CHAPTER ONE

1. INTRODUCTION
1.1 Background to the study
In recent times, auditors have been put under pressure to ensure that their reports constitute
assurance to investors that their funds are put into good use and properly accounted for. In
Ethiopia, every incorporated company is required to appoint an external auditor, who is required
to render an independent opinion on the financial statements; whether or not they show a true
and fair view. The Jovanova, B., & Josheski, D. (2011) states that every auditor of a company
shall have a right of access, at all times, to the books, accounts and vouchers of the company and
to such information and explanations as may be necessary in the course of an audit. The auditor
shall make a report to the members of the company on the accounts examined by them. The
auditor in performing his duties is expected to exercise all care, diligence and skills as is
reasonably necessary in each particular circumstance.
Audit report is the medium through which the auditor expresses his opinion on the financial
statement examined by him. Due to familiarity, threat of replacement of an auditor, provision of
book-keeping services by the auditor and many other factors, the auditor may want to issue an
unqualified audit report even when the situation on ground proved otherwise. This situation
raises doubt about the independence of an auditor. Independence is the cornerstone of
accountability. The challenge is that corporate management hires, fires, and pays both their
internal and external auditors. Auditors, therefore, develop good relationships with management
to keep the job of the client. They may not, therefore, be independent of the corporate
management. In the United States of America, the Hall (2011) prevents auditors from providing
non-audit services to their clients. Nevertheless, auditors will understandably, want to keep their
clients for as long as possible (Lotfii, A. (2005).
In Ethiopia, there have been a number of audit failures, some leading to the restatement of
figures in the financial statements. For example, Lever Brothers, African Petroleum and
Cadbury, just to mention a few important ones. Although, it has not been proved by any detailed
investigation that these audit failures were due to impairment of auditor’s independence it could
reasonably be suspected to be a contributing factor Gellinas (2005). Many researchers in the
developed nations have investigated the extent of audit independence, DiGabriele, J. A., & Ojo,

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M. (2014). All these studies were conceptualized and executed from the perspectives of
developed nations. However, in Ethiopia, there is a paucity of empirical studies in the same
direction. The foregoing perspectives, therefore, make it desirable to investigate the impact of
audit independence on corporate financial reporting in Ethiopia.

Audit quality practices are procedures established by auditors to ensure that financial reports
communicate relevant and reliable information to members of an organization and the public.
These practices vary from one audit organization to the other depending on their sizes, nature of
activities and applicable legislations. Literature documents differences in opinion as to what
constitutes appropriate definition of audit quality. Saleh and Azary (2008:65 -77) view audit
quality as how well an audit detects and reports material misstatements, reduces information
asymmetry between management and stockholders and thus assist protect the interest of
stockholders. From the reasoning of audit quality is the probability that financial statements
contain no material misstatements. Also, Youssef, (2013) define audit quality as a function of the
auditor’s ability to detect and eliminate material misstatements and manipulations in reported net
income. While Spencer, Picket (2010) reports audit quality as the market assessed joint
probability that a given auditor will both discover a breach in the client’s accounting system and
report the breach. These definitions, no matter how divergent, emphasis compliance with
relevant audit procedures and standards (Al-Bawab, A. (2012). Users of financial statements
demand nothing less than a report that conveys accurate and reliable information relevant for
decision making. This is made possible by auditors through the provision of quality services.
Ojo, M. (2006) investigated the effect of audit quality on accrual reliability of listed companies
and found existence of more accrual stability coefficient in audit firms with higher audit quality
than those with lower audit quality. Similarly, Al-Bawab, A. (2012) did a work on the factors
affecting the quality of auditing, drawing data from Jordanian commercial Banks. Results
indicate a positive and significant association between audit quality and audit efficiency, the
reputation of auditing office, auditing fees, the size of audit firm and the proficiency of the
auditor.

