INTERNAL FACTORS INFLUENCING EXTERNAL AUDITORS INDEPENDENCE AMONG PRACTICING ACCOUNTANTS IN KENYA

Abstract

Purpose – Auditors independence holds sway in ensuring that the public has confidence in financial reporting. Therefore, this study focus was to examine the factors that determine external auditors’ independence in Kenya.

Methodology - The study employed a cross-sectional descriptive study design and used primary data. The collected data was analyzed with the help of the SPSS software version 22 and presented with the help of frequency distributions, computation of mean and standard deviation. The association between the research variables was presented using an ordinal a regression model.

Findings – The study established that internal factors influence auditor independence by 31.7%. From the results of the research, it also revealed that there is a significant relationship between audit tenure, audit firm size and audit independence. This was indicated with a p-value of 0.029 and 0.009. The study also established that there is no significant relationship between audit committee and audit independence with a p-value of 0.465. The study concludes that audit tenure and firm size affect audit independence and thereby the study recommends the need for ICPAK to develop a policy that will guide audit tenure and audit committee.

Implications –The study findings suggest that ICPAK develops a policy that will guide the audit tenure and audit committees, this will in essence promote an understanding of the auditors’ independence in the profession. The study also further suggested that similar studies should be carried and focus on the perception of users such as institutional and private investors, audit committees and members of regulatory bodies.

Value -The findings of the study concludes that audit tenure and firm size affect audit independence and thereby the study recommends the need for the Institute of Certified Public Accountants of Kenya (ICPAK) to develop a policy that will guide audit tenure and audit committee.

Key words:  Audit Committee, Auditor Independence, Auditor, Audit tenure, Audit Quality.