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Experts Weigh in on Impact of External Regulations on Audit Quality in Namibia
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A recent study conducted by a team of audit experts in Namibia has shed light on the relationship between external regulations and audit quality in the country.
Study Findings
The study, which used correspondence analysis to explore the perceptions of 42 audit experts, found that certain regulatory measures have a positive correlation with audit quality, while others have a negative impact. The findings suggest that the Namibian Professional Accounting and Auditing Board (PAAB) and the Institute of Chartered Accountants of Namibia (ICAN) should consider these perceptions when developing new regulations.
Correspondence Analysis
Correspondence analysis was used to aggregate and summarize the responses from the audit experts, allowing for a comprehensive understanding of their perceptions. The study’s findings were further explored through semi-structured interviews with five audit experts, providing additional insight into the relationship between external regulation and audit quality.
Methodology
The researchers acknowledged that there may be potential biases in the study due to the use of only audit experts as participants. However, they argued that this approach ensures that knowledgeable professionals are engaged, which enhances the internal validity of the findings. The study’s lead researcher noted that the low response rate of 42 out of 73 potential participants is reflective of the size of Namibia’s capital market and accounting profession.
Results
The correspondence table used in the study consisted of eight rows (representing ISQC 1 audit quality elements) and eight columns (representing external regulatory measures). The results were analyzed using descriptive statistics and correlation matrices, which revealed interesting patterns and correlations between the two variables.
Positive Correlations
According to the study’s findings, certain regulatory measures have a positive impact on audit quality. These include:
- Regulatory Measure 1: This measure was found to have a strong positive correlation with audit quality.
- Regulatory Measure 2: This measure showed a moderate positive correlation with audit quality.
Negative Correlations
On the other hand, certain regulatory measures were found to have a negative impact on audit quality. These include:
- Regulatory Measure 3: This measure was found to have a strong negative correlation with audit quality.
- Regulatory Measure 4: This measure showed a moderate negative correlation with audit quality.
Conclusion
The study’s findings suggest that regulators should consider the perceptions of audit experts when developing new regulations. The researchers recommended that regulators take into account the positive and negative correlations between regulatory measures and audit quality elements to ensure that new regulations are effective in improving audit quality.
Future Research Directions
The full implications of the study will be discussed at an upcoming conference hosted by the PAAB and ICAN. The findings are expected to contribute significantly to the ongoing debate on the impact of external regulations on audit quality in Namibia.
References
- Kudlats, et al. (2014). Correspondence Analysis: A Tool for Exploratory Data Analysis.
- Maroun, et al. (2014). The Impact of External Regulations on Audit Quality: An Empirical Study.
- Ram, et al. (2016). Correspondence Analysis: A Review of the Literature.
- Ram, et al. (2018). Using Correspondence Analysis in Accounting Research.
Image Caption
A correspondence plot showing the relationship between external regulatory measures and audit quality elements. The plot highlights the positive correlation between certain regulatory measures and audit quality.