Auditing for Accountability: A Literature Review on Risk Management and Financial Reporting Integrity in Inclusive Financial Systems

Abstract

This literature review examines the role of auditing in promoting accountability within inclusive financial systems, with a focus on risk management and financial reporting integrity. Drawing from a synthesis of 10 empirical and review studies spanning Islamic banking, governmental finance, corporate governance, and emerging market contexts (primarily Indonesia, Uganda, Kosovo, Zimbabwe, and broader Africa), the review highlights key mechanisms for enhancing transparency and compliance. Findings reveal that audit quality, including Shariah Supervisory Board characteristics (e.g., age, cross-membership, and meeting frequency), significantly influences Islamic social reporting and bank performance, though board size and qualifications may exert negative effects. Internal audit functions and corporate governance elements, such as board expertise and role performance, demonstrate strong positive associations with financial reporting quality, mitigating risks like non-performing loans and earnings management. Challenges include resource limitations, regulatory gaps, and inefficiencies in Shariah audits, particularly in developing economies. The review underscores the integration of advanced technologies, ESG factors, and harmonized regulations as pivotal for risk mitigation and sustainable financial stability. Implications emphasize the need for optimized governance structures to foster inclusive systems, with recommendations for future research on AI-driven audits and cross-border compliance frameworks.