Impact of internal audit function (IAF) on financial reporting quality (FRQ): Evidence from Saudi Arabia

Alshetwi, Mohammed; Ramadili, Shamsher Mohamed; Chowdury, Taufiq Hassan Shah; Sori, Zulkarnain Muhamad

doi:10.5897/ajbm11.1805

Cited by 12 publications

(9 citation statements)

References 32 publications

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“…The deep pocket hypothesis that was proposed by Simunic (1980) and Becker et al (1998) duel in the wealth of auditing companies that can be at stake in the event of litigation. Despite that the significance of big 4 has been reported to be inconsequential in many of the GCC countries (Aljifri and Mustafa, 2007;Alzharani et al, 2011), Al-Shetwi et al (2011 highlight some big 4 roles in the minimization of earnings management among GCC. These variable results encourage the need for further studies.…”

Section: Audit Quality and Earnings Qualitymentioning

confidence: 99%

Emerging policies and the effectiveness of corporate governance mechanisms on earning quality

Obaid¹,

Amrah²

2020

IJRBS

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Current study review extant empirical researches on the relationship between CG and EQ. However, the scope of the reviewed studies was shown to vary, most studies on CG and EQ are specific in focus, with different studies focusing on specific aspects or measures of CG. This study evaluates the role of emerging policies and the effectiveness of corporate governance mechanisms on earning quality within a conceptual framework for the Gulf cooperation council. This study concludes that the majority of companies with big board size, higher board independence, and more frequent meetings have improved EQ. Also, the result indicates companies with big audit committee size, a larger number of independent directors, more audit committee meetings and more experts tend to have an increase in EQ. Finally, this review emerged as a framework suitable for assessing the level of EQ disclosed and the relationship between CG and EQ base on GCC policies.

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Section: Audit Quality and Earnings Qualitymentioning

confidence: 99%

Emerging policies and the effectiveness of corporate governance mechanisms on earning quality

Obaid¹,

Amrah²

2020

IJRBS

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“…According to the agency theory, an increase in the internal control system could lead to an increase in the monitoring process of the company to reinforce and increase the financial information outcomes (Jensen & Meckling, 1976). Internal audit function has become a crucial internal monitoring mechanism in corporate governance (Al-Shetwi, Ramadili, Chowdury, & Sori, 2011). Prawitt, Smith and Wood (2009) argue that internal audit function is relatively well funded has a greater monitoring ability to detect and deter material misstatements.…”

Section: Investment In Internal Audit Functionmentioning

confidence: 99%

“…The independence of the board of directors and audit committee from the management can reduce uncertainty about the quality of financial reporting as a result of improved flow of information between the firms and stakeholders. Also, more investment in internal audit function increase the internal control of reported earnings process and increase the integrity of financial reporting quality (Al-Shetwi, Ramadili, Chowdury, & Sori, 2011;Prawitt, Smith, & Wood). of discretionary accruals by Yoon et al (2006) to measure earnings quality in Malaysian Main Market listed companies.…”

Section: Introductionmentioning

confidence: 99%

Directors’ Independence, Internal Audit Function, Ownership Concentration and Earnings Quality in Malaysia

Al-Rassas¹,

Kamardin²

2015

ASS

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Concentration of ownership in Malaysian public listed companies contributes to agency conflict between majority and minority shareholders. An effective monitoring mechanism is critical to mitigate this conflict. The study aims to examine the influence of board and audit committee independence, internal audit function and ownership concentration on earnings quality proxied by discretionary accruals. The sample of the study 508 companies listed on the Bursa Malaysia Main Market from 2009 to 2012. Two measures of discretionary accruals are used: Modified Jones model (Dechow et al., 1995); and extended Modified Jones Model (Yoon et al., 2006). Using OLS regression, results of the study suggest that audit committee independence and more investment in internal audit function are related to higher earnings quality. However, board of directors' independence and ownership concentration are associated with lower earnings quality. The finding indicates the importance of audit committee independence in producing quality financial reporting. Consistent findings are found for most variables in both models. The findings of the study have implication on the use of measurement of discretionary accruals in earnings quality studies and corporate governance practices in Malaysia.

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“…Furthermore, does financial accountability mediate the influence of internal control on financial performance? Besides, the current literature primarily focuses on internal control in the context of quality-of-service delivery, with limited attention given to financial accountability and performance [ 24 , 29 , 30 ]. Consequently, this study aims to fill this gap by examining the interplay between internal control, financial accountability, and financial performance in the private healthcare sector in the KSA.…”

Section: Introductionmentioning

confidence: 99%

The financial performance of private hospitals in Saudi Arabia: An investigation into the role of internal control and financial accountability

Al Rahhaleh,

Al-khyal,

Daghran Alahmari

et al. 2023

PLoS ONE

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The aim of this study was to examine the relationship between internal control, financial accountability, and financial performance in the private healthcare sector in the Kingdom of Saudi Arabia (KSA) through a questionnaire survey of 78 private hospitals. Drawing on agency theory, the study utilized structural equation modelling with partial least-squares technique to test multiple hypotheses. Results indicate a significant positive relationship between internal control and financial performance, with financial accountability acting as a mediator. Additionally, financial accountability was found to have a direct positive effect on financial performance. These findings provide new evidence for improving financial performance in private hospitals in the KSA through the implementation of internal control and financial accountability measures. Further research could examine additional factors that may impact financial performance in the healthcare sector.

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Impact of internal audit function (IAF) on financial reporting quality (FRQ): Evidence from Saudi Arabia

Cited by 12 publications

References 32 publications

Emerging policies and the effectiveness of corporate governance mechanisms on earning quality

Emerging policies and the effectiveness of corporate governance mechanisms on earning quality

Directors’ Independence, Internal Audit Function, Ownership Concentration and Earnings Quality in Malaysia

The financial performance of private hospitals in Saudi Arabia: An investigation into the role of internal control and financial accountability

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