Internal Audit Chief Turnover; the Quality of Financial Reporting and Audit Report Delay

Considering the extensive role of the internal audit chief in the internal audit sector, implementing the company's internal controls and improving quality of financial reporting; and since the importance and effect of internal controls on the financial reporting quality and strengthening the ability of independent auditors to rely on financial statements or reduce time to review financial statements, this study aimed to investigate the relationship between internal audit chief rotation with the quality of financial reporting and delay of independent audit report.
In this research, variables of financial reporting quality and the delay of independent audit report were measured respectively by the modified Jones model and the time interval between the end date of the company's financial year and the date of issuing the independent audit report. So, the data of companies listed in Tehran Securities Exchange for 2013-2022 was gathered and analyzed by regression models.
The results of this research indicated that there is a positive and significant relation between internal audit chief rotation and financial reporting quality. In addition, there is a negative and significant relation between internal audit chief rotation and delay of independent audit report.
The result of this research showed that periodic turnover of the internal audit chief can lead to focus on establishing internal controls on financial reporting and subsequently increase the quality of financial reporting. The reason is that a new internal audit chief can be more independent, motivated and have new knowledge, expertise and insights. So he can do his job more effectively. Also having a new internal audit chief who is relatively independent and has the necessary innovation to perform his job and organizational duties can lead to improve the quality of internal controls on financial reporting. So independent auditors rely more on these controls and reduce their content tests about them. Therefore, with the turnover of the internal audit chief, the delay of independent audit report reduces. According to the results of this research, it is suggested to the members of the audit committee of the companies, as the supervisor of the internal audit, to pay attention to the issue of changing the internal audit chief at appropriate intervals in order to improve the quality of the company's financial reporting. It is also suggested to the shareholders, investors, analysts and institutions supervising the capital market to consider the rotation of the internal audit chief and its possible effects on the quality of financial reporting in their decisions. In addition, independent auditors and their clients are advised to pay attention to the issue of changing the internal audit chief and its effect on the necessary amount of content tests to do and complete the audit of financial statements.