Assessing the Influence of Financial, Compliance, and Operational Audits on Financial Reporting Quality in Microfinance Institutions
Mbuh Vincent Sunday
*
School of Business and Economics, Department of Accounting and Auditing, Atlantic International University, Pioneer Plaza, 900 Fort Street Mall 905, Honolulu, Hawaii 96813, USA.
*Author to whom correspondence should be addressed.
Abstract
External auditing strengthens transparency and credibility in microfinance institutions by improving the quality of financial reporting. This study examines how financial, compliance, and operational audits influence reporting reliability in MFIs in Bamenda II Municipality. Drawing on Agency, Accountability, and Stakeholder theories, the model explains how audits reduce information asymmetry, reinforce stewardship obligations, and safeguard the interests of regulators, donors, depositors, and communities. Results show financial audits have the strongest effect by enhancing accuracy and detecting misstatements. Compliance audits improve adherence to COBAC, OHADA, and IFRS requirements. Operational audits support stronger internal controls and more consistent reporting. The study recommends continuous independent audits, improved governance, and greater adoption of digital audit tools to enhance audit efficiency and reduce manual errors. The conceptual model positions the three audit types as direct predictors of financial reporting quality, demonstrating that reporting integrity relies on accurate verification, compliance assurance, and operational discipline working together.
Keywords: External audit, financial reporting quality, microfinance institutions, compliance audit, operational audit