The Power of Assurance: External Audit Quality and Its Influence on Corporate Financial Performance

Abstract

This paper probes the impact of external audit quality on firm performance. External audits function as a critical tool to improve stakeholder confidence and mitigate financial irregularities. This study utilizes a dataset comprising 37 companies for the years 2021 to 2023 across various industries extracted from their financial statements.  This research employs quantitative methodologies including correlation and regression analysis to assess the impact of audit quality on firm performance. The results indicate a positive effect that suggests that better quality external audit can improve profitability indicating that companies audited by reputable and independent firms exhibit stronger financial performance. These results highlight the critical role of rigorous external audits in improving financial health providing valuable insights for stakeholders including regulators, and corporate management. Companies can strengthen their policies when appointing the external auditor. On the other hand, regulators can make policies that can best serve the need of the shareholders. This research adds to the present literature by offering an insight on the intersection of external audit practices and profitability with implications for developing regulatory frameworks.