Reliable Financial Statements: External Auditing System or Financial Statement Insurance?

Main Article Content

Nasrin Azar
Sahar E-Vahdati


Research Aim: This study reviews the literature to find whether financial statement insurance can be substituted for the current external auditing system.
Design/ Methodology/ Approach: This article reviews how financial statement insurance (FSI) advances external audit independence, reduces audit failure, boosts audit quality, and increases the reliability of financial statements.
Research finding: This study shows that the FSI system assists in mitigating the monetary relationship between auditors and the audited companies by forcing companies to purchase insurance for their financial statements. Accordingly, FSI protects investors against any losses due to any misrepresentation instead of having them audited. In this system, companies hire insurance companies, and insurance companies hire external auditors to assess the insurance premiums and policy coverages through auditing financial reports. Also, it guarantees a lack of any misrepresentation or omission in them.
Theoretical contribution/ Originality: This study contributes to the literature by concluding that financial statements insurance can be an alternative to a current audit system and investigates its usability from the perspectives of the components of the system
Practitioner/ Policy implication: The study results can be useful for investors in the capital markets, companies, audit firms, and insurance companies.
Keywords: External Auditors; Investors; Insurance Companies; Financial Statement Insurance
Type of article: Literature Review
JEL Classification: M41, M42, G22


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Article Details

Literature Review
Author Biographies

Nasrin Azar, Head of the department of Accounting and Management, Rasam Higher Education Institute, Alborz, Iran

Nasrin Azar is currently a Senior Lecturer and the Head of the Department of Accounting and Management at Rasam Higher Education Institute in Iran. She received her Ph.D. in Accounting from University of Malaya (UM). She has published more than 10 articles and conference papers in various academic journals, including Scopus, Malaysian indexed journals, Iranian indexed journals. She has conducted a strong thesis regarding Corporate Governance and Earning Quality that has many publication opportunities. She is finalizing those articles. She has reviewed some manuscripts for Iranian indexed journals and Premier Publisher. Nasrin has held many workshops regarding Research and Analysis. She has had more than six years’ experience in teaching at university and more than 10 years’ experience as being a managing director in industrial companies.

Sahar E-Vahdati, Othman Yeop Abdullah Graduate School of Business (OYAGSB), Universiti Utara Malaysia, Kuala Lumpur, Malaysia

Sahar E-Vahdati is currently a Ph.D. and D.Mgmt Programme Director & Senior Lecturer of Accounting and Finance Department at Othman Yeop Abdullah Graduate School of Business (OYAGSB), University Utara Malaysia. She received her Ph.D. in Accounting from University of Malaya (UM). She has published many articles, and conference papers in various academic journals, including ISI-indexed and ABDC, Scopus, and ABS rankings. One of her articles was designated for the consolidation prize and merit award from MIA (Malaysian Institute of Accounting) in 2015. She has also received an international grant from Japan in 2019 for her research proposal. Sahar has reviewed many manuscripts for Scopus-indexed journals, ABS and ABDC journals.


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