The Roles of External Auditors on Financial Information Quality

Chnar Abdullah Rashid1 and Naji Afrasyaw Fatah2

1Sulaimani Polytechnic University, Technical College of Administration
Accounting Technique Department, Sulaymaniyah, Kurdistan Region, Iraq

2Sulaimani Polytechnic University, Technical College of Administration,
Public Relations & Marketing Technique Department, Sulaymaniyah, Iraq
Correspondence: [email protected]

Received: August 13, 2022 | Revised: September 13, 2022 | Published: September 20, 2022

 

Abstract

The aim of this study is to explain and assess the reasons why auditors devote time and resources to auditing a company’s financial statements. In addition, attempts are made to explain the reasons for gathering further audit evidence in specific areas of the entity’s reporting and operations. In addition, the roles of external auditors are critically assessed. Thus, the hypothesis has been made in which external auditor has a significant effect on financial information quality. Moreover, we hypothesize that external auditors can rely on the internal audit function but with further audit evidence. For testing the hypotheses, a questionnaire has distributed among internal and external auditors in public and private companies and organizations. The findings suggest that external auditors have a significant effect on financial information quality. Furthermore, external auditors cannot rely only on the internal auditors, instead, he/she must gather audit evidence to give his/her opinion regarding a true and fair view of the company’s financial statement.

Keywords: external auditor (EA), internal auditor (IA), audit evidence, corporate governance (CG) and reasonable assurance.

Download the PDF Document 

DOI: https://doi.org/10.23918/ejmss.V3i2p1

Citation
Rashid, C. A., & Fatah, N. A (2022). The Roles of External Auditors on Financial Information Quality. Eurasian Journal of Management & Social Sciences, 3(2), 1-13. https://doi.org/10.23918/ejmss.V3i2p1

© Rashid, C. A., & Fatah, N. A, Published by EJMSS. This article is published under the Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0) license. Anyone may copy and redistribute the material in any medium or format, subject to full attribution to the original publication and authors. The full terms of this license may be seen at https://creativecommons.org/licenses/by-nc/2.0/

References

Al‐Twaijry, A. A., Brierley, J. A., & Gwilliam, D. R. (2004). An examination of the relationship between internal and external audit in the Saudi Arabian corporate sector. Managerial auditing journal.

Bame-Aldred, C. W., Brandon, D. M., Messier Jr, W. F., Rittenberg, L. E., & Stefaniak, C. M. (2013). A summary of research on external auditor reliance on the internal audit function. Auditing: A Journal of Practice & Theory, 32(Supplement 1), 251-286.

Breger, D., Edmonds, M., & Ortegren, M. (2020). Internal audit standard compliance, potentially competing duties, and external auditors’ reliance decision. Journal of Corporate Accounting & Finance, 31(1), 112-124.

Budur, T. (2020). The role of online teaching tools on the perception of the students during the lockdown of Covid-19. International Journal of Social Sciences & Educational Studies, 7(3), 178-190.

Budur, T., Abdullah Rashid, C., & Poturak, M. (2018). Students’ perceptions on university selection, decision making process: A case study in Kurdistan Region of Iraq. International Journal of Social Sciences & Educational Studies, 5(1), 133-144.

Demir, A., Budur, T., Omer, H. M., & Heshmati, A. (2021). Links between knowledge management and organizational sustainability: does the ISO 9001 certification have an effect? Knowledge Management Research & Practice, 1-14.

Dezoort, F. T., Houston, R. W., & Peters, M. F. (2001). The impact of internal auditor compensation and role on external auditors’ planning judgments and decisions. Contemporary Accounting Research, 18(2), 257-281.

Čular, M., Slapničar, S., & Vuko, T. (2020). The effect of internal auditors’ engagement in risk management consulting on external auditors’ reliance decision. European Accounting Review, 29(5), 999-1020.

