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Abstract

The study investigates the relationship between risk-based audit quality, financial oversight efficiency and financial corruption reduction in banks listed on the Iraq Stock Exchange in the years 2008–2025 by applying International Professional Practices Framework (IPPF) 2024. A composite risk-based audit quality index was created which included auditor independence, auditor professional qualification, frequency of audit committee meetings, and auditor presence of a formal risk committee. Thirty three hundred annual reports were processed using AI-supported structured extraction with the Gemini API, resulting in an unbalanced final panel of 303 bank-year observations from 20 banks. Random Effects and some robustness and diagnostic tests were used to estimate the main ones. The results indicate that financial oversight efficiency (β = 0.2793, p < 0.001, R2 = 0.2155) and auditor-opinion-based financial corruption reduction proxy (β = 0.1569, p < 0.001, R2 = 0.0674) are positively correlated with risk-based audit quality, and the relationship is statistically significant. Other specifications have these associations as well. The mechanical correlation is however not significant with an independent H1 based on the timeliness of the outcome (β = 0.0350, p = 0.4083), and there is temporal sensitivity suggested by the lagged specifications. The IPPF-period control is a side effect of IPPF and is not considered to be an implementation effect as observations are limited in post-effective-date periods. In general, the results showed evidence of conditional associations, and highlighted the sensitivity of measurements and specifications when assessing the quality of audits based on risk in Iraqi banks.

Keywords

Audit quality risk assessment, Risk-based auditing, Financial oversight efficiency, Financial corruption, IPPF 2024, Iraqi banks, Panel data, Agency theory, Signaling theory

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