The Role of Corporate Governance in Enhancing Financial Reporting Integrity: A Systematic Literature Review of the Board of Commissioners, Audit Committee, and Internal Audit

Abstract

Abstract

Objective: This study aims to examine the role of corporate governance in safeguarding financial reporting integrity, with particular emphasis on the board of commissioners, audit committee, and internal audit function. It seeks to identify the governance mechanisms most consistently associated with financial reporting quality and explain the factors underlying variations in empirical findings.

Method: This study employs a limited systematic literature review guided by the PRISMA 2020 framework. A total of 39 records were identified through four search queries, of which 13 studies met the eligibility criteria and were included in the synthesis. The selected studies were analyzed using a narrative-thematic approach to identify recurring patterns, contextual differences, and inconsistencies in the relationships between corporate governance mechanisms and financial reporting integrity.

Results: The synthesis reveals three main patterns. First, the audit committee demonstrates the most consistent association with financial reporting quality, particularly through its independence, expertise, size, and meeting frequency. Second, the effectiveness of independent commissioners is contingent on measurement approaches and regulatory contexts. In Indonesian studies, their effect is often statistically insignificant when their proportion merely meets the minimum regulatory threshold. Third, internal audit contributes more effectively to financial reporting oversight when professional competence and independence are present simultaneously, with its effectiveness further strengthened by the involvement of risk oversight committees. Differences in the proxies used to measure financial reporting integrity emerge as a major source of inconsistency across studies.

Conclusion/Novelty/Implications: This study proposes a three-layer conceptual framework of financial reporting oversight integrating the board of commissioners, audit committee, and internal audit function. Its contribution lies in explaining how these mechanisms interact and why their effectiveness varies across institutional and measurement contexts. The findings highlight the need to strengthen substantive independence, professional expertise, and coordination among oversight mechanisms rather than relying solely on formal compliance with regulatory requirements. Future research should develop more consistent measures of financial reporting integrity and empirically test the proposed framework across different industries and regulatory settings.