Internal audit issues and their impact on the quality of financial reporting

Аннотация

This paper examines the core challenges confronting internal audit functions and evaluates their implications for the quality of financial reporting. Drawing on prior research emphasizing the role of internal audits in enhancing transparency, the study situates its analysis in the context of small and medium-sized enterprises (SMEs) that experience acute resource constraints and heightened vulnerability to fraud and misstatements. Key findings reveal that methodological incoherence—evidenced by a lack of unified audit standards—coupled with incomplete adoption of advanced data-analytics tools significantly undermines the reliability of financial disclosures. Moreover, widespread digitalization introduces additional complexities, including cybersecurity threats and the need for specialized IT expertise. These deficiencies can inflate audit risk and detection failures, ultimately jeopardizing stakeholder trust. The paper concludes with targeted recommendations to refine audit procedures, integrate robust technological solutions, and foster stronger engagement of managerial and shareholder communities in sustaining high-quality financial statements.