The impact of external audit quality on improving the financial performance of economic units

Abstract

The research aims to study the role of external audit quality in improving the financial performance of Iraqi economic units by testing the relationship between the dimensions of external audit quality, which are represented by (independence, auditor experience and competence, adherence to professional standards) and the dimensions of financial performance, which are represented by (profitability, operational efficiency, reducing financial risks), as well as studying the factors affecting the quality of external audit. In order to achieve the research objective, a questionnaire was prepared and distributed to a sample of external auditing companies, auditors, and Iraqi profit-making economic units who possess sufficient experience and academic qualifications. The sample included (118) individuals. After analyzing the results, it was concluded that there is a direct relationship with significant moral significance between the quality of external audit and the financial performance of economic units, indicating that the high level of audit quality contributes to improving various aspects of financial performance. The results also concluded that the impact of external audit quality was more evident in the profitability dimension, followed by the financial risk reduction dimension and then operational efficiency, indicating that the role of external audit quality is not limited to the supervisory aspect, but extends to influence administrative and strategic decisions. The study concluded with a set of recommendations, the most important of which is the need to enhance the independence of external auditors through legislation and regulatory controls that reduce the impact of personal relationships or administrative pressures on their professional work, and to call on regulatory and supervisory bodies to adopt mechanisms for periodic evaluation of the effectiveness of external auditing within the framework of improving the efficiency of the financial market in general.