The effect of independent audit quality on financial performance: evidence from Kuveyt Türk

In this thesis, the impact of audit quality on financial performance is examined through the case study of Kuveyt Türk Participation Bank operating in Türkiye. As transparency, accountability, and reliability have become increasingly critical within globalized financial markets, the quality of independent audit services has emerged as a crucial factor for businesses aiming to sustain growth and preserve competitive advantage. Particularly for participation banks operating under interest-free banking principles, the effectiveness of audit processes directly influences both corporate reputation and financial stability. In the theoretical part of the study, the concepts of independent auditing, audit quality, and financial performance metrics were comprehensively discussed. In the empirical part, financial data belonging to Kuveyt Türk Participation Bank for the period 1989–2024 were analyzed. To mitigate the effects of multicollinearity among the variables and to optimize data structure, Principal Component Analysis (PCA) was applied. Following this step, Elastic Net regression analysis was conducted using the newly generated components, offering a more robust and accurate modeling of the relationships between variables compared to traditional regression methods.The empirical findings reveal a statistically significant and positive relationship between audit quality and financial performance. The results demonstrate that high-quality independent auditing improves the reliability of financial statements, thereby enhancing investor confidence and contributing to the improved financial performance of banks. Particularly in the participation banking sector, strengthening audit quality is not only a regulatory requirement but also a strategic necessity for financial resilience and competitive advantage.This thesis adopts a holistic approach by analyzing the impact of audit quality on business performance both theoretically and empirically, contributing to the academic literature and providing practical insights for industry practitioners. In conclusion, recommendations are offered to enhance audit effectiveness and ensure the sustainable financial success of participation banks