Managerial effectiveness, internal audit quality and financial reporting quality:

Abstract

The aim of the study is to examine the association between managerial effectiveness, internal audit quality and financial reporting quality. The study objectives included; to examine the link between managerial effectiveness and financial reporting quality, to establish the association between managerial effectiveness and internal audit quality, to examine the association between internal audit quality and financial reporting quality, and to establish the mediating relationship of internal audit quality on managerial effectiveness and financial reporting quality among public statutory corporations in Uganda. The study applied the the principal agent theory, and a cross sectional research design with a target population of 82, and a sample size of 66 public statutory corporations identified with the aid of Krejcie and Morgan (1970) Table for determining a sample size and selected basing on simple random sampling technique. The questionnaire instrument was used and checked for validity and reliability using expert judgement and Cronbach alpha coefficient. Descriptive statistics, correlation, regression, and Sobel 1982-Test was used to analyze for mediation effect, and the results indicated a significant correlation between managerial effectiveness, internal audit quality and financial reporting quality, whilst regression results revealed significant association between managerial effectiveness and financial reporting quality (R2 = 0.11, β = 0.49, P < 0.05), managerial effectiveness and internal audit quality (R2 = 0.09, β = 0.37, P ≥ 0.05), and internal audit quality with the quality of financial reporting (R2 =0.67, β = 1.01, P > 0.05). The findings further show that internal audit quality partially mediates managerial effectiveness and financial reporting quality (Sobel Z-value 2.5345268 ≥ P-value of 0.000001). The study concluded that internal audit quality conveys the inputs of managerial effectiveness to induce completeness, consistency, understandability, verifiability and timeliness in financial reporting. The study recommends integrating internal audit quality with managerial effectiveness to improve financial reporting quality. Future scholars should examine the influence of external auditing quality and financial reporting quality to broaden the development and understanding of the concept of organizational auditing.