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 1.2 Statement of Research Problem
Today shareholders can use audited f i nancial statements as an important tool to notice how to
operate their assets and ensure the accuracy of managers’ performance.
Nowadays due to the policy of the changing government and also due to the competition in the
globalize era, the financial statement of the town administration is not appreciable. There is no or
less proper instruction from the authorities, the possibility of bad intention in setting and
preparation of the statements by the administration, led to the need for the audit profession
and individuals called auditor to be felt. Further there is considerable delay in implementing the
auditing system because of more formalities to change the existing system. The financial
performance of the town should be analyzed well to increase the efficiency in utilization of its
budget and make the organization to compete with others doing similar activities. There is also
the inadequate performance of the auditors is mainly due to the lack of knowledge, lack of
experience and lack of independence of the auditor

1.3 Objective of the Study

1.3.1 General objective
The general objective of the study is to assess the impact of auditing on financial statement in
Chiro town Administration.

1.3.2 Specific objectives

The specific objectives of the study are to find out the following:
 To examine the impact of auditing on financial statement in Chiro Town
Administration.
 To examine whether the Auditing process has improved the quality of financial
statement in Chiro town Administration.
 To find out the problems confronting the internal auditors in Chiro Town
Administration in implementation of system.

1.4 Research Questions

 What are the impact of auditing on financial statement in Chiro Town Administration?

 Does Auditing in Chiro Town Administration improve the quality of financial statement
in Chiro town Administration?

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  Is there any problems confronting the internal auditors in Chiro town Administration
in in enhancing quality financial statement?

1.5 Significance of The Study

The ultimate goal of every industry or organization is to quality financial statement (statement)
information is issued to public. This goal can be achieved in the public sector for effective
financial reporting. This study is necessary because it would enable the Chiro town
Administration and other public sectors to improve on their implementation of the auditing
standards. Finally, it would serve as a reference source to students or others researchers who
might want to carry their research on similar topic.

1.6 Scope of the Study

The study only delimited to or concerns about the impact auditing on financial statements with a
particular reference to Chiro town Administration.

1.7 Definition of Terms

ACCOUNTING: This is defined as the process of identifying, measuring, and communicating
economic information to permit informed judgments and decisions by users of the information

AUDITING: is a systematic process of objectively obtaining and evaluating evidence regarding

assertions about economic actions and events to ascertain the degree of correspondence between
those assertions and established criteria and communicate the results to interested users

FINANCIAL STATEMENT: Financial statements are a collection of reports about an

organization’s financial results, conditions and cash flows.

INCOME STATEMENT: Income statement is a financial statement that measures a company’s

financial performance over a specified period

STATEMENT OF CASH FLOW: Statement of cash flow is a financial statement that shows
changes in the balance sheet (financial position) accounts and income affects cash and cash
equivalents and breaks the analysis down to operating, investing, and financing activities

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 CHAPTER TWO

LITERATURE REVIEW
2.0 Introduction
2.1 Concept of auditing and their roles

The word “audit” is derived from the Latin word “audire” which means the act of listening. The
concept of auditing might be explained as a systematic process of objectively obtaining and
evaluating evidence regarding assertions about economic actions and events to ascertain the
degree of correspondence between those assertions and established criteria and communicate the
results to interested users (Eilifsen and McKee 2006). In the audit process, there are two parties;
auditee and auditor.
An auditor is a professional whose task is to perform the audit by verifying the accounting and
the decision-making by the management of an auditee and final report in an auditor report. This
is necessitated by laws.

Auditors have been responsible for detecting fraud in many stages. Initially, auditors were
responsible for detecting fraud, as one of the main objectives of the review process. However,
nowadays the auditors’ responsibility is limited to examining the financial statements and giving
reasonable assurance, not at all, about the extent to which the financial statements are free of
fraud and that they reflect honestly and fairly the financial position of the company (Alarbeed,
Alothman, & Assee, 2014).

