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The Moderating Role of Corporate Governance on the Associations of Internal Audit and Its Quality with the Financial Reporting Quality: The Case of Yemeni Banks

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  • Nabil Ahmed Mareai Senan

    (Department of Accounting, College of Business Administration, Prince Sattam bin Abdulaziz University, Alkharj 11942, Saudi Arabia
    Accounting Department, Administrative Science College, Albaydha University, Albaydha 14517, Yemen)

Abstract

This study investigates the moderating effect of corporate governance on the associations of the internal audit and quality of the internal audit with the quality of financial reporting among commercial banks in the Republic of Yemen. The final sample includes 210 internal auditors, heads of internal auditors, chairpersons, and members of audit committees. Using a survey-based methodology, the results of the Smart-PL4 analysis showed a positive association between the internal audit and quality of the internal audit and quality of financial reporting. Interestingly, the results showed an insignificant association between the internal audit, quality of the internal audit, and quality of financial reporting when considering the moderating effect of corporate governance. It is worth noting that the results confirm the existence of a positive relationship between the internal audit, quality of the internal audit, and quality of financial reporting. This confirms the importance of the internal audit and quality of the internal audit in enhancing the quality of financial reports and instilling confidence in improving internal control processes and the financial reporting framework. Among the study’s many contributions are that it enhances current research on the interrelationship between internal auditing, quality of internal audits, and quality of financial reporting. It highlights the pivotal role of the internal audit, its effectiveness, and its ability to improve the quality of financial reports. This study calls for more stringent internal controls and posits that strengthening the internal audit and quality of the internal audit, along with improving corporate governance, can enable managers to raise financial reporting standards in banks. It also provides a mechanism for audit committees to monitor internal audit processes and evaluate internal performance.

Suggested Citation

  • Nabil Ahmed Mareai Senan, 2024. "The Moderating Role of Corporate Governance on the Associations of Internal Audit and Its Quality with the Financial Reporting Quality: The Case of Yemeni Banks," JRFM, MDPI, vol. 17(3), pages 1-16, March.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:3:p:124-:d:1359433
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    References listed on IDEAS

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    1. Stephen Korutaro Nkundabanyanga & Venancio Tauringana & Waswa Balunywa & Stephen Naigo Emitu, 2013. "The association between accounting standards, legal framework and the quality of financial reporting by a government ministry in Uganda," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 3(1), pages 65-81, February.
    2. George Drogalas & Michail Pazarskis & Evgenia Anagnostopoulou & Angeliki Papachristou, 2017. "The Effect of Internal Audit Effectiveness, Auditor Responsibility and Training in Fraud Detection," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 16(4), pages 434-454, December.
    3. Bartov, Eli & Gul, Ferdinand A. & Tsui, J.S.L.Judy S. L., 2000. "Discretionary-accruals models and audit qualifications," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 421-452, December.
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