Disclosing the identity of audit engagement partners and quality of financial accounting information: examining the effect of internal governance mechanisms

Purpose This study aims to investigate how the identity disclosure of audit engagement partners (IDEP) affects the quality of financial reports and explored the moderating effect (if any) of internal governance attributes (i.e. board size, board independence and gender inclusive boards). Design/methodology/approach Archival data from the audited annual reports of microfinance institutions in Ghana between the period 2009–2023 was used to test the study’s hypotheses. Multiple regression estimators were used. Findings The results show that IDEP improves the quality of financial reports of microfinance firms in Ghana, as it is negatively associated with earnings management. In addition, the study finds that in the presence of board size, board independence and board gender diversity, the earnings management reducing effect of IDEP is further amplified. Practical implications The study supports some findings from developed contexts, emphasizing that IDEP is important for financial reporting quality. For microfinance entities, the study further highlights the need to prioritize internal governance measures such as board size, board independence and board gender diversity to improve the quality of financial reporting further in the presence of the disclosure. Originality/value The 2017–2019 financial sector clean-up in Ghana sparked doubts about the quality of accounting information produced by some firms. This study, the first of its kind in the Ghanaian context, provides empirical evidence that disclosing the identity of lead audit engagement partners can promote accountability and transparency, thereby improving financial report quality. However, internal governance indicators are also shown to play a crucial role in this process.