2.1.1 The Importance of the Audit

The importance of auditing is determined by providing service for multiple parties who used the
audited financial statements in making decisions, and examples of these parties are as follows
(Al-Bawab, 2012):
(1) Management: The auditor’s report illustrates the impact of effective management, where
it depends upon the development plans, monitoring and evaluation of the performance of
the management;

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 (2) Investors: The auditors’ report to investors represents a safety tool for their money, where
the investors depend on the financial statements certified by an auditor who is
independent and impartial when they think about making any decision related to their
savings and their investments in order to gain the highest return possible;
(3) Lenders: In general, banks prefer to rely on financial statements audited when examining
the financial centers of the projects that apply for credit facilities and loans from them;
(4) Government bodies: Based on the audited financial statements for many purposes,
including planning, control and taxation, pricing, and the report of subsidies to some
industries (Budur, 2008, p. 97).
Several studies have indicated that the credibility and fairness of the published financial
statements of the companies depend on the existence of audit committees emanating from the
boards of directors of these companies, where the audit committees increase the effectiveness of
the supervision of the preparation of financial statements and reduce disputes between
management and external auditor (Ahmed, 2011).

Auditors are generally and ultimately appointed by the shareholders and report to them
directly or via the audit committee (or its equivalent) and others charged with governance.

However, many companies’ audited financial statements, and particularly public companies,
are on public record.

2.1.2 Audit environment

The changing economic and legal environment has significant implications for a company’s
operations and financial reporting, and changes in the business, economy and laws and
regulations generally increase the level of risks affecting the business and require adequate
response and disclosure in the financial statements. This also affects the way an audit is
conducted, since the auditor’s work needs to be scaled to address increased risks of material
misstatement of the financial statements. Gellinas (2005)

In the current environment, auditors have to take into account various evolving factors that may
result in additional challenges (see the chart below). When a company is comprised of multiple
entities there are additional complexities that need to be addressed. These considerations are
likely to complicate matters further when the company has locations in different countries and
therefore may span different regulatory requirements

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 2.2 Types of Audit
2.2.1 External Audit
External audit is considered as one of the most important processes contributing to the
achievement of reliable accounting information, which produces accurate and reliable
information through using controls tools for different activities in the organization (Youssef,
2013).

The external audit is a:

Review of the financial statements of an organization by independent legal authorized
auditors. The main objective of the external audit is to provide an opinion on the financial
statements. The word audit originates from the Latin word (audire) to listen. The auditor
is defined as a listener: one who reviews the statements (Jovanova & Josheski, 2011, p. 2)

The external audit represents the audits operations for the parties outside of the entity under
auditing, by experts specialized independent of entity under auditing, or its staff or officers,
called the external auditors. These auditors are qualified and independent, and the external
auditor performs the audit in accordance with the international auditing standards (Lotfii, 2005).

Kassem and Higson (2016) conducted a study aiming to determine the role of external auditors
in corporate corruption, besides determining the implications for external audit regulators.
external auditors are responsible for detecting material misstatements arising from corruption
that would have a material impact on the financial statements.
DiGabriele and Ojo (2014) highlighted the dual roles of external auditors and its impact on the
objectivity and independence, in addition to examining whether it is suitable for the external
auditors to incorporate internal auditor’s responsibility or not.

[Link] The Role of External Auditor

Kassem and Higson (2016) illustrated that the auditor’s responsibility to detect and report
misstatements resulting from illegal acts having a direct and material effect on the determination
of financial statement amounts is the same as that for misstatements caused by error or fraud.
While Ojo (2006) showed that the role of the external auditor in the supervisory process requires
standards such as independence, objectivity and integrity to be achieved.
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If we compare the regulator and external auditor’s performance, we can find that both of them
have the same functions regarding the verification of financial statements, and they serve
particular interests, where the regulator works towards safeguarding financial stability and
investor interests, while the external auditor serves the private interests of the shareholders of a
company.

2.2.2 Internal audit

Definition of internal audit also noted by Carl Geffken (2004) in the Internal Compliance Audits,
Internal auditing is a sure way to identify key staff responsibilities to assess how procedures are
documented, to confirm how well staff and workers are trained in their assigned tasks, and to
determine where significant control points are needed to assure your product quality by meeting
written specifications. A well designed audit should address all the critical steps and
opportunities for process flow from beginning to end. It should also identify how, where and
when necessary corrections will be made, as well as how any specified and acceptable target
conditions are controlled and documented Budur, J. I. (2008).

