Relationship Between Auditors’s Independence And Audit Quality In Mbale Municipal Council Uganda, The Moderating Role Of Auditor’s Capacity

Abstract

Audit quality is a major concern in organizations worldwide and it has been a vital subject in recent time to the development and execution of local municipal councils’ strategies. Auditors should operate in the primary shareholders' best interests while taking the general public interest into consideration. This study was conducted to examine the relationship between auditor’s independence and audit quality in Mbale Municipal Council (MMC) Uganda, the moderating role of auditor’s capacity. The study specifically aimed to address the following objectives: To establish the relationship between programming independence and audit quality, the relationship between investigative independence and audit quality and the relationship between reporting independence and audit quality in Mbale Municipal Council. The study also examined the moderating role of auditor’s capacity in the relationship between programming, investigative, reporting independence and audit quality. The theories of agency and stewardship served as the study's compass. The post-positivist philosophy served as the study's compass. A mixed technique approach was used in the research. Stratified sampling was used to choose 423 respondents from a target population of 1158. A systematic interview schedule and closed-ended questionnaires were used to gather the study's primary data. A test-controlled research conducted at Soroti (MMC) on 10% of the sample was used to verify the instrument's dependability. The Cronbach's alpha (∝) value of the average CVI of 85.5% and 0.882 were used to calculate the reliability coefficient of the instruments. While content analysis (coding, categorizing, developing themes) was used to evaluate qualitative data, descriptive statistics (frequencies, percentages, means, standard deviation) and inferential statistics (correlation analysis and regression) were used to study quantitative data. The results of the study showed that the independence of the auditor in terms of reporting, programming, and investigation had a favorable and substantial impact on audit quality. The results also showed that the association between the auditor's independence and audit quality was moderated by the auditor's capacity. The study came to the following conclusions: auditors must maintain and exercise command over programming independence; investigative independence is essential to preventing financial misstatement as well as providing assurance on the financial statements; and reporting independence must be given the respect it deserves. Further, it was concluded that auditors should have the necessary experience and an understanding of company’s businesses. The researcher recommended that the Ministry of Local Government (MoLG) should offer auditors an opportunity to be guided by the audit processes and the Parliament should put a law that requires the use of computerized auditing software or mobile applications in audit programming, investigative and reporting. The MoLG should mandate all Local Government Units with direct access to their staff and all sources of information. Additionally, the researcher advises against the habit of leaving important details out of the formal report in favor of including them in an informal one. In addition, audit reporting software should be used in all aspects of their operations, and audit reporting hierarchy should be expedited and respected.