Abstract
The purpose of this study is to examine the Audit Firm Rotation and Audit Quality using Evidence from selected Ethiopia Commercial Banks in Addis Abeba, Ethiopia. The main objective of the study is to examine the extent that audit firm rotation significantly affects audit quality, and to evaluate the relationship between board independence and audit quality. The possibility of enhancing audit quality through audit firm rotation is a key method used by regulatory body. This study intended to assess the applicability of the mandatory auditor rotation concept in the Ethiopian banking sector so as to enhance and improve audit quality, from the findings of both the literature as well as the field survey, it was discovered that audit firm rotation significantly affect audit quality. It was concluded that rotation is a good solution to enhance Audit quality and also to maintain the auditor independence by decreasing the audit firm’s dependence on the client. Recommendations were made based on the findings that the regulatory bodies such as National Bank of Ethiopia, Federal Auditor General should make a laws that will appreciate audit firm rotation in order to improve audit quality, also the National Bank of Ethiopia should think of possible other ways of addressing the concept of audit quality. Keywords: Audit Quality, Audit Firm Rotation, Audit Fee, National Bank of Ethiopia. DOI : 10.7176/RJFA/11-1-04 Publication date: January 31 st 2020
Highlights
Background of the StudyThe issue of Audit quality has attracted enormous attention since the financial reporting mis-representation and falsification of data stared in major world corporations like Enron and World Com in the United State of America as well as Parallax in Italy
The 2006 EC the where a core banking system agreement among all commercial banks in Ethiopia, and this consolidation of banking sector in Ethiopian brought about the introduction of mandatory audit firm rotation as part of banks’ code of corporate governance with the aim of further strengthening audit quality
1.3 Objectives of the Study The general objective of this study is to examine the enhancement of audit quality through audit firm rotation
Summary
The issue of Audit quality has attracted enormous attention since the financial reporting mis-representation and falsification of data stared in major world corporations like Enron and World Com in the United State of America as well as Parallax in Italy. It is defined as the auditor’s ability to discover a breach in the client’s accounting system combined with the auditor’s willingness to report such breach (Deangelo, 1981; Watts & Zimmerman, 1981). It was said by the national bank that for the avoidance of doubt, the maximum period of 10 years shall include the period an audit firm that started new era for banking sector in Ethiopia
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