The role of internal audit on transparency and financial reporting quality: external auditors’ perspective

The intent of the study was to assess the external auditors view towards the role of internal audit function on financial reporting quality and transparency in Ethiopia. From the total of 63 private audit firms in Ethiopia, registered in Federal Office of Auditor General as of 2013, 12 audit firms located in Addis Ababa were selected purposively based on their grade. 140 Self administered questionnaires were distributed to employees (auditors) in the selected audit firms. To analyze the collected data, descriptive data analysis method was employed. The findings of the study revealed that based on the external auditors’ view, internal audit function has considerable effect on financial reporting quality by detecting fraud and insuring integrity and reliability of financial statements. Furthermore, auditors believe that the internal audit function improves transparency in organizations.