| dc.description.abstract | This research sought to establish if there is any significant relationship between firm size,
financial stability and audit independence. Audit independence refers to the probability
that the auditor will refuse to support detected misstatements. Similar research on this
topic is rare in Kenya. Empirical research on firm size effect on Audit Independence in
Barbados recommended that it could be studied in developing countries such as Kenya.
The research design was mainly quantitative in nature by using a questionnaire to gather
primary data to help in establishing the extent of relationship between the variables.
Secondary data on the other hand was uploaded from the internet. The source of data was
solely drawn from ICPAK‟s website because it is the only institution with audit firms‟
records in the country besides depending on the nature of the problem that was being
sought by the researcher. The period of study was sufficient enough for a plausible
research, 5 years ranging from 2009-2013. 32 Audit firms out of 620 firms registered
with ICPAK in Nairobi county as at August 2014 were stratified Sampled into large and
small, each 50% and accessed from ICPAK Website. Simple random sampling method
was used to capture the 16 firms from each stratum. The respondents were 13 small firms
and 8 large firms giving a 65% response rate. Multiple regression analysis and correlation
analysis were used to analyze the data so as to test the research objective. The coefficient
of correlation (R) is 0.818 and coefficient of determination (R2) is 0.669. This implies
that 66.9% of the variation in AI can be explained by the independent variables while
33.1% of the Audit independence is explained by the error term and other factors not
under study. Therefore the model is statistically significant as indicated by the F value of
18.2 significant value 0.000. The results of the study show that there is a relationship (an
association) between Firm size, financial stability and Audit independence, thus the
function is strong and reliable. This resonates well with the researcher expectations and
previous studies, though the results did show a negative relationship between financial
stability and audit Independence. The negative relationship according to the researcher
was perhaps due to low response from large firms who considered some information in
the questionnaire particularly on their liquidity and profitability as confidential
information. ICPAK should ensure audit firms file annual financial statements with it in
order for the public, researchers and other interested parties to be able to access their
financial operations. This is likely to bring accountability, thereby enhancing
independence plus giving ICPAK teeth to monitor proactively the operations of Audit
firms in Kenya. | en_US |
