Assessing the efficiency of the external auditor in combating money laundering in the financial sector governance

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Abstract

This study evaluates the efficiency of external auditors in combating money laundering in the Sudanese financial sector. It examines how auditors’ capabilities and characteristics influence their effectiveness in anti-money laundering (AML). Quantitative data were collected through a survey of 228 external auditors in Sudan. Partial least squares structural equation modeling (PLS-SEM) was used to analyze the data. Auditors’ skills in rigorous financial analysis and investigation significantly improve their AML performance. Additionally, a strong ethical orientation positively affects auditors’ effectiveness. However, practical experience did not enhance the detection of money laundering. Most notably, the adoption of advanced technologies and analytics tools had the strongest positive impact. The findings highlight the need for enhanced auditor training, greater investments in regulatory technology (RegTech), increased oversight of ethics, and expanded information-sharing between auditors, regulators, and financial institutions. This study provides unique empirical evidence on leveraging external auditors’ capabilities to combat money laundering, specifically within the Sudanese context. The research model demonstrated good explanatory power and predictive accuracy.

Keywords: Anti-Money Laundering, Audit, External Audit, Financial Crime, Forensic Accounting, Regulatory Technology

Authors’ individual contribution: Conceptualization — N.H.A.A.; Methodology — E.M.A.-M.; Software — E.M.A.-M.; Validation — E.M.A.-M.; Formal Analysis — M.A.A.-B.; Investigation — A.A. and A.M.O.; Resources — A.A. and O.A.A.M.; Data Curation — N.H.A.A. and E.M.A.-M.; Writing — Original Draft — N.H.A.A. and E.M.A.-M.; Writing — Review & Editing — N.H.A.A., E.M.A.-M., M.A.A.-B., A.A., A.M.O., and O.A.A.M.; Visualization — A.A., A.M.O., and O.A.A.M.; Supervision — E.M.A.-M. and A.A.; Project Administration — E.M.A.-M.; Funding Acquisition — A.A., A.M.O., and O.A.A.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G23, M42, M48

Received: 05.04.2024
Revised: 22.07.2024; 28.08.2024; 29.01.2025
Accepted: 07.02.2025
Published online: 11.02.2025

How to cite this paper: Alnor, N. H. A., Al-Matari, E. M., Al-Bukhrani, M. A., Alhebri, A., Omer, A. M., & Mohammed, O. A. A. (2025). Assessing the efficiency of the external auditor in combating money laundering in the financial sector governance [Special issue]. Journal of Governance & Regulation, 14(1), 262–276. https://doi.org/10.22495/jgrv14i1siart3