| Abstract: | This study aimed to investigate the influence of internal audit control practices on the quality of
financial reporting within microfinance institutions located in Addis Ababa. The study was conducted
using an explanatory research design to attain this study. The study employs a quantitative research
methodology to gather and estimate primary data sources.the sample population consisted of
directors, managers, internal auditors, and senior accountants, from which 181 active staff members
of microfinance institutions were chosen using a convenient sampling technique to participate in the
survey. Primary data were gathered via self-administered standardized questionnaires directed at
the selected respondents. Data analysis was performed using a multiple linear regression model to
explore the relationship between internal audit control practices and financial reporting quality,
specifically focusing on aspects such as audit standard compliance, auditor autonomy, staff
competency, the effectiveness of the internal control system, and risk mitigation. Both descriptive and
inferential statistical methods were utilized for analysis, facilitated by SPSS version 22.0. The results
indicated that all five internal audit practices exerted a positive and statistically significant impact
on financial reporting quality. Notably, risk mitigation emerged as having the most substantial effect,
followed by auditor independence. The internal control system and audit standard compliance
demonstrated a moderate influence, while the impact of professional competency was comparatively
minimal. In summary, strict adherence to established audit standards plays a crucial role in
enhancing financial reporting quality. The independence of auditors not only facilitates unbiased
assessments but also bolsters the integrity of financial statements. Although professional competence
contributes positively to financial reporting quality, its impact is less pronounced than that of other
factors. The presence of robust risk mitigation strategies and internal control systems within the
institutions mitigates the likelihood of inaccuracies and fraudulent activities, leading to more reliable
financial statements. Ultimately, the effectiveness of audit systems is essential for sustaining auditor
independence and ensuring compliance with relevant standards |
