Exploring The Role of Internal Audit Characteristics and Report on Quality in Shaping External Auditors’ Reliance: Evidence From Saudi Arabia
DOI:
https://doi.org/10.14419/cz5m5j85Published
26-06-2025Keywords:
Internal Audit Function, External Auditors’ Reliance, Quality of Internal Audit Reports, Work Performance, Competence, Objectivity, Corporate Govern-ance Quality, Internal Control System Effectiveness, Saudi Arabia, Stakeholder TheoryAbstract
The current study aims to understand and examine the influences of work performance (WP), competence (COM), objectivity (OBJ) as well as corporate governance quality (CGQ) and internal control effectiveness (ICSE) on external auditors’ accreditation (REA) in Saudi Arabia. The mediating role in this study is the internal audit report quality (IRQ). Existing studies have not adequately covered the characteristics, importance, and benefits of internal audit, especially in the Saudi context. The current study is based on a logical and clear approach (positivist approach) through specific theories such as stakeholder theory and RBT theory.
This study is also based on a quantitative approach to understanding the linkage between variables by collecting primary data using a structured questionnaire designed for this purpose. The questionnaires were already distributed via email to the study sample, which consists of audit managers in CPA firms in the Kingdom of Saudi Arabia, to pinpoint relevant facts. To increase response rates, follow-up phone calls were necessary. By targeting all 376 audit firms, the author ensured representativeness and generalizability. For testing the hypothesis, the study relies on collecting questionnaire data. Based on a Structural Equation Model (SEM), the analysis revealed that ICSE, WP, and CGQ are critical determinants of IRQ and REA, with IRQ significantly mediating their effects. Conversely, objectivity and competence did not directly influence IRQ or REA, suggesting that external auditors prioritize tangible performance measures over intangible attributes in the Saudi context. High job performance, effective internal controls, and strong corporate governance are pivotal in enhancing the reports’ quality and fostering reliance. These findings underscore the need for organizations to improve their IAF processes, align internal audit practices with external auditors’ expectations, and leverage high-quality audit reports to build trust and collaboration. The study contributes theoretical insights and practical applications to strengthen the relationship between IAF and REA, particularly in the context of the evolving governance frameworks in Saudi Arabia.
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