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Dr. Hajj Twaha Kigongo Kaawaase  | 


Twaha K. Kaawaase (Department of Accounting, Makerere University Business School, Kampala, Uganda) Mussa Juma Assad (Department of Accounting, University of Dar Es Salaam Business School, Dar Es Salaam, Tanzania) Ernest G. Kitindi (Department of Accounting, University of Dar Es Salaam Business School, Dar Es Salaam, Tanzania) Stephen Korutaro Nkundabanyanga (Department of Accounting, Makerere University Business School, Kampala, Uganda)

"Audit Quality Differences amongst Audit Firms in a Developing Economy: The Case of Uganda," Journal of Accounting in Emerging Economies, 2016, Vol. 6 Issue 3 (


The objective of the paper is to report findings of audit quality differences among audit firms in Uganda, a developing country. Specifically, we examine the assumption of marked audit quality differences among large audit firms (Big 4) and small- and medium-sized practices (SMPs).

Audit quality continues to attract the attention of scholars and policymakers owing to the long-established need for credible audited financial statements as a basis for decision making by various user groups, such as shareholders, regulatory agencies, governments, and creditors, among others. Most previous research on audit quality typically assumed that big audit firms provide high-quality audits and, hence, the use of a Big 4 versus non-Big 4 firm is often a proxy for audit quality. However, the collapse of Arthur Anderson could signal that “big” may not always be better and, therefore, may undermine the assertion that large auditors are always associated with high audit quality.

Previous research reveals no consistent way of measuring audit quality and has been inconclusive on the subject of an audit quality differential among audit firms.


First, we developed scales for assessing perceived audit quality in the financial services sector based on qualitative data obtained from 106 audit practitioners, 31 credit analysts and 13 board members. We used NVivo© to analyze 13 transcribed interviews and followed “cross-case analysis” to visualize dimensions and scales of audit quality. In addition, we used the measurement scales to assess quantitative data from 183 board members and top executives in the financial services sector and tested for perceived audit quality differences among audit firms using a Mann-Whitney U test. 


Our findings suggest that audit quality is a multi-dimensional construct comprised of levels of discretionary accruals; audited accounts’ compliance with accounting standards, laws, and regulations; and audit fees. Based on these three measures, we find that Big 4 audit firms ensure more compliance with accounting standards, legal, and other regulatory requirements than SMPs. However, taking all three audit quality dimensions together reveals no significant differences in audit quality levels between Big 4 firms and SMPs.

These findings are inconsistent with the widely held view, which has dominated research from developed economies, that significant differences in audit quality exist, specifically that bigger firms offer superior audit quality than their smaller counterparts, the SMPs. However, the current findings support other scholars from emerging and developing nations who have failed to find quality differences between big audit firms and SMPs.


Based on the results of this study, a number of issues call for the attention of researchers, practitioners, and society. This includes financial service firms in Uganda, policymakers, company boards, and management who could use these findings as a guideline on what to focus on in the context of auditor selection. Indeed, all registered companies in Uganda have to be audited (per Companies Act of 2012), and registered SMEs could consider using SMPs, as this study indicates that SMPs provide similar quality audits relative to the Big 4 firms. When approving audit firms in the financial services sector, focus should not be on the size of the firm per se but should examine: how the audit firm deploys audit procedures meant to constrain discretionary accruals; the compliance of financial statements to accounting standards, legal and regulatory requirements; and the size of audit fees the firm charges. The fees charged should reflect audit effort and service quality.



Dr. Hajj Twaha Kigongo Kaawaase

Partner, Sejjaaka, Kaawaase & Co.

Dr. Hajj Twaha Kigongo Kaawaase CPA, is a Fellow of the Association of Chartered Certified Accountants (ACCA) and is also a member of the Institute of Certified Public Accountants of Uganda (ICPAU). He holds a PhD in Auditing from the University of Dar Es Salaam (Tanzania). Dr. Kaawasse is a partner at Sejjaaka, Kaawaase & Co. and is a senior lecturer at Makerere University Business School. In January 2014 he was nominated by the ICPAU as a Technical Advisor to the IFAC Small and Medium Practices Committee representing Brazil.