The effect of the efficiency of communications between audit committee and internal audit on financial reporting quality: A research in BIST

Enterprises exist together with their internal and external environments. Financial statements transfer financial issues that emerge from business activities to internal and external stakeholders. Reflecting the truth of the information presented by these financial reports, which are a means of transferring financial information, is vital in using the information in the decision-making process. The study includes companies registered in Borsa Istanbul (BIST) and the manufacturing sector. The data covers the 2015-2019 period of 81 companies in the manufacturing sector. The data for the companies included in the study for the year 2015-2019 is obtained in two stages. In the first stage, data is collected with a questionnaire to measure the level of communication between the internal audit unit and the audit committee of the enterprises. In the second stage, the balance sheet, income statement, and cash flow statement are required to measure the enterprises' financial reporting quality over discretionary accruals obtained from the Public Disclosure Platform (PDP) and the official websites of the enterprises. The obtained data were subjected to regression analysis using panel data analysis method via Ewievs 10 and Stata 14.1 econometrics package program. The study mainly focuses on the impact of the level of communication between the internal audit function and the audit committee on the quality of financial reporting. According to the findings, the variables of the number of audit committee meetings, leverage, corporate stakeholder ratio and CEO incumbency are statistically significant and positive. The variables of supervisory board independence, supervisory board size, audit committee expertise, holding meetings with internal audit management which does not participate, holding meetings between effective audit committee and internal audit management which does not participate, independence of board management, presence of internal audit, firm size, loss, audit committee tenure, external stakeholder ratio and manager's share of ownership are statistically insignificant.