An Examination of the Causes of Poor Audit Quality in Small Audit Firms in Lusaka, Zambia

Abstract

This work sought to uncover reasons why audit quality is low in small audit firms in Lusaka, Zambia with special consideration of their importance in Zambia’s financial landscape. Despite providing important audit related services to businesses and other stakeholders, small audit firms including small medium entrepreneurs (SMEs) experience daunting challenges that continue to affect audit quality in the firms. Working under the framework of convergent parallel research design, the research employed both the quantitative and the qualitative methodologies to assess the drivers of audit quality. Questionnaires were used and administered on 42 out of the 67 ZICA registered audit firms and analysis was done using both thematic analysis and complete analysis. The findings indicate that some of the core factors contributing to the poor quality of audits include; limited availability of resources, insufficient professional development, and negative regulatory influence pad. Others are lack of access to advanced auditing technologies, restricted professional development, inadequate training to the audit staff and very high turnover rates. The above factors also determine the competency of the audit staff and result in variations and ineffectiveness within the audit frameworks. In the following section, the lack of and competitiveness in attractive salaries and/or procurement and progression opportunities challenges the firms to suffer high skills desertion, thus making the firms to rely so much on senior and inexperienced audit employees who for most of the time lack the experience and skills needed for complex services. Overall, this study is important for its additions to appreciating the nuances of audit quality in developing markets such as Zambia. It emphasizes the need for specific interventions that include resource sharing platforms, public private partnerships (PPPs), and availing incentives such as grants or tax breaks to support small audit firms. Recommendations include enhancing ZICA’s training frequency, reduction of training costs, and promoting collaboration among firms to pool expertise and resources. Furthermore, recommendations included the adoption of advanced audit technologies and sector specific support policies which are important to addressing the systemic challenges plaguing the small audit firms. The aforesaid measures are very important for enhancing audit quality, fostering financial transparency, and strengthening the economic stability of Zambia’s financial reporting framework.