Macquarie University
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Impact of tribe ties between the chief executive officer, chief financial officer, audit committee members and audit engagement partner on auditor selection, audit quality and audit fees: evidence from Kenya

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posted on 2024-02-26, 01:10 authored by Jane Nyambura Mbuki

This thesis contributes to understanding the impact of tribe ties between the chief executive officer (CEO) and the engagement partner (EP) for audits (i.e., CEO–EP ties), the chief finance officer (CFO) and the EP (CFO–EP ties) and audit committee members (ACMs) and the EP (ACM–EP ties) on the auditor selection, audit quality and audit fees in the setting of Kenya. This country has 42 main tribes and various minor tribes, each with a distinctive culture, traditions and beliefs. Although studies have detailed the consequences of social ties on auditing, little is known about the effects of CEO–EP, CFO–EP and ACM–EP tribe ties. To fill this literature gap, this thesis draws on social identity and homophily theories, to argue that persons from the same tribe have similar cultural backgrounds because of shared kinship relationships, which could serve as an important channel through which they may establish connections and social ties.

Therefore, this thesis conjectures that tribe ties may signify the presence of similar beliefs and values between the CEO, CFO, ACMs and EP, which may be either detrimental or beneficial. Further, social ties enhance the establishment of social networks, which provides access to social capital. Social capital may be valuable but may also have a ‘dark side’. Hence, this thesis examines whether and how this new type of CEO–EP, CFO–EP and ACM–EP social ties resulting from the fact that these individuals belong to the same tribe influences audit outcomes and the auditor’s monitoring effectiveness.

Using hand-collected data on a sample of non-financial public listed companies in Kenya for the 2013–2019 period, this thesis provides varying results about the influence of this type of tribe ties on auditor selection. Although, the logit results on tribe ties and auditor selection are non-significant, the results of a univariate analysis of within-tribe auditor selection reveal that Kikuyu, Luhya, Kalenjin and other tribes’ connections are likely to select auditors from their own tribe, when they switch auditors. Further, logit regression results of within-tribe auditor selection confirm these univariate results.

In addition, this thesis finds that CEO–EP, CFO–EP and ACM–EP tribe ties can be detrimental to audit quality, as evidenced by the increase in discretionary accruals as well as the low audit fees charged by connected auditors. This thesis suggests that the low audit fees may be the outcome of the reduced effort and time committed to the audit because the connected auditor may over-trust the CEO, CFO and ACMs, resulting in low perceived audit risk, which leads to fewer substantive tests and, consequently, impairs audit quality.

Overall, this thesis provides novel empirical evidence that suggests that companies are more likely to appoint auditors from the same tribe as their CEO, CFO and ACMs. Such appointments lead to the formation of CEO–EP, CFO–EP and ACM–EP tribe ties, which reduces the audit quality and audit fees. Hence, these tribe ties impair auditors’ independence and monitoring effectiveness. This thesis provides some important contributions to the emerging auditing literature on Africa, where tribal interests play a critical role in politics and economics and have significant consequences for various stakeholders, such as policymakers, regulators and shareholders.


Table of Contents

Chapter 1: Introduction -- Chapter 2: Literature review -- Chapter 3: Institutional background, tribe ties and audit environment of Kenya -- Chapter 4: Influence of CEO/CFO/ACM tribe ties on auditor selection -- Chapter 5: Effects of tribe ties between the engagement auditor and the CEO, CFO and ACM on audit quality and audit fees -- Chapter 6: Conclusion -- References

Awarding Institution

Macquarie University

Degree Type

Thesis PhD


Doctor of Philosophy

Department, Centre or School

Department of Accounting and Corporate Governance

Year of Award


Principal Supervisor

Jeng fang Chen

Additional Supervisor 1

Grant Richardson


Copyright: The Author Copyright disclaimer:






196 pages

Former Identifiers

AMIS ID: 284561

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