Efficiency of External Audit Engagement and Its Determinants in Ethiopian Share Companies

Abstract

The main purpose of this study is to examine the efficiency of external audit engagement and its determinants in Ethiopian share companies registered by the Federal Office of Auditor. Senior external auditors and the supervisory auditors are the source of the necessary data to the researchers and administered questionnaires and interviews have used to collect the data. Audit firms which provide services for share companies during the investigation of this study were 27 out of 65 audit firms. From each 27 purposively selected audit firms, a proportional number of senior auditors were selected based on their experience in auditing. Besides, the objective of this study is to examine the effects of internal control system, firm size, organizational independence, auditors’ qualification and proficiency, audit fees and auditors’ reputation on the efficiency of external audit engagement on share companies. The independent variables were measured using a 5-point Likert- scale so that the subsequent data is agreeable to statistical analyses in testing the research hypotheses. According to the regression outputs the internal control system, organizational independence, auditors’ qualification and proficiency, and audit fee has positive and significant effect on the efficiency of external audit engagement on share companies. The rest two variables were positively related to the efficiency of external audit engagement but their contribution to the external audit engagement was statistically not significance. The external audit firms should understand that the contributions of these variables were jointly significant to identify any noncompliance activities in their clients particularly share companies thus, the external audit firms should provide a vital monitoring role to assure the quality of financial reporting and that will create a road for the efficiency of external audit engagement.