The Research Department of Economics and Management of Tadbir Nikan Business, Marketing, and Finance Open 3092-6238 In Press 2027 08 01 Social Trust and Financial Reporting Quality: The Differing Roles of Internal and External Capabilities of Audit Firms Social Trust and Financial Reporting Quality: The Differing Roles of Internal and External Capabilities of Audit Firms 1 16 EN Journal Article 2026 06 23 <p>The present study aimed to examine the effect of social trust on financial reporting quality and to explain the differing roles of audit firms’ internal and external capabilities in this relationship. In terms of purpose, the study was applied, and in terms of methodology, it employed a descriptive-survey design. The statistical population comprised partners of audit firms accredited by the Securities and Exchange Organization (SEO). Based on the predetermined sample size, 159 valid questionnaires were collected through purposive sampling and used in the analyses. Financial reporting quality was measured using the questionnaire developed by Aldemore et al., while social trust was assessed using the questionnaire developed by Saffari Gerayli and Valian. In addition, audit firm capabilities were examined in two dimensions: internal capabilities and external capabilities. Data were analyzed using structural equation modeling (SEM) and SmartPLS software. The findings indicated that social trust has a positive and significant effect on financial reporting quality; therefore, higher levels of social trust in the professional environment can contribute to improvements in financial reporting quality. The results also demonstrated that audit firms’ internal capabilities have a positive and significant moderating role in the relationship between social trust and financial reporting quality, meaning that stronger internal capabilities enhance the positive effect of social trust on financial reporting quality. In contrast, audit firms’ external capabilities have a negative and significant moderating role in this relationship, such that an increase in these capabilities within the research model reduces the magnitude of the positive effect of social trust on financial reporting quality. Overall, the findings indicate that social trust alone is insufficient to enhance financial reporting quality and that the type of capabilities possessed by audit firms can play a decisive role in determining how this effect materializes. Whereas internal capabilities strengthen the relationship between social trust and financial reporting quality, external capabilities do not perform such a role, and their moderating effect operates in the direction of weakening this relationship. Accordingly, strengthening audit firms’ internal capabilities, alongside establishing and maintaining social trust, can provide a more favorable basis for improving financial reporting quality.</p> https://www.bmfopen.com/index.php/bmfopen/article/download/640/463