The Moderating Effect of Auditing Report on the Relation between Internal Control Weakness Disclosure and Information Asymmetry

Document Type : Research Paper

Authors

1 Associate Professor of Accounting, University of Mazandaran

2 Phd. of Accounting, University of Mazandaran,

Abstract

According to the agency theory, due to interest conflict between firm managers and investors, auditing report affects financial statements validity and may increase or decrease information asymmetry in capital market. Internal control weakness report is one of the reports whose reliability may be affected by audit report and may moderate information asymmetry in the capital market. So, this study is aimed to investigate the relation between disclosure report of internal controls weakness and information asymmetry and moderating effect of audit report on this relation in firms listed in TSE. To do this, the 3 years (2012 to 2014) data about internal controls weaknesses of firms listed in Tehran Stock Exchange is analyzed by panel data analysis method. The results show that there is a significant relation between disclosure of internal controls weakness and information asymmetry and also, audit report has a moderating effect on this relation. These results confirm the important role of auditing in validation of financial statements and reduction of information asymmetry.
 

Keywords

References

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History

  • Receive Date: 11 June 2017
  • Revise Date: 23 April 2018
  • Accept Date: 29 August 2017

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