ISSN: 2225-8329
Open access
Numerous studies have been done to obtain a written pattern in order to determine auditing quality since 1981 following documentation of auditing quality according to company size by Linda De Angelo. Multiple factors such as auditing company size, tenure period of auditor and report type were applied in various investigations to determine quality. Recently, the tendency to evaluate factors affecting auditing quality has been increased among researchers due to the change of demands of auditor services. Pattern of internal studies have indicated that a company's size (organization as big and society as small) and tenure period of an auditor are the main factors in studies. Divergent findings have been obtained. In this paper a company’s size is considered as auditing quality scale. We examined the two proposed hypothesis using statistical logistic regression and multivariate regression. Tests were conducted using real data related to 155 companies chosen from those companies accepted in Tehran stock exchange during (2004-2009), in these tests the known software SPSS and LISREL were used. Findings have shown that companies with high-investment opportunities have greater discretionary accrual and companies with high-quality accounting have fewer opportunities for investment. It is obvious that companies with higher discretionary accrual and are subjected to profit manipulation have more investment opportunities. Companies that choose organization as independent auditor (this selection as independent auditor is parallel with having higher auditing quality) have less opportunity for investment and as a result have lower profit manipulation. In general, it is obvious that companies with less investment opportunity and less discretionary accrual and lower profit manipulation choose organization as independent auditor. These findings show that although managers of companies with higher investment opportunities are expected to manipulate discretionary accrual and have better auditing quality and organization is chosen as an independent auditor but the mentioned possibility is reduced.
Azar, A., and Momeni, M. (2003). Statistics and its application in management. MI: Samt Publishers.
Baber, W. R., Janakiraman, S. N., Kang, S. H. (1996). Investment opportunities and the structure of executive compensation. Journal of Accounting and Economics 21, pp. 297–318.
Bartov, Ferdinand and Judy. (2000). "Discretionary-Accruals Models and Audit Qualifications", Journal of Accounting and Economic, Vol. 30, No. 3, pp. 421-452.
Davidson, R. A., &Neu, D. (1993). A note on the association between audit firm size and audit quality. Contemporary Accounting Research, 9, pp. 479?488.
DeAngelo. (1981). "Auditor size and audit quality". Journal of Accounting and Economics, vol. 3(3), pp. 183-189.
Dechow, P. M., Sloan, R. G., Sweeney, A. P. (1995). Detecting earnings management. The Accounting Review 70, pp. 193–225.
Defond, M. L., and Jiambalvo, J. (1993), Factors Related to Auditor Client Disagreements over Income-Increasing Accounting Methods, Contemporary Accounting Research, Vol. 9, pp. 415- 431.
Dillon, W. R., Goldstein, M. (1984). Multivariate Analysis: Methods and Applications. John Wiley & Sons, New York, US.
EbrahimiKordlor, A., and Seyedi, S. A. (2008). Role of independent auditors on reducing discretionary accrual items. chapters auditing and accounting, number 57, pp. 3-16.
Gaver, J. J., Gaver, K. M. (1993). Additional evidence on the association between the investment opportunity set and corporate.
Gul, F.A., Tsui, J.S.L. (1998). A test of the free cash flow and debt monitoring hypothesis: Evidence from audit pricing. Journal of Accounting and Economics 24, pp. 219–237.
Harvey, C. R., Lins, K. V., Roper, A. H. (2004). The effect of capital structure when expected agency costs are extreme. Journal of Financial Economics 74, pp. 3–30.
Jalily, M., and Abasabadi. (2010). investigating relation between auditing quality and profit management in Tehran stock exchange, accounting research journal
Lang, L. H. P., Litzenberger, R. (1989). Dividend announcements: cash flow signaling vs. free cash flow hypothesis. Journal of Financial Economics 24, pp. 181–192.
Leenox C. (1999), Audit quality and auditors size: an evaluation of reputation and deep pockets hypotheses, Journal of Business Finance and Accounting, vol. 26, no7-8, pp. 779-805.
McConnell, J. J., Servaes, H. (1995). Equity ownership and the two faces of debt. Journal of Financial Economics 39, pp.131–157.
Myers, S. C. (1977). Determinants of corporate borrowing. Journal of Financial Economics 5, pp. 147–175.
Skinner, D. J. (1993). The investment opportunity set and accounting procedure choice: preliminary evidence. Journal of Accounting and Economics 16, pp. 407–446.
Stevens, J. (1996). Applied multivariate statistics for the social sciences, third ed. Lawrence Erlbaum Associates, Mahwah, NJ, US.
Subramanyam, K. R. (1996). The pricing of discretionary accruals. Journal of Accounting and Economics 22, pp. 249–281.
Tsui, J. S. L., Jaggi, B., Gul, F. A. (2001). CEO domination, growth opportunities, and their impact on audit fees. Journal of Accounting, Auditing and Finance 16, pp. 189–208.
In-Text Citation: (Mousavi & Daneshvar, 2012)
To Cite this Article: Mousavi, S. A., & Daneshvar, B. A. (2012). An Investigation of Relationship between Audit Quality and Investment Opportunities in Tehran Stock Exchange (TSE). International Journal of Academic Research in Accounting Finance and Management Sciences, 2(4), 1–20.
Copyright: © 2021 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode