There are a number of audited companies in Libya which have gone into bankruptcy\ud
between 1995 and 2005. Therefore, there is a significant question about the audit\ud
quality situation in Libya. There is not itself much research about audit quality in Libya.\ud
In particular, there is not much research that has tried to measure audit quality in Libya.\ud
This study is an attempt to pursue further some of the issues around financial audit\ud
quality in Libya.\ud
Secondary data analysis presents observations of Libyan companies from 2006 to 2009\ud
to measure discretionary accruals. It applies an appropriate type of statistical method, to\ud
identify accruals and then examine the type of audit opinion related to these statements.\ud
Findings indicate that there is earnings management in almost all financial statements.\ud
The findings divided all companies into 113 positive andl40 negative discretionary\ud
accruals. In addition, Findings indicate that auditors of the agency and auditors working\ud
for him/her self issued in general 85.7% unqualified (clean) audit opinion for financial\ud
statements that have earnings management, and 11% modified audit opinion. The\ud
results answer the first question in this study about the level of audit quality in Libya:\ud
audit quality level in Libya is low.\ud
The semi-structured interviews support finding of the secondary data analysis, that is\ud
the level of audit quality in Libya is low. Also findings indicate that in Libya there are\ud
some fundamental elements which themselves are insufficient to deal to develop audit\ud
quality. Furthermore, the Libyan audit context suffers from some obstacles and\ud
problems that prevent the development of audit quality