The role of internal audit function on financial reporting quality: perspective of external Auditors in Tanzania

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Date
2020
Journal Title
Journal ISSN
Volume Title
Publisher
University of Dar es Salaam
Abstract
This study was focused on examining the role of internal audit function (IAF)'s attributes on the quality of financial reporting as perceived by Tanzanian-based external auditors. The study specifically intended to determine the effect of IAF's independence, internal auditors' competence, management support to internal audit function, internal audit resources, internal audit function's reporting channel, and internal audit function's composition on the quality of financial reporting. Quantitative research approach was employed in the study using structured questionnaires distributed to Certified Public Accountants in Public Practice (CPAPPS) with over three years' registered post-qualification experience, as a data collection tool. The study used convenient sampling technique to select Seventy-Two (72) respondents from external audit firms in Tanzania. Collected data were coded and analyzed by using SPSS version 20.0 Findings from the study suggested that management support, internal audit resources, and composition of IAF have a positive role and statistical significance of enhancing financial reporting quality by mitigating earnings management. It was further noted that independence of IAF and its reporting channel mitigate earnings management but have no statistical significance, which suggests that impact of the two attributes is dependent on positive contribution of other IAF attributes. On the other hand, the findings showed that IAF's competence has a negative relationship with financial reporting quality suggesting that internal auditors in Tanzania are motivated by other factors such remuneration and enabling working environment. This study suggests that management support, internal audit resources, and composition of IAF play key role on financial reporting quality followed by independence and reporting channel. The study underscores the role of IAF on financial reporting quality and provides practical implications to Tanzanian entities, audit firms, academicians and policy makers while adding new insights and knowledge to a body of literature especially in developing countries like Tanzania. While this study is based on views from external auditors, further studies may be based on views from audit committee members, accountants, financial analysts and CAEs. Further studies may also be conducted by expanding size of respondents beyond the 56 CPAs based on their views conclusion on this study was drawn
Description
Available in print form, Eat Africana Collection, Dr. Wilbert Chagula Library,(THS EAF HF5668.T34.E934)
Keywords
Auditing, internal, Financial statement, Auditors, Tanzania
Citation
Ezekiel, Y. G. J. (2020) The role of internal audit function on financial reporting quality: perspective of external Auditors in Tanzania. Masters dissertation, University of Dar es Salaam, Dar es Salaam.