Investigating the Effect of Corporate Governance and Internal Audit Quality on the Financial Reporting Quality

Companies, as economic units, are always looking for profitability and gaining more wealth. For various reasons, the most important of which is the separation of ownership from management, in addition to the task of conducting economic activity, companies are also responsible for responding to people outside the company. The most effective form of accountability, based on empirical evidence, is financial reporting. The financial reporting quality reflects the accuracy of financial statements in providing information about the company's operations, especially expected cash flows, in order to inform investors. Therefore, studying the factors affecting the financial reporting quality is important. Based on the above, the present study investigates the effect of corporate governance and the internal audit quality on the financial reporting quality in companies listed on the Tehran Stock Exchange. In order to achieve the above objectives, two hypotheses were formulated. Therefore, in order to test the research hypothesis, a sample of 108 firms was selected from the firms listed in Tehran Stock Exchange during the period 2014 to 2020. Multivariate regression model based on combined data was used to test the research hypothesis. The results of this study show that there is a positive relationship between corporate governance and the financial reporting quality, which means that with increasing corporate governance, the financial reporting quality will increase; In addition, there is a positive and significant relationship between the internal audit quality and the financial reporting quality, which means that with increasing the internal audit quality, the financial reporting quality will increase.