Perceived auditor independence factors in Uganda

  • Twaha Kigongo Kaawaase Department of Accounting, Makerere University Business School
  • Stephen Korutaro Nkundabanyanga Department of Accounting, Makerere University Business School
Keywords: Auditor Independence factors, users, preparers, financial statements, developing country.


Purpose – The purpose of this paper is two-fold: the first is to establish whether, in the face of the company-pay model, financial statement preparers perceive threat and enhancing factors of Auditor Independence (AI) the same way as users and external auditors, then secondly to model AI factors in Uganda.

Design/methodology/approach – A two-methods approach is used which comprises, use of a one- way ANOVA where the independent variable (AI factors) is measured using different participants or groups (preparers, auditors and users) to examine the differences in opinions between the groups, and confirmatory factor analysis technique of structural equation modelling to achieve the two-fold objective. We use a self-administered survey questionnaire to accountants in Uganda involved with entities’ financial statements as preparers, external auditors or users to collect data.

Findings – There are significant differences in opinions of the preparers and the other stakeholders (users and auditors) regarding non-rotation of audit firm, staff and partners and, board control of appointment and remuneration of auditors; as AI undermining factors. The preparers opine that failure to rotate auditors and the control of auditor appointment and remuneration by the board is more AI constraining, relative to the opinions of both the auditor and user regarding these factors. Financial statement preparers were more concerned than auditors and users that failure to rotate auditors and the control of auditor appointment and remuneration by the board impairs AI. A six- dimensional model of AI undermining factors was fitted and a five-dimensional model best fitted for AI enhancing factors.

Practical implications – The paper provides two models that can be used by accountancy bodies or other stakeholders as a starting point in improving/or evaluating AI in developing countries.

Originality/value – This study is representative of key parties on the demand and supply sides of the audit services market, auditors, financial report preparers and financial report users. It thus extends the frontiers of knowledge on critical factors affecting AI in a developing country context and has implications for theory, policy and practice.