The primary objective of most financial statements is to provide a concentrated as well as categorized reports on financial performance and flexibility to help decision makers reach suitable financial decisions. This paper presents an empirical investigation to study the relationship between internal auditing and quality of financial statements on selected firms listed on Tehran Stock Exchange. The proposed study selects 140 firms over the period 2008-2012. Using some regression technique, the study has determined that there was a positive and meaningful relationship between firms with internal auditing in their activities and quality of financial statements.