Internal Audit Control and Financial Reporting Quality

This research investigates how internal audit controls influence the quality of financial reporting, specifically in organizations located in developing economies. The quality of financial reporting is crucial for promoting transparency, accountability, and informed decision-making among stakeholders. Nonetheless, numerous organizations encounter issues like inadequate internal audit systems, absence of auditor independence, and poor adherence to auditing standards, resulting in potentially unreliable or fraudulent financial statements. Utilizing Agency Theory and Stakeholder Theory, this research emphasizes the significance of internal audit in diminishing information asymmetry and fostering trust. The results show that internal audit control has a notable positive impact on the quality of financial reporting. Among the critical elements, risk management and auditor independence hold the most significant influence, while internal control systems and compliance are moderately impactful. While professional competence does enhance audit effectiveness, its influence is comparatively lesser. In general, effective internal audit control mechanisms minimize mistakes and fraudulent activities, enhance the dependability of financial data, and bolster organizational governance. The research highlights the necessity for organizations to improve internal audit procedures to ensure high-quality financial reporting and uphold stakeholder trust.