DETERMINANTS OF INTERNAL AUDITORS INDEPENDENCE IN COMMERCIAL BANKS OF ETHIOPIA

Abstract

This paper focuses on identifying determining factors affecting internal auditor’s independence in Commercial Banks of Ethiopia. Cross-sectional survey designs were employed in carrying out the perceptions of internal auditor’s independence. The researcher used primary data collected through the distribution of questionnaires which was administered to auditors in 17 commercial banks head offices in Ethiopia by using purposive sampling techniques. In this study, the researcher collected quantitative, numbered data using 5-point likert scale questionnaires and statistically analyzed the data to describe trends about responses to questions and to test research questions or hypotheses. Examination was carried out using descriptive statistics and, regression analysis while hypotheses formulated were tested by fitting the ordered logit model (OLM) regression. The results indicate a positive and significant correlation between auditor independence with Competence of the audit staff, access to audit and reporting relationship, employment affiliation and Size of internal audit department while existence of audit committee and traditional role within the internal audit department seem to have no significant in this study. Based on the finding it is recommended that Government to include the Companies Act, some legal provisions for auditors to have professional indemnity insurance, Auditors should seek to maintain higher level of competence in auditing through participating in special seminars and training, the need to implement the audit process in a proper way by auditors and having access to audit and reporting relationship of auditors and finally audit department should have sufficient resource. Of all; since independence is the mental impartiality of auditors and the main recommendation is that auditors should remain strictly independent in mind and in appearance for the reputation of the profession.