Corporate governance and modified audit opinion : evidence from state owned enterprises in Kenya

Abstract

Purpose: The purpose of the study was to examine the relationship between corporate governance practices and modified audit opinion in the commercial and manufacturing sector of state owned enterprises in Kenya. -- Design/Methodology/Approach: The study collected data from 25 companies in the commercial and manufacturing sector covering the period 2013 to 2016. Logistic regression technique was adopted to analyze the variables. -- Findings: The study findings established negative and significant effect of both board size and board independence on modified audit opinion. This results suggest board size and percentage of independent directors significantly influenced the likelihood of state owned enterprises receiving modified opinion. Results on the effect of control variables; leverage and return on assets were statistically insignificant. -- Originality/Value: This study contributes to both theoretical literature and empirical evidence in the corporate governance in public sector context.