Internal Audit Competency and Financial Reporting Quality: Evidence from LinkedIn Human Capital Data
利用领英人力资本数据，研究发现内部审计部门的经验、教育和规模与更高的财务报告质量相关，且企业会通过提升内部审计能力来应对不良报告事件。
SUMMARY Limited availability of human capital data on the internal audit function (IAF) has constrained research on this topic. This study overcomes certain data limitations by using LinkedIn data from Revelio Labs. Using longitudinal data on individual IAF employees, we document that IAF experience, education, and size are associated with higher financial reporting quality. Specifically, we find that IAF competency is inversely associated with the propensity for material weaknesses and misstatements. We further document that firms respond to these adverse reporting events by investing in IAF competency, and these results are driven by improvements to IAF experience and size. Finally, we find that improvements in IAF competency are positively associated with the remediation of material weaknesses. Our findings can help internal audit leaders focus on shaping their functions and aid them in garnering support for investment in the IAF from management and the board. JEL Classifications: M40; M41; M42.