The Effects of External Audits on Financial Performance: Evidence from Commercial Banks in Nangarhar, Afghanistan

Abstract

Through a thorough investigation, this study examines how external audits affect financial performance.  The study attempts to determine the connection between financial results and external audits by using a multilayer linear regression approach.  To ensure representation of the larger population, a random selection procedure was used to pick a sample of 200 individuals.  The primary means of collecting data were questionnaires intended to elicit opinions and thoughts about how external audits affect financial performance.  This thorough approach aims to identify important relationships that improve comprehension of the potential impact of external audits on financial outcomes.  The results show a high positive link between external audits and financial performance, with a correlation coefficient of 65%. This suggests that better financial results may result from higher-quality external audits, underscoring the significance of sound auditing procedures.  The study's independent variables explain a sizable amount of the variance in financial performance, according to the R-Squared value of 0.422, which supports the importance of external audits in this situation.  Additionally, the external audit coefficient is 0.083, indicating significant significance at the 5% level.  This implies a direct positive association, meaning that, assuming all other variables stay the same, financial performance should rise by 0.083 units for every unit increase in the efficacy of external audits.  To sum up, this study emphasizes how important external audits are for improving financial performance. Strong statistical data suggests that upholding excellent auditing standards is essential to improving an organization's financial results.  Businesses can prioritize their auditing procedures by acknowledging the benefits of external audits, which will ultimately result in increased stability and financial health.  In addition to adding to the body of knowledge already available on financial performance, this study offers useful advice for businesses looking to maximize their auditing operations.