FROM EXTERNAL AUDIT ATTRIBUTES TO ORGANIZATIONAL PERFORMANCE; THE MEDIATING ROLE OF FINANCIAL REPORTING CREDIBILITY IN FINANCIAL INSTITUTIONS OF PAKISTAN

Abstract

This study examines the impact of external audit attributes, namely external audit quality, external audit technology, and external audit risk on organizational performance, with financial reporting credibility as a mediating variable. The research focuses on financial institutions listed on the Pakistan Stock Exchange (PSX), including banks, insurance companies, and microfinance institutions. A quantitative research approach was adopted, and data were collected from employees working in these institutions through a structured questionnaire. A total of 343 valid responses were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that external audit quality, external audit technology, and external audit risk have a significant and positive direct impact on organizational performance. However, the mediating role of financial reporting credibility was found to be insignificant. The study contributes to the existing literature by providing empirical evidence from a developing economy context, highlighting that external audit mechanisms act as direct drivers of organizational performance. The findings offer practical implications for financial institutions, regulators, and policymakers in strengthening audit practices to enhance organizational outcomes.