Examining and explaining the relationship between internal audit and financial reporting quality

Internal auditing is still an emerging profession. Internal audit plays an important role in helping organizations to achieve their goals and protect their assets. In addition, internal audit has become a critical management tool to achieve effective control in organizations. Internal audit is recognized as one of the keys to corporate governance, whose role has evolved over time. The evolution in Iran's economic environment, especially in recent years, has caused more attention to be paid to corporate governance as a supervisory mechanism, one of the pillars of which is the internal audit unit, and it plays a decisive role in financial reporting and the validity of financial statements. The main purpose of this research is to examine and explain the relationship between internal audit and the quality of accruals as a representative of the quality of financial reporting in companies admitted to the Tehran Stock Exchange. The time period of this research is between 2007 and 2016, which includes two periods, 5 years before the requirement of internal audit and 5 years after that for companies admitted to the Tehran Stock Exchange, which is done using multivariate regression analysis method. In this research, the model of Kohlbeck and Warfield (2008) was used to measure the quality of accruals and the data of 109 companies were used to test the hypothesis. The results of the coefficients from the hypothesis test showed that the implementation of internal audit had a significant and negative impact on the quality of accruals.