2.2.2 .1 Effectiveness of Internal Audit Function

According to Etzioni, et al., (1985: 54-55); Mardiasmo (2002: 134) state that Effectiveness as the
level of success of the organization in an effort to achieve the objectives and goals. Mauzt &
Sharaf (1993) stated about the origin of the word auditing. Auditing is derived from the word
"audire" which means to hear or pay attention, it is heard or considered is the financial
responsibility submitted by the person in charge of financial (management). Auditing is a process
of collecting and evaluating evidence about the information that can be measured, on an
economic entity that is performed by a competent and independent to determine the suitability
of the information and reporting, with the criteria set (Arens [Link], (2010) ; Boynton (2006)).
Internal auditing is an independent, objective assurance and consulting activity designed to add
value and improve an organization's operations. (Spencer, 2010). It helps an organization
accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve
the effectiveness of risk management, control and governance processes. The Internal Auditor
Professional (Moeller, 2010) defines internal auditing as follows: "Internal auditing is an
independent appraisal function established within an organization to examine and evaluate its
activities as a service to the organization". Internal quality audits according to Moeller include:
1) The level of compliance with IIA standards

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 2) The ability to audit plan
3) Execute audit findings
4) communicate audit findings

2.2.2 .2 Internal audit and roles

Furthermore, Sawyers (2003: 10) defines a broad internal audit and roles as follows:
Internal auditing is a systematic objective appraisal by Internal Auditors of the diverse operation
and controls within an organization to determine whether:
(1) Financial and operating information is accurate and reliable;
(2) Risk to the enterprise are identified and minimized;
(3) External regulations and acceptable internal policies and procedure are followed;
(4) Satisfactory operating criteria are met;
(5) Resources are used efficiently and economically; and
(6) the organization’s objectives are effectively achieved-all for the purpose of assisting
members of the organization in the effective discharge of their responsibilities.”

2.3 Financial statement 

A financial statement (or financial report) is a formal record of the financial activities of a
business, person, or other entity. Financial statement is an organized collection of data according
to logical and consisted accounting procedures. Its purpose is to convey an understanding of
some financial aspects of a business form. It may reveal a series of activities over a given period
of time, as in the case of an income statement Arens, etal, (2010).

Relevant financial information is presented in a structured manner and in a form easy to

understand. They typically include basic financial statements, accompanied by a management
discussion and analysis: Al-Bawab, A. (2012).

1. A balance sheet, also referred to as a statement of financial position, reports on a

company's assets, liabilities, and ownership equity at a given point in time.
2. An income statement, also known as a statement of comprehensive income, statement of
revenue & expense,    profit and loss report, reports on a company's income, expenses,
and profits over a period of time. A profit and loss statement provides information on the
operation of the enterprise. These include sales and the various expenses incurred during
the stated period.

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 3. A statement of cash flows reports on a company's cash flow activities, particularly its
operating, investing and financing activities.

For large corporations, these statements may be complex and may include an extensive set
of notes to the financial statements and management discussion and analysis. The notes typically
describe each item on the balance sheet, income statement and cash flow statement in further
detail. Notes to financial statements are considered an integral part of the financial statements.

2.3.1 Purpose of Financial Statement Audit

"The objective of financial statements is to provide information about the financial position,
performance and changes in financial position of an enterprise that is useful to a wide range of
users in making economic decisions."  Financial statements should be understandable, relevant,
reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly
related to an organization's financial position.

