This study aims to examine the effect of internal audit outsourcing and experience of internal auditor on the understandability of financial reporting. It also investigates the moderating effect of self-efficacy on the relationship between internal audit outsourcing and experience of internal auditor with understandability of the financial reporting.
This study has collected primary data through a survey from 211 chief internal auditors and chief financial officers of Jordanian companies listed on the Amman Stock Exchange. The study model was validated and assessed using partial least squares structural equation modeling.
The findings showed the significant positive effect of internal audit outsourcing and experience of internal auditors on the understandability of financial reporting. Self-efficacy moderated between internal audit outsourcing and financial reporting understandability, but not between experience of internal auditors and financial reporting understandability.
The implications of this study entail the need for enhancing investor protection, strengthening control measures, increasing transparency and fostering the overall growth of the financial system to facilitate enterprises, particularly in Jordanian companies. This study noted that the selection of top management as sample of study may result in low response rate additionally, due to the small sample size and time period.
The findings may be of interest to various stakeholders interested in improving the financial reporting process and quality, including external and internal auditors, human resource departments and chief internal audit officers. This study contributes to the literature on internal and external auditing, corporate governance and outsourcing in general by synthesizing existing studies and constructing a framework for understanding the origins, evolution, current state and impact of internal audit outsourcing.
