The effect of internal audit effectiveness and quality of financial reporting on information asymmetry between manager and auditor

In business units where there is more unique information, the information gap between the auditor and management widens, which can affect the quality of auditing and the quality of accounting information. According to game theory, internal audit as one of the mechanisms of the management system on the one hand can reduce the conflict between the independent auditor and the company and on the other hand can improve the quality of financial reporting. Therefore, the purpose of this study is to investigate the effect of internal audit effectiveness and quality of financial reporting on the information asymmetry of the manager and auditor of companies listed on the Tehran Stock Exchange. For this purpose, a statistical sample consisting of 114 companies listed on the Tehran Stock Exchange for the years 2010 to 2019 was selected. In order to measure the information asymmetry between the manager and the auditor, a combined five-factor index called the distance from the industry index has been used. Data analysis was performed by multivariate regression method using STATA software. The results of testing the research hypotheses showed that the quality of financial reporting and the effectiveness of internal audit lead to a reduction of information asymmetry between the manager and the auditor. Also, the effect of financial reporting quality on manager-auditor information asymmetry is intensified despite the presence of an effective internal auditor. The research findings provide evidence of the internal auditor's supervisory role on the financial reporting process and reduce manager-auditor asymmetry.