Internal Auditor Competence and Financial Performance of Listed Companies: Evidence from the Casablanca Stock Exchange

Abstract

Internal auditor competence is widely recognized as a key driver of internal audit quality. However, research in the Moroccan context has largely conceptualized competence as a unidimensional or aggregate construct, leaving the specific effects of its underlying dimensions on financial performance underexplored. This study addresses this gap by examining whether five dimensions of internal auditor competence, namely academic and professional training, professional experience, technical knowledge, analytical skills, and professional ethics and integrity, are positively associated with the perceived financial performance of companies listed on the Casablanca Stock Exchange. Specifically, the study asks: Is internal auditor competence, through its distinct dimensions, positively associated with the perceived financial performance of CSE listed companies? A quantitative survey was conducted among 108 internal auditors representing 77 listed companies. Financial performance was measured perceptually through questionnaire items referring to return on assets (ROA), return on equity (ROE), return on capital employed (ROCE), and return on sales (ROS), rather than through accounting ratios extracted from financial statements. The proposed relationships were tested using partial least squares structural equation modeling (PLS-SEM) with SmartPLS 3. The findings show that all five competence dimensions are positively and significantly associated with perceived financial performance. Academic and professional training exhibits the strongest relationship (β = 0.401, p < 0.001), followed by professional ethics and integrity (β = 0.370, p = 0.005), professional experience (β = 0.297, p = 0.002), analytical skills (β = 0.232, p = 0.007), and technical knowledge (β = 0.216, p = 0.048). The five competence dimensions explain 49% of the variance in perceived financial performance. These findings support a multidimensional conceptualization of internal auditor competence and extend existing evidence from the Moroccan context by demonstrating that its individual dimensions differ in the strength of their association with perceived financial performance.

Classification JEL: M42; M41; G34.

Paper type: Empirical Research