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The Effect of Internal Audit Reports to Stakeholders on Audit Quality and Earnings Performance: An Empirical Study of the Companies Listed on the London Stock Exchange (LCE) - Essay Example

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An internal audit is an independent and objective consulting and assurance activity in which the idea of adding value to enhance the operations of a company is the guiding principle. It helps the company to accomplish its objective by bringing a systematic and disciplined…
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The Effect of Internal Audit Reports to Stakeholders on Audit Quality and Earnings Performance: An Empirical Study of the Companies Listed on the London Stock Exchange (LCE)
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"The Effect of Internal Audit Reports to Stakeholders on Audit Quality and Earnings Performance: An Empirical Study of the Companies Listed on the London Stock Exchange (LCE)"

Download file to see previous pages nt quality audit underpins the confidence in the credibility and the integrity of the financial statements, which is essential for the proper functioning of the markets and the enhancement of financial operations (Farouk and Hassan, 2014, p. 2). The internal audit department provides an objective, reliable, and neutral service to the management, the board of directors, and the audit committee (Ljubisavljević and Jovanovi, 2011, p. 124). However, the stakeholders are interested in a return on investments, sustainable growth, reliable reporting on financial performance, strong leadership, and business practices (Al-Matari, Al-Swidi and Fadzil, 2014, p. 35).
Recently, the issue of the globalization of auditing has gained more attention, and so the need for ensuring the quality of audit functions at different locations is essential. Similarly, the growth of investments across borders has increased, and thus the importance of evaluating the quality of financial statements attested to by audit firms has increased (Kleinman, Lin and Palmon, 2014, p. 62).
The responsibility of the auditor is not exclusively to satisfy the needs of individual customers or employees. The auditor is responsible to the decision makers, either internally or externally, since they use the information with the belief that there are no material misstatements in the financial statements (Hoa et al., 2014, p. 73). The responsibility of the auditor is, therefore, to act in the interest of the public, since the perception of audit quality is necessary to ensure public confidence in public accounting.
The Institute of Internal Auditors (2015, p.1) defines the essential purpose, nature, and extent of internal auditing. It identifies an internal audit as an independent and purposeful assurance and consulting undertaking that intends to improve the value and functions of a firm. It assists the organization in achieving outlined goals by establishing a systematic, disciplined methodology of assessing ...Download file to see next pagesRead More
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