This study aims to examine the effect of audit quality (auditor expertise and discretionary accruals) on financial communication quality and to distinguish the moderating role of corporate governance mechanisms (board size, CEO duality, board gender diversity and block ownership) on this relationship.
Linear regression is used to analyze the annual reports of 150 nonfinancial firms that belong to the CAC All-tradable index for the period 2015–2023.
The empirical results show that auditor expertise has a positive and significant effect on financial communication quality. Furthermore, board size reinforces the negative effect of discretionary accruals on financial communication quality. However, CEO duality and block ownership attenuate the positive effect of auditor expertise on the dependent variable.
Our research covers three areas of research, i.e. audit quality, corporate governance and financial communication research. It presents the moderator role of some governance mechanisms on the relation between audit and financial communication quality. Furthermore, it aims to identify best practices in the governance system that attempt to facilitate and improve the positive impact of audit quality on the quality of financial communication, which increases stakeholder confidence in the firm. We caution readers from generalizing the findings of this study, as our study is based on a well-developed sample. Also, it is limited only to annual reports to measure the financial communication index without looking at other information transmission channels.
This study investigates the moderating role of internal governance mechanisms in the relationship between audit quality and financial communication quality in the French context.
