Keywords
Auditing, Quality control, Accounting, Uganda
Citation
Kaawaase, T. K. M (2013) Auditor monitoring and audit quality: a perspective of board members and top executives in the financial services sector in Uganda, Master dissertation, University of Dar es Salaam. (Available at http://41.86.178.3/internetserver3.1.2/detail.aspx)