Desai, N. K., Gerard, G. J., & Tripathy, A. (2011). Internal audit sourcing arrangements and reliance by external auditors. Auditing: A Journal of Practice & Theory, 30(1), 149-171.

Fatah, N. A., Hamad, H. A., & Qader, K. S. (2021). The Role of Internal Audit on Financial Performance Under IIA Standards: A Survey Study of Selected Iraqi Banks. QALAAI ZANIST JOURNAL, 6(2), 1028-1048.

Fatah, N. A. J. I. (2018). Factors affecting customers’ decision for taking out bank loans: A case of Sulaymaniyah city commercial banks (Doctoral dissertation, Master thesis of Middle East University).

Glover, S. M., Prawitt, D. F., & Wood, D. A. (2008). Internal audit sourcing arrangement and the external auditor’s reliance decision. Contemporary accounting research, 25(1), 193-213.

Haron, H., Chambers, A., Ramsi, R., & Ismail, I. (2004). The reliance of external auditors on internal auditors. Managerial auditing journal.

Ismael, B. A., Ahmed, R. A., Yaba, J. A., Hamawandy, N. M., Abdullah, R., Jamil, D. A., & Sulaiman, A. A. (2020). The Effects of Computerized Accounting System on Auditing Process: A Case Study from Northern Iraq. Solid State Technology, 63(5), 8564-8578.

Jaf, R. A. S., & hamid Ahmad, K. A. (2021). The Role of Accounting Mechanisms for Bank Governance in Improving the Quality of the Information Content of the Interim Financial Reports: An Exploratory Study of The Opinions of a Sample of Workers in Private Iraqi Banks Operating in The Kurdistan Region/Iraq. QALAAI ZANIST JOURNAL, 6(1), 279-305.

Karim, A. H. M., AL-Shatnawi, H. M., Jaf, R. A. S., Al-Kake, F., & Hamawandy, N. M. (2020). The role of adopting strategic audit to improve audit quality. management, 7(11), 2020.

Mihret, D. G., & Admassu, M. A. (2011). Reliance of external auditors on internal audit work: A corporate governance perspective. International business research, 4(2), 67-79.

Munro, L., & Stewart, J. (2010). External auditors’ reliance on internal audit: the impact of sourcing arrangements and consulting activities. Accounting & Finance, 50(2), 371-387.

Noori, T. M., & Rashid, C. A. External Auditor’s Responsibility Regardying To Going Concern Assumption In His/Hers Report: Case of Kurdistan Region/Iraq.

Pirchegger, B., & Wagenhofer, A. (1999). Financial information on the Internet: a survey of the homepages of Austrian companies. European Accounting Review, 8(2), 383-395.

Porter, B., Simon, J., & Hatherly, D. (2003). Principles of external auditing. John Wiley & Sons.

Rashid, C. A. (2017). The Importance of Audit Procedure in Collecting Audit Evidence/Case of Kurdistan Region/Iraq. International Journal of Social Sciences & Educational Studies, 4(2), 15.

Rashid, C. A. (2018). Efficiency of financial ratios analysis for evaluating companies’ liquidity. International Journal of Social Sciences & Educational Studies, 4(4), 110.

Rashid, C. A. (2019). Pricing policy and its impact on the profitability. International Journal of Finance & Banking Studies, 8(3), 101-108.

Sabir, R. A. (2022). the The Role of International Financial Reporting Standards (IFRS) to Encourage International Investments in the Kurdistan Region-Iraq: An applied study on a sample of banks listed in the Iraqi Stock Exchange. Academic Journal of Nawroz University, 11(1), 30-46.

Saunders, W. M., Goldenberg, C. N., & Gallimore, R. (2009). Increasing achievement by focusing grade-level teams on improving classroom learning: A prospective, quasi-experimental study of Title I schools.

Zaiţ, A., & Bertea, P. S. P. E. (2011). Methods for testing discriminant validity. Management & Marketing Journal, 9(2), 217-224.

Visits: 129