The Role of Internal Audit Quality in Mitigating Financial Misstatements: Evidence from Publicly Listed Companies

Abstract

Internal audit quality is a key factor in ensuring the accuracy of financial statements. However, there remains a research gap in understanding how specific attributes of internal audit affect the detection and prevention of financial misstatements. This study aims to address this gap by examining the influence of external audit quality on financial mistatements across diverse industries and geographical contexts. The study utilizes a cross-sectional dataset of publicly listed companies from both developed and emerging markets, providing a comprehensive analysis of how regional differences impact internal audit effectiveness. The results indicate that internal audit independence, expertise, and audit frequency are significant predictors of financial errors, particularly in industries with complex regulatory environments. The findings suggest that companies with robust internal audit practices experience fewer financial discrepancies, reinforcing the importance of internal controls in maintaining corporate transparency and investor trust.