Factors Affecting Selection of External Auditors in Banking Industry in Bangladesh: An Application of AHP

Authors

  • Mahmud Rahman American International University-Bangladesh (AIUB)
  • Mahbubul Haque American International University-Bangladesh (AIUB)
  • Afia Muqtadir American International University-Bangladesh (AIUB)

Keywords:

External Auditor, Analytic Hierarchy Process, Agency Theory, Banking Industry

Abstract

The selection of external auditors has a paramount significance in ensuring transparency and accountability of the publicly traded business entities, particularly in the banking sector. This prompts us to investigate the factors that influence the clients in appointing external auditors in this industry. Analytic Hierarchy Process (AHP) is applied by choosing five criteria that affect the selection of external auditors. The results indicate that among the chosen five criteria, ‘affiliation with the Big 4’ is given the most importance (around 63%) in choosing the auditors. Experience (15%) and technical expertise of the auditors (14%) are ranked second and third followed by their independence (6%) and the audit fees (3%) charged by them. Inconsistency in the judgment being 9% falls below the threshold value of 10% demonstrating the acceptability of the results of the study. Addressing the limitations will open the door for future research. The implications of the research findings and avenues open for further studies are also put forward.

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Published

2014-11-30