Internal factors influencing external auditors independence among practicing accountants in Kenya

Abstract

Auditor independence holds sway in ensuring that the public has confidence in financial reporting. The general setting within which audit decisions made and audit independence formed is evolving rapidly due to competitive and regulatory changes. Policy makers must work continuously to evaluate the critical threat factors and develop appropriate independence principles. This study sought to establish the determinants of auditors’ independence in Kenya. Four research aims guided the study: to determine the influence of economic factors on auditors’ independence in Kenya: to establish the impact of regulatory factors on auditors’ independence in Kenya; to establish the effect of firm factors on auditors’ independence in Kenya and to establish the challenges faced in establishing auditors’ independence in Kenya. The study employed a cross-sectional descriptive study with a sample size of 214 audit firms and the target population in the study were practising accountants in Kenya. Primary data was collected using a semi-structured questionnaire and the data analysed through statistical software (SPPS) versions 22 through ordinal regression analysis to present the 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.