Masmudi, 2003 stated that Financial statements are intended to be understandable by readers
who have "a reasonable knowledge of business and economic activities and accounting and who
are willing to study the information diligently."  Financial statements may be used by users for
different purposes:

 Owners and managers require financial statements to make important business decisions that
affect its continued operations. Financial analysis is then performed on these statements to
provide management with a more detailed understanding of the figures. These statements are
also used as part of management's annual report to the stockholders.
 Employees also need these reports in making collective bargaining agreements (CBA) with
the management, in the case of labor unions or for individuals in discussing their
compensation, promotion and rankings.
 Prospective investors make use of financial statements to assess the viability of investing in a
business. Financial analyses are often used by investors and are prepared by professionals
(financial analysts), thus providing them with the basis for making investment decisions.
 Financial institutions (banks and other lending companies) use them to decide whether to
grant a company with fresh working capital or extend debt securities (such as a long-
term bank loan or debentures) to finance expansion and other significant expenditures.

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2.3.2 Types of Financial Statements

There are three major Types of Financial Statements. These are consolidated financial
statements, Government financial statements and Personal financial statements

2.3.2 .1 Consolidated Financial Statements

Consolidated financial statements are defined as "Financial statements of a group in which
the assets, liabilities, equity, income, expenses and cash flows of the parent (company) and
its subsidiaries are presented as those of a single economic entity", according to International
Accounting Standard 27 "Consolidated and separate financial statements", and International
Financial Reporting Standard 10 "Consolidated financial statements". Ojo, M. (2006).

[Link] Government Financial Statements

The rules for the recording, measurement and presentation of government financial
statements may be different from those required for business and even for non-profit
organizations. They may use either of two accounting methods: accrual accounting, or cost
accounting, or a combination of the two Youssef, M. (2013). A complete set of chart of
accounts is also used that is substantially different from the chart of a profit-oriented business.

[Link] Personal Financial Statements

Personal financial statements may be required from persons applying for a personal
loan or financial aid. Typically, a personal financial statement consists of a single form for
reporting personally held assets and liabilities (debts), or personal sources of income and
expenses, or both. The form to be filled out is determined by the organization supplying the loan
or aid.

2.3.3 Quality of Financial Statements Reporting

The definition of quality according to the Office of Government Commerce (2009: 48) is degree
to which a set of inherent characteristics fulfills requirements. Quality is generally defined as the
totality of features and inherent or assigned characteristics of a product, person, process, service
and/or system that bear on its ability to show that it meets expectations or satisfies stated needs,
requirements or specification. According to Hall (2011) in Accounting Information system, the
dimensions of information quality Consist of relevant, timeliness, accuracy, completeness and
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summarizing. According Gellinas (2005) in Accounting Information systems mentioned
Dimensions of the quality of information’s are accurate, timely, relative, and completeness.
The financial statements are a statement in the reporting entity's financial statements
components, is a form of financial management accountability country / region over a period.
The financial statements of the public sector are basically a form of government accountable to
the people for the management of public funds either from taxes, fees or other transaction.
(Masmudi, 2003). There are two public sector financial reporting purposes, the general and
specific objectives. Common purpose to provide useful information and meet the needs of the
user. Specific objectives to identify resources obtained and provide information on resource
allocation, financing, commitments and liabilities, financial condition, and changes in public
sector organizations, the information to evaluate the performance of public sector organizations.
(Public Sector Committee - International Federation of Accounting Committee, 2010).

The components of the public sector report in the International Public Sector Accounting
Standards (IPSAS,2010) consists of: Statement of Financial Position, Statement of Financial
Performance, Statement of Changes in Equity, Cash Flow Statement, Accounting Policies and
Notes to Financial Statements that consist of Budget Realization Report, Balance Sheet, Cash
Flows and Notes to the Financial Statement.
Statement of Financial Accounting sets of qualitative characteristics of accounting information
as follows: Relevance, Timeliness, Reliable, Consistency. According to Geffken (2004: 40),
quality information must have the characteristics of
(1) Accurate. It means that information must reflect the actual situation.
(2) Timely. It means that information must be available or exist on when the information is
required.
(3) Relevant. It means the information-provided must be in accordance with the required
one.
(4) Completeness.

2.4 Audit and Legal Implication

Although laws differ from country to country, an audit of the financial statements of a public
company is usually required for investment, financing, and tax purposes. These are usually
performed by independent accountants or auditing firms Scheiner, (2003). Results of the audit
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are summarized in an audit report that either provide an unqualified opinion on the financial
statements or qualifications as to its fairness and accuracy. The audit opinion on the financial
statements is usually included in the annual report.

