External Audit on the Work Performance of Public Financial Institution: A Case Study of People’s Bank of Zanzibar

ABSTRACT This research investigated the effect of external audit to the performance of People’s Bank of Zanzibar (PBZ) from 2004 to 2008. The specific objectives of the research were to determine the relationship between work performance and PBZ, external audit performance and PBZ and independence of external audit and efficiency and effectiveness of PBZ. The study was contacted at People’s Bank of Zanzibar (PBZ) situated along Benjamin Mkapa Road, Western Region, Town District, Zanzibar and it covered period of one year that is, from April 2009 to April 2010. In the literature review, theories were used to support the study and concepts linked and analyzed to bring a conceptual framework. In the research methodology, the study employed a simple descriptive survey design where both qualitative and quantitative approaches were employed and study population consisted of management of the bank, bank employees, bank’s clients and 45 respondents were sampled through simple random and purposive sampling techniques. Both questionnaire and interview methods were used to collect data and the researcher followed all the research procedures on ground besides respecting all the ethical and logistical considerations of research. Both qualitative and quantitative approaches were also used to analyze data. The findings of the study reveal that the effect of external audit work performance, competence, and independence at PBZ have led not only to improved performance of the bank but also its growth and development. Due to some of the areas of weaknesses vii in external auditing, the study recommended that financial institution managers should develop the necessary audit practices and take into considerations the effective internal control procedure to achieve sufficient comfort level from the stakeholders as well as maximum profit levels.

TABLE OF CONTENTS

TITLE PAGE Page

DECLARATION A

DECLARATION B Hi

APPROVAL SHE~~ iv

ACKNOWLEDGEMENT

ABSTRACT vii

TABLE OF CONTENTS

LIST OF TABLES

LIST OF FIGURES xfli

LIST OF ACRONYMS AND ABBREvIATIONS xiv

CHAPTER ONE:

1. INTRODUCTION

1.1 Background 1

1.2 Statement of Problem 3

1.3 Purpose of the study 3

1.4 Objectives of the Study 4

1.5 Research Question 4

1.6 Scope of the Study 4

1.7 Significance of the study 5

1.8 Conceptual Framework

1.8.1 External Audit

1.8.2 Financial Institution 7

CHAPTERTWO:

2. REVIEW OF RELATED LITERATURE

2.1 Overview

2.2 Review of Past Related Literature

2.2.1 Work performance in External Audit and efficiency and Effectiveness

ix

in Financial Institutions9

2.2.2 Relationship between External Audits and efficiency

and Effectiveness of Financial Institution 15

2.2.3 Independence of External Audit influence on Efficiency and

Effectiveness of Financial Institutions 20

2.2.4 Audit Quality 23

2.2.4 Challenges facing External Auditors in their Duties 26

2.2.5 Some solution for challenges facing External Auditors 28

CHAPTER THREE:

3. METHODOLOGY

3. Overviews’ 31

3.2 Research Design 31

3.3 Target Population 31

3.4 Sampling Design 32

3.5 Data collection methods and Procedures 33

3.5.1 Questionnaire 34

3.5.2 Interviews 35

3.6 Research Procedure 35

3.7 Reliability and Validity of data collection tools 37

3.8 Ethical consideration 37

3.9 Data analysis 38

CHAPTER FOUR

4, PRESENTATION, ANALYSIS AND INTERPRETATIONOF DATA

4.1 Overview 39

4.2 Demographic Characteristics of Respondents 41

4.2.1 Gender 41

4.2.2 Age Group 42

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4.2.3 Numbers of years respondents worked in or with PBZ 44

4.2.4 Education of respondents 46

4.3 Work performance in External Audit and efficiency and

Effectiveness in PBZ from 2004 to 2008 48

4.4 External Auditor Competence and Efficiency and Effectiveness

in PBZ from 2004 to 2008 54

4.5 Independency of External Audit on Efficiency

and Effectiveness of PBZ from 2004 to 2008 56

4.6 Limitations of External Audit Control in PBZ from 2004 to 2008 58

CHAPTER FIVE

5. FINDING, CONCLUSIONS AND RECOMMENDAn0NS

5.1 Overview 61

5.2 Summary of the Major Findings 61

5.3 Conclusion 63

5.4 Recommendations 63

5.5 Areas for further study 65

REFERENCES 66

APPENDICES:

APPENDIX A: RESEARCH INSTRUMENT 69

APPENDIX 8: TIME FRAME 78

APPENDIX C: TRANSMISSION LETTER 79

APPENDIX D: BUDGET FOR DISSARTATION 80