The Role of Internal Governance Mechanisms in Supporting the Independence of External Auditors: An Empirical Study on External Auditors in Commercial Banks

Abstract

This study aimed to identify the role of internal governance mechanisms in supporting the independence of external auditors, from the perspective of external auditors working in commercial banks. To achieve this objective, a deductive-inductive approach was adopted, and a questionnaire was designed as a data collection tool targeting the study population of external auditors. The sample consisted of external auditors registered with the Central Bank of Libya, totaling (150) auditors. The sample size was determined using the Krejcie & Morgan (1970) tables, resulting in a sample size of (108) respondents. Both descriptive and inferential statistical methods were employed to analyze the data, and the study's hypotheses were tested using Spearman's correlation analysis. The study found a strong positive correlation between the role of internal corporate governance mechanisms and the support for external auditor independence. Furthermore, the results revealed a strong, statistically significant positive relationship regarding the role of internal governance mechanisms in supporting external auditor independence, when considering the variables of years of experience and accounting specialization versus finance and banking specialization. The study recommended that commercial banks conduct periodic reviews of their internal governance mechanisms to evaluate their effectiveness in supporting external auditor independence. It is crucial that these reviews align with international standards to ensure the preservation of audit independence.