The Effect of Audit Quality on the Financial Performance of Commercial Banks in Sri Lanka.

Abstract

This research aims to analyse the effect of audit quality on the financial performance of commercial banks in Sri Lanka. A mixed-method approach was employed for this investigation. Primary data was collected through self-administered questionnaires, while secondary data was obtained from the financial statements of commercial banks over the past five years (2019–2024). These analyses aimed to illustrate the relationship between various independent and dependent variables. The independent variables being studied are auditors' independence, competency, and experience, as well as audit committee size and international auditing standards, whereas the dependent variable is return on assets. A research hypothesis was formulated to evaluate the impact of audit quality on commercial bank performance and to test the relationship between them. The findings highlight that auditors' independence, competency, and experience, as well as audit committee size and adherence to international auditing standards, have a significant relationship with financial performance (ROA). The study highlights the significant role of effective audit quality in enhancing financial performance and achieving sustainable growth for commercial banks in Sri Lanka.