The effect of internal audit on fraud financial reporting: An application on independent auditors

The global financial crises and the resulting bankruptcies of large enterprises have once again emphasized the importance of financial information. Risk made up of the result of financial information which includes substantial mistakes will cause lower national productivity due to increased resource costs,wrong investments and credit cards. Since fraud and irregularities cause important economic and social problems, many measures are taken within the scope of possibilities on a global and local basis. In this context, businesses activate auditing bodies such as internal audit established within the business in order to minimize the fraudulent financial reporting they experience. The internal audit activity's position in the organizational structure, training, personnel knowledge, familiarity with management policies and operating procedures, and an understanding of business conditions and the internal control environment enable them to identify and evaluate indicators of fraud that indicate potential fraud and fraudulent financial reporting. In this study, information about internal audit and fraudulent financial reporting techniques is given by using the literature, and it is aimed to analyze the effect of internal audit on awareness of fraudulent financial transactions. The data of the research was obtained by applying a questionnaire, the research questionnaire was applied to the independent auditors working in 150 independent auditing companies operating throughout Turkey, including KAYIK, and data were collected from 112 participants. First of all, Frequency analysis, difference tests, and explanatory factor analysis were carried out in the research questionnaire. Afterwards, reliability and validity analysis was performed for the analysis of the construct validity, and correlation analysis was applied for the testing of the hypotheses. As a result of the analysis of the data, it was determined that internal audit has a significant effect on the awareness of fraudulent financial transactions. In addition, in the last part of the thesis, a model including all variables was proposed by using the PLS SEM method and presented as an additional analysis. Keywords: Audit, Internal Audit, Fraud, Fraudulent Financial Reporting, PLS SEM