The quality of internal auditing and its role in reducing accounting  information asymmetry: An applied study in the banking sector

Abbas Aadi Owaini; Haneen Sami Hadi

doi:10.32792/universityofthi-qar.v21i2.490

Authors

Abbas Aadi Owaini Middle Euphrates Technical University/Al-Musayyib Technical Institute
Haneen Sami Hadi Middle Euphrates Technical University/Al-Musayyib Technical Institute

DOI:

https://doi.org/10.32792/universityofthi-qar.v21i2.490

Keywords:

Quality of internal audit, Asymmetric accounting information, the banking sector

Abstract

The aim of this research is to analyze, study, and interpret the relationship between quality in
internal auditing and inconsistency of accounting information. This study is an applied study
conducted on a sample of banks listed on the Iraq Stock Exchange.The research sample
included eight banks for the period 2024-2025. The researcher used a checklist for the
independent variable, which is the quality of internal auditing and the extent of adherence to
the professional practice standards issued by the Institute of Internal Auditors (IIA). The
following model (Corwin & Schultz, 2012) was used to measure accounting information
asymmetry.
The study concluded that there is a direct, positive effect of the internal audit quality variable
on accounting information asymmetry. A one-unit increase in internal audit quality leads to a
(-0.567) increase in accounting information asymmetry. This means that the quality of internal
auditing contributes significantly to reducing inconsistencies in accounting information in
banks. This is achieved through the application of the professional practice standards for the
internal audit function issued by the Institute of Internal Auditors (IIA), specifically the
attribute standards and performance standards. This, in turn, helps the internal audit function
and tasks to be performed at a high level of quality for accounting information.

References

- Guidance Manual for Internal Audit Units in the Republic of Iraq – Baghdad, (2019), Federal Board of Supreme Audit.

- Bilal, Sayed Hassan Salem, and Al-Asdawi, Mustafa Sayed Mustafa Ali, (2020), "The Impact of Disclosing Key Audit Matters on Information Asymmetry and Audit Report Delays," a selective study on Saudi joint-stock companies, Scientific Journal of Financial and Commercial Studies and Research, Faculty of Commerce, Damietta University, Volume 1, Issue (2), Part 2.

- Khayoun, Ali Mohammed, and Al-Muaini, Saad Salman, (2021), "The Role of Integrated Reporting in Reducing Information Asymmetry," an analytical study of a sample of Iraqi banks listed on the Iraq Stock Exchange, Journal of Financial and Accounting Studies, (89-103), Volume (16), Issue (56).

- Mohsen, Fouad Mohsen, (2021), "The Impact of Accounting Information Asymmetry on Stock Prices and its Reflection on Investment Decisions in Companies Listed on the Iraq Stock Exchange," Thesis submitted to the University of Baghdad - College of Administration and Economics.

- Ahmed, Jia Karim, (2017), "The Role of Using Six Sigma to Activate and Improve Internal Auditing and its Reflection on the Quality of Accounting Information," Exploratory Research on a Sample of Commercial Banks in Sulaymaniyah Governorate, Journal of the University of Human Development, Volume (3), Issue (3).

- Institute of Internal Auditors, (2018), "Standards for the professional practice of internal auditing".

- Institute of Internal Auditors, (2017), "Standards for the professional practice of internal auditing".

- Kusumaningtyas, M., Chariri, A., & Yuyetta, E. N. A. (2019). Information asymmetry, audit quality, and institutional ownership on earnings management: Evidence from mining companies listed on the Indonesia stock exchange. International Journal of Engineering and Advanced Technology, 8, 126-139.?

- Makhlouf, M. H., Soda, M. Z., Oroud, Y., & Ramadan, A. H. (2022). The moderating effect of audit quality on the relationship between information asymmetry and earnings management: evidence from Jordan. Afro-Asian Journal of Finance and Accounting, 12(2), 165-177.?

- Zaidan, A. M., & Neamah, I. S. (2022). The Effect of the Quality of Internal Audit Function to Improve the Operational Efficiency of Companies: An Empirical Study. Webology (ISSN: 1735-188X), 19(1).?

- Nurdiono, N., & Gamayuni, R. R. (2018). The effect of internal auditor competency on internal audit quality and its implication on the accountability of local government. European Research Studies Journal, 21(4), 426-434.?

- Kwabena, K. A. (2017). The effects of internal audit quality on financial performance of firms listed at the Nairobi securities exchange (Doctoral dissertation, University of Nairobi).?

- Ajila, M., & Khaira, Z. (2017). Quality requirements of internal audit services A comprehensive vision. Global Journal of Economic and Business, 2(2), 61-73

- Izedonmi, F. I. O., & Olateru-Olagbegi, A. (2021). Internal Audit Quality and Public Sector Management in Nigeria. European Journal of Social Sciences Studies, 6(5).?

- Louwers , T. J, Ramsay , R. J, Sinason , D. H, Strawser , J. R, Thibodeau , J. C, (2015), "Auditing & Assurance Services", Sixth edition, Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121.

- Pitt, S. A. (2014). Internal audit quality: Developing a quality assurance and improvement program. John Wiley & Sons.?

- Krichene, A., & Baklouti, E. (2021). Internal audit quality: perceptions of Tunisian internal auditors an explanatory research. Journal of Financial Reporting and Accounting, 19(1), 28-54.?

- Welay, P. A., Rosidi, R., & Nurkholis, N. (2019). Analysis of factors affecting internal audit quality: Study at the inspectorate of Maluku Province, Ambon City and West Seram District. International Journal of Multicultural and Multireligious Understanding, 6(6), 116-126.?

- Dania, S. P., Wardayati, S. M., Wahyuni, N. I., Arianto, A. C., & Ningsih, N. (2019). Analysis of Factors Affecting the Quality of Audit Results at Internal Control Unit of University of Jember. Proceeding UII-ICABE, 123-132.?

- Abad, D., Lucas-Pérez, M. E., Minguez-Vera, A., & Yagüe, J. (2017). Does gender diversity on corporate boards reduce information asymmetry in equity markets?. BRQ Business Research Quarterly, 20(3), 192-205.?

- Komalasari, P. T., & Nasih, M. (2020). Information asymmetry in capital market: What, why and how. In Advances in Business, Management and Entrepreneurship (pp. 347-352). CRC Press.

- Rymar, I. E. (2016). Information asymmetry and its impact on cost of equity capital: Volkswagen case.?

- Mavlanova, T., Benbunan-Fich, R., & Koufaris, M. (2012). Signaling theory and information asymmetry in online commerce. Information & management, 49(5), 240-247.?

- Jasman, J., & Amin, M. N. (2017). Internal audit role on information asymmetry and real earnings management. Jurnal Akuntansi dan Auditing Indonesia, 21(2), 95.?