Internal audit independence, legal person governance structure, and financial reporting quality

This study measures the independence of internal audit through the lens of audit committee independence and examines its impact on financial reporting quality. Based on empirical analysis using panel data from A-share listed companies in Shanghai and Shenzhen, the research finds that the independence of internal audit contributes to the enhancement of financial reporting quality. Furthermore, legal person governance structure plays a crucial mediating role in this relationship. Specifically, the independence of internal audit can optimize financial reporting quality by expanding board size and diversifying share ownership. Additionally, the promoting effect of internal audit independence is more pronounced in firms with strong executive incentives and high-quality information disclosure.