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 on Ethiopian share companies. This study is focused on external audit firms and there are about 65 private audit firms in Ethiopia, registered by the Federal Office of Auditor. The senior external auditors and the supervisory auditors of purposively selected 27 external audit firms are the source of the necessary data to the researcher through the administered questionnaires and interviews. Besides, the objective of this study is to examine the direct relation effects of internal control system, firm size, organizational independence, auditors’ qualification and proficiency, audit fees, and auditors’ reputation for the efficiency of external audit engagement on share companies. According to the regression outputs made using Stata 12 software the internal control system, organizational independence, auditors’ qualification and proficiency, and audit fee was contributed for the efficiency of external audit engagement on share companies positively and significantly. The rest two variables; the size of external audit firms and the auditors’ reputation were positively related to the efficiency of external audit engagement but their contribution to the external audit engagement was statistically not significance. All of these six independent variables are making 74.51% of the contributions for the efficiency of external audit engagement on share companies. 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 and to add values for the external audit efficiency in share companies.