An Investigation of the effect of audit firms' factors on external audit quality

Abstract

The purpose of this research is to examine the effect of audit firm' factors on external audit quality from the point view of the Libyan external auditors. The research was divided into four sections. The problem of the research and its objective, and importance was announced in the first section. The second section was dedicated to build the theoretical framework of the research. The third section illustrates the empirical part of the research, Finally, a summary of the main results and a possible recommendations are provided in the fourth section. the necessary data were collected from a randomly selected sample of external auditors in Tripoli (89 auditors), only 72 useable questioners were collected which made a response rate of 73.5 %. According to the statistical analysis of gathered data, the results indicated that: audit quality in the Libyan environment was negatively affected by audit firm' factors such as: Size of the audit firm, long relationship between auditors and their audit clients, and high levels of competition among audit firms. Based on the obtained results, some recommendations has been suggested that aims to improve audit quality such as: the necessity to adopt local accounting and auditing standards, reviewing the existing litigations that controls accounting and auditing profession, providing support to small and medium sized audit firms to reorganize itself, reduce high levels of competition among audit firms, and prohibiting audit firms from auditing the same audit client after five years.