Audit quality criteria and their effect on the characteristics of Profit Sensitivity and Precision

Document Type : Research Paper

Authors

1 Department of Accounting, Ahvaz Branch, Islamic Azad University, Ahvaz, Iran

2 دانشیار مدعو، گروه حسابداری، واحد اهواز، دانشگاه آزاد اسلامی، اهواز، ایران / گروه حسابداری، دانشکده اقتصاد و علوم اجتماعی، دانشگاه شهید

3 Department of Economics, Ahvaz Branch, Islamic Azad University, Ahvaz, Iran.

10.22051/jera.2024.46030.3197

Abstract

What increases profitability for shareholders is its quality and sustainability.However, what can control the managed opportunistic behavior and reduce the problems of agency between shareholders and managers and lead to the stabilization of profitability is the quality of auditing. Higher quality audits can affect the amount of optional accruals applied by management and the quality and accuracy of profits. The aim of this study was to investigate the effect of audit quality on the precision and sensitivity characteristics of earnings in companies listed on the Tehran Stock Exchange over a 10-year period from 2012 to 2022 using the information of 105 companies. The hypotheses were tested by multiple regression using generalized least squares (EGLS) method with arrangement of panel data.

The results showed that among the various criteria of auditing quality, the size of the audit firm, the auditor industry specialization, the auditor tenure and the auditor's independence increase the accuracy and sensitivity of profits. However, there was no significant relationship between audit fees and profit accuracy and sensitivity. Auditors can increase the quality of audits, the quality of profits, and their precision and sensitivity by increasing the quality of auditing and reducing agency costs.

Keywords

Main Subjects

Empirical Research in Accounting

Articles in Press, Corrected Proof
Available Online from 21 June 2024

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History

  • Receive Date: 31 December 2023
  • Revise Date: 02 February 2024
  • Accept Date: 29 February 2024

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