Factors Affecting Auditor’s Independence for Quoted Companies in Nairobi Securities Exchange

The purpose of this study was to evaluate the factors that affect the auditor’s independence among the companies that are quoted on the Nairobi securities exchange. The specific objectives of the study were to establish the effect of audit firm size on auditor’s independence, to determine the effect of audit firm’s tenure on auditor’s independence, to establish if size of the audit fee has an effect on the auditor’s independence among the companies quoted on the securities exchange and to examine the effect of audit committee competence on the auditor’s independence among companies quoted on the Nairobi securities exchange. The study used a descriptive sample design. The target population entailed all the 64 companies quoted on the NSE by December 2023. The accountants, internal auditors and senior managers formed the main respondents. A total of 180 respondents were selected and used for the study. Questionnaire was used for data collection. Data was analyzed using descriptive statistics (mean and standard deviation), correlation analysis as well as simple and multiple linear regression analysis. The SPSS software was used to analyse the data. Results indicated the existence of a strong positive correlation between auditor independence and audit firm size (r = 0.928, P value = 0.008< 0.05), auditor tenure shows a strong positive correlation with auditors independence (r = 0.919, P value = 0.021<0.05) , audit fees charged was also strongly correlated with auditors independence (r = 0.946, P value = 0.000< 0.05) and lastly, there was a strong positive statistically significant correlation between audit committee competence and auditor independence (r= 0.853, P value = 0.000<0.05). Based on these results, the study concluded that firms that need to enhance their auditor’s independence must be ready to address not only the four factors described in this study but also make consideration of all the other factors and address their effect. This will lead to better reporting of the financial statements and hence it will help to provide appropriate performance indicators for the firms.