The impact of internal auditing on corruption: Evidence from the emerging market

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Abstract

The main aim of this research is to test the impact of internal auditing on corruption. In recent years, most firms around the world have witnessed a series of financial crises and scandals, this is mainly because of the absence of occurrence and the separation of fraud and corruption in financial reporting. The manipulation of the financial data is caused by the weakness and the disability in the internal auditing system, which negatively affects the level of transparency and disclosure in financial reporting. This issue has increased and exacerbated the level of corruption in the governmental public sector (Hayek et al., 2022). This research contributes to the accounting and auditing literature by improving the corporate governance code and accounting quality. Also, this research contributes to the theory by testing the stewardship theory by providing empirical evidence of how the steward (the internal auditing system reduces corruption). The study used 164 questionnaire forms that were distributed to the internal auditors within 12 Iraqi governorates out of 15 governorates except for the Kurdistan region, which included four domains of 71 questions. The main finding of this research is that internal auditing plays a major role to reduce the level of corruption and helps firms in the public sector to produce high-quality financial reporting.

Keywords: Internal Auditors, Corruption, Public Sector, Stewardship Theory

Authors’ individual contribution: Conceptualization — A.S.A., H.A.N.A.-R., and A.M.A.W.; Methodology — A.S.A., H.A.N.A.-R., and A.M.A.W.; Investigation — A.S.A., H.A.N.A.-R., and A.M.A.W.; Data Curation — A.S.A., H.A.N.A.-R., and A.M.A.W.; Writing — Original Draft — A.S.A., H.A.N.A.-R., and A.M.A.W.; Writing — Review & Editing — A.S.A., H.A.N.A.-R., and A.M.A.W.

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

JEL Classification: M420, H5, C790

Received: 09.07.2022
Accepted: 24.03.2023
Published online: 29.03.2023

How to cite this paper: Abdulhussein, A. S., Al-Refiay, H. A. N., & Wahhab, A. M. A. (2023). The impact of internal auditing on corruption: Evidence from the emerging market [Special issue]. Journal of Governance & Regulation, 12(1), 367–375. https://doi.org/10.22495/jgrv12i1siart15