Social Identity of Audit Committee Members, Restatements of Financial Statements and Internal Control Weaknesses

Previous professional experiences and social identities of members of the audit committee can influence the performance of the committee and therefore affect important components such as the quality of financial reporting and internal controls. Therefore, the aim of the present study is to investigate the relationship between the social identities of the members of the audit committee of companies and the restatements of financial statements and internal control weaknesses. To achieve the purpose of the study, the composite data of 114 companies listed on the Tehran Stock Exchange in the period 2012-2020 were analyzed using multivariate logistic linear regression. Findings showed that the social identity of the members of the audit committee has a negative and significant effect on the quality of financial reporting with the alternative of financial statements restatements. Also, the social identity of the members of the audit committee has a negative and significant effect on the quality of financial reporting with the alternative of internal control weaknesses. Based on these findings, it can be said that the use of a strong audit committee with a high social identity in companies will greatly reduce the possibility of presenting inaccurate and distorted financial statements and improve the quality of the information provided and reduce the number of times financial statements are presented, and reduce the internal controls weaknesses through more effective monitoring of the effectiveness of internal control systems.