Audit quality and firm performance : evidence from Botswana and Uganda

Abstract

Purpose: The purpose of this study was to analyse the impact of audit quality on firm performance of listed companies in Botswana, and Uganda. As a monitoring mechanism, the role of auditing is to reduce information asymmetry between management and shareholders, thereby bolstering investor confidence which consequently improves firm value. -- Design/methodology/approach: The study sampled domestically listed financial and non-financial companies on the stock exchanges of Botswana and Uganda for the five years 2014-2018.Using auditor size and audit fees as proxies for audit quality and return on assets, and Tobin's Q as measures of firm performance, the relationship between the variables was determined through regression analysis. The study also controlled for complexity, risk and growth of the companies. -- Findings: Results of the study show that audit quality is a negative but non-significant predictor of firm performance for financial performance. -- Originality/value: The findings of the study provide empirical evidence into the effectiveness of auditing as a corporate governance mechanism in the Sub-Saharan capital markets.