There has been much legal debate over who an auditor is liable to. Since audit reports tend to be
addressed to the current shareholders, it is commonly thought that they owe a legal duty of care
to them. But this may not be the case as determined by common law precedent. In Canada,
auditors are liable only to investors using a prospectus to buy shares in the primary market. In
the United Kingdom, they have been held liable to potential investors when the auditor was
aware of the potential investor and how they would use the information in the financial
statements. Nowadays auditors tend to include in their report liability restricting language,
discouraging anyone other than the addressees of their report from relying on it. Liability is an
important issue: in the UK, for example, auditors have unlimited liability Mauzt & Sharaf
(1993).

In the United States, especially in the post-Enron era there has been substantial concern about the
accuracy of financial statements. Corporate officers (the chief executive officer (CEO) and chief
financial officer (CFO)) are personally responsible for fair financial reporting allowing those
reading the report to have a good sense of the organization (Masmudi, 2003)

2.5 Factors Affecting Auditing Quality

AL Tuwaijri & AL Nafabi, 2008 and Hassanein & Kotp, 2003) stated that factors affecting the
auditing quality which are linked by
 political, economic and social environment.
 regulatory environment for the profession of external audit
 the regulatory environment for the Office of External Audit:
 The size of the office of external audit
 The reputation of the external auditing office
 Commitment to the generally accepted professional criterion
 Fees the process of auditing
 Independence of the auditor
 Experience of auditing team

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  Company size
 The structure of auditing

2.6 Methods for Improving the Process of Auditing Quality

There are much of the studies and professional practices by professional organizations proposed
work on a set of methods, Eldhraoei, (2002) stated ways of improving the auditing quality as
follows:
 Scientific and practical development and qualification for the auditor.
 Placing criteria for controlling auditing quality.
 Putting methods of control on the auditing quality, including: peer review and style of the
Supervisory Board on the offices of external auditing.
 Supporting the independence of auditing through the formation of the Audit Committee
or the mandatory change for external auditor.

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 CHAPTER THREE

3. RESEARCH METHODOLOGY

3.1. Background of the study area

Oromia is one of the nine regions in Ethiopia which constitute about 35% of total population and
40% of urban population of the country. Chiro is among many Oromia regional state towns
which is located at about 312km south east of Addis Ababa along the main road from Addis to
Harar and Dire Dawa. The total area of the town is 32 km 2 and topographically it is plain. The
town was established in 1915 during emperor regime. Currently according to Oromia
proclamation Number 65/2003 urban grading, it is recognized as reformed city and found at 2 nd
rank (Megeleta Oromia, 2003). The town has both municipal and state function. It is the capital
of western Hararghe zone. According to CSA (2014) projection the current total population is
83,643 of which male constitute 48,092 and female 45,551, among these, economically active
population estimated around 70%. In General, the town characterized by weak governance, poor
social service delivery and infrastructure provisions, high unemployment, and mismatch
between population growth and economic development

Economic activities.

In Chiro the major economic activities are mainly tertiary such as trade and shopping goods
which are displayed at market, hotel, restaurant and bar; selling and buying agricultural products,
retail trade of consumable goods like Chat and coffee and products of small scale industry like
wood and metal works.

B, Social services

Education: In the town currently, there are 10 elementary schools, 0ne TTC college, 2 high
school, and one preparatory school, two Universities, one technical and vocational training
college and. The educational coverage of the town is 77.8%. The approximate primary school
converge of the town, is about 94.3% (Chiro Town Local Government, 2012).

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Health: Concerning health situation of the town, there are 8 private clinics, 15 pharmacies that
are owned privately, one family Health Guidance clinic and one health post, and one hospital.
The total health coverage of the town is 81%. This increment is from 69% in 2004/05 to 81%in
2007/08.

The child and maternal death decrease as infant mortality are given due attention by the city
administration, even if there is no data at a time (ibid).

