THE ROLE OF AUDIT QUALITY IN ENHANCING FINANCIAL REPORTING TRANSPARENCY: EVIDENCE FROM CORPORATE REPORTING PRACTICES

Abstract

Reliable and transparent financial reporting is essential for investors, shareholders, regulators, and other stakeholders because corporate financial information provides an important basis for economic decision-making and accountability. External auditing plays a significant role in enhancing the credibility of financial statements by providing independent assurance regarding the fairness and reliability of reported information. However, the existence of an external audit does not necessarily guarantee a high level of financial reporting transparency. Differences in auditor independence, professional competence, audit effort, audit committee oversight, auditor reporting, internal controls, and corporate disclosure practices may influence the usefulness and credibility of financial information. Therefore, this study examines the role of audit quality in enhancing financial reporting transparency through corporate reporting practices. The study adopts a documentary research design and relies on secondary documentary data obtained from publicly available annual reports, independent auditor's reports, audit committee reports, corporate-governance disclosures, financial statements, and related corporate reporting documents of selected non-financial companies listed on the Pakistan Stock Exchange. The data are analysed using thematic content analysis, focusing on auditor independence, auditor competence, audit committee oversight, auditor reporting, internal controls, risk management, and financial reporting transparency. The study concludes that audit quality can contribute to greater financial reporting transparency when supported by effective governance, strong auditor independence, competent audit practices, meaningful auditor communication, and comprehensive corporate disclosures. The study recommends that companies improve the specificity and clarity of disclosures, audit committees strengthen oversight and reporting, auditors provide more meaningful audit communication, and regulators strengthen monitoring and enforcement to encourage transparent rather than merely compliance-based corporate reporting.