Determinants of Auditing Firms Growth in Tanzania

Abstract

Tanzania has witnessed the growth in the auditing industry spearheaded by the mandatory requirement of having audited financial reports to all businesses for the consumption of stakeholders including the Government. Despite such growth and the need for auditing services, auditing firms have remained to be in small size category while few are found in the medium size and fewer in the large size firm. The aim of this study was to analyse the determinants of auditing firms’ growth in Tanzania while using Arusha and Kilimanjaro regions as a case study. The study used primary data collected through questionnaires administered in a sample of 99 respondents, including 33 Auditors, 33 Managers and 33 Partners. The study used Multinomial Logit Model (MNL) since the dependent variable had multi category choice outcomes (polychotomous). Findings revealed that financial capacity, regulatory framework, managerial capability and staff competency were statistically significant and therefore prerequisites in the growth of auditing firms. The study recommends that NBAA employ regulations that will support small size auditing firms graduation to subsequence categories i.e. medium and large sized firms, also small auditing firms should think of merging in order to bring together financial, staff and managerial resources which are better enjoyed with large scale firms as evidenced by the four (4) big auditing firms of PwC, KPMG, Deloitte and EY.