Housing: generally, the housing condition of the town is in poor condition except some private
residential houses.

Road: Generally speaking, the network of the road in the town is poor before four years.
However, after the town is reformed efforts have been made to construct roads. Hence currently
12 km of gravel and 3km couble stone road is constructed and 5 km of road become asphalted.
This is one way or another contributes to socio economic development to the town (Chiro Town
Local Government, 2017).

Banking and Insurance: the town has two governments and four private bank and three
insurance corporations.

3.2 Study Design

It is obvious that, based on the target group, nature and purpose of the study, different types of
studies require various research methods. Since the purpose of this study is to assess the impact
of auditing on financial statement, the researcher will employ descriptive and analytical survey
research methods. The study also uses primary and secondary sources that will collect through
in-depth interview, survey questionnaires and reviewing of different articles and books.

3.3 Sources of Data

The researcher will use both Primary and secondary data sources. Primary sources will collect
through in depth interview and survey questionnaire. The researcher will also review secondary
sources from different scholars’ books, project documents, action plan, periodic report, previous
research papers, relevant articles, magazines, reports were analyzed. In addition, internet sources
will be used as source of data.

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 3.4. Sampling Techniques and Sample Size

This study will be conducted in Chiro town which is found in Oromia National regional state.
The town will be selected purposely because of no former research which has done on impact of
auditing on financial statement in this area. The finial reason is to inform the government the
fact that not taking action on audited financial statements is badly affecting the town
administration system and search for possible solution to respective problems resulted from
financial statement in the town.

The total number of employees in Revenue Authority, Finance cooperation and Economic
development, mayor office and city council of the town are 130. Among these employees only
60 staffs (39 males and 21 females) have the knowledge and information concerning the subject
of the study. The researcher will select all 60 representatives who have knowledge and
information concerning the subject using purposive and stratified random sampling techniques.

In addition, all heads and main process owners from town administration particularly mayor
office, Revenue Authority, Finance cooperation and Economic development, and city council
will select as sample of study through purposive sampling because they are the key informants
and able to provide detail information about issues.

3.5. Data Collection Instruments and procedures

To produce valuable data conclusions, the researcher will collect the data through in-depth
interview, and questionnaire. Data collection instruments will be prepared in English and be
translated into the local language Afan Oromo to avoid language barriers . The Primary data will
gather using the following instruments. The primary data may collect by using interview and
questionnaires. The interview guide is semi- structural because this make it possible to focus on
the main issue of audit and financial statement and incorporate other issues which arises during
the interview. Interview will be used to collect data from selected informal settlers, who are
illegal settled or squat red on the state, on the public land or private land. The questionnaire will
be used to collect data from staffs. Secondary data will be used to collect data from Revenue
Authority, Finance cooperation and Economic development, mayor office and city council of
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chiro town Administration office documents. Documents review will be made from different
books, proclamations and relevant data sources particularly on audited financial statements
issues and both hard print and electronic forms will be used.

3.6. Data Analysis

The data to be collected for this study will comprise both quantitative and qualitative data. The
qualitative data will organize and present in the form of statements and the quantitative data will
be analyzed using descriptive statistics and it will present in tables and percentages. The
qualitative data will be used to make arguments and also to describe quantitative data.

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 CHAPTER FOUR

4. TIME SCHEDULE AND RESEARCH BUDGET

4.1 Time schedule

S .No Activities Implementation Year 2010E C/2018 G .C

May June July August September
1 Problem Formulation X
2 Review of literature X X X
3 Proposal writing X
4 Submission of proposal X
5 Developing Questionnaire X
6 Data collection X
7 Entering data X
8 Data analysis’s X
9 Research report Write up X
10 Submission of first Draft X
11 Submission of final Research X

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 4.2. Research Budget

No Item Unit Quantity Unit price Total

cost

600 0.1 600

1 Photocopy pages

1 250 250
2 Flash disk(8Gb) Piece

100 5 500
3 Printing cost page

10 20 200
4 Binding number

16 200 3200
5 Personal expense Birr

4750
Total

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