Role External Auditing and Corporate Governance Practices in Combating Corruption in The Financial Sector: An Exploratory Study of Islamic Banks in Kurdistan

Abstract

The main objective of the study is to the role of external auditing initiatives and corporate governance practices in dealing with incidences of corruption observed in the financial sector. A structural equation model was estimated using data collected from 200 Islamic bank managers, auditors, accountants and other employees in Erbil, Kurdistan using Smart PLS. The findings revealed that auditing financial statements acts as a disciplining device for curbing bribery in environments that encourage corruption. It was concluded that external auditing fosters acceptable ethical conduct essential for fostering good corporate governance practices in financial institutions. The study interestingly concludes that the effectiveness of corporate governance practices to warrant a reduction in corrupt practices is conceivable in an environment with solid external auditing initiatives as evidenced by the moderating analysis results.