THE ROLE OF EXTERNAL AUDITING IN EVALUATING THE IMPACT OF CASH FLOW STATEMENT ITEMS ON THE FINANCIAL POSITION OF BANKS

Abstract

Banks encounter numerous operational challenges in managing their activities, particularly in cash flow management, where inflows are frequently lower than outflows. This imbalance results in difficulties in financing their operational requirements and meeting obligations without incurring substantial losses, or in some cases, an inability to settle cash outflows. Such circumstances adversely influence financial performance. The study investigates the shortcomings of external auditing practices in assessing the implications of cash flow statement components on financial position. These shortcomings arise from reliance on inaccurate data detected during audit processes, as well as insufficient attention to the preparation methods of the cash flow statement and to the analysis of patterns and interrelationships among its activities. The research is guided by the assumption that external auditing should emphasise its critical role in examining preparation methods, evaluating statement items, and recognising prevailing trends. The study focuses on the banking sector in Iraq, using the Iraqi National Bank as the sample. Data were collected for the period 2022 to 2024, as these represent the most recent financial statements available during the research timeframe. The findings indicate that the Iraqi National Bank did not incorporate qualitative analysis results or examine interrelationships among activities within the cash flow statement, while external auditing procedures showed limitations in evaluating the influence of these activities on the financial position.