THE IRANIAN ACCOUNTING AND AUDITING REVIEW
Year:2020 | Volume:27 | Issue:1|Papers Count:6

Objective: In this article, after reviewing the single index for, we introduce a composite index for measuring this by constructing composite index methodology. Methods: Using standard linear discriminant method, a weighted composite index was introduced. In order to achieve the weight for each criterion, the financial data of 148 firms listed on the Tehran Stock Exchange during 2007 were analyzed in two groups. Also, to check the robustness of the financial data over 2003-2006, cross-sectional analysis was performed. Results: The findings showed that the composite index was more comprehensive than the signal index due to its larger dimensions. Also, to test the significance of the index, the success ratio test was used. The results demonstrated the introduced index had higher reliability and can accurately classify the firms into two groups with audit opinion shopping and with no audit opinion shopping. Conclusion: In general, the proposed composite index had more dimensions and, therefore, could better explain the audit opinion shopping. Also, in the proposed composite index, the index of changing the partner auditor firm had the maximum coefficient, suggesting that changing the partner auditor firm could cause less cost and is less visible. On the other hand, the criteria of changing the auditor firm resulted in obtaining the minimum coefficient in the composite index, i. e. changing the auditor firm did not mean that the employer had access to the unqualified opinion of auditor. These findings provided useful information for investors and policy-markers to explain and detect whether any audit opinion shopping has occurred.

Objective: This research analyzed the impact of institutional ownership concentration on the relation between board independence and audit services fees to distinguish between supply & demand based perspectives, and also misalignment effect & expropriation effect hypotheses. Methods: Statistical analyses include 118 firms listed in the Tehran Securities & Exchange over the period 2013 to 2018; thereby, 708 firm-year observations have analyzed. Research hypotheses have investigated through multivariate regression models using panel data and generalized least squares method. Results: According to the results, there is a meaningful and positive relationship between board independence and audit services fees. In addition, there is a meaningful and negative relationship between institutional ownership concentration and audit services fees. Findings show that institutional ownership concentration has meaningful and negative impact on the relation between board independence and audit services fees. Also, these results confirmed at the high level of board independence and high level of ownership concentration. Other findings show that there is no relationship between auditor size and audit services fees. While firm size, debt ratio, receivables and inventories ratios, and audit opinion have a meaningful and positive relationship with audit services fees; but, current ratio and return on assets have meaningful and negative relationship with audit services fees. Conclusion: The positive relationship between board independence and audit services fees is consistent with the demand based perspective of auditing services and complementary approach; also, the negative relationship between institutional ownership concentration and audit services fees is consistent with the supply based perspective of auditing services and substitutive approach. Based on the findings, the negative impact of institutional ownership concentration on the relationship between board independence and audit services fees is consistent with the expropriation effect hypothesis. As a whole, the research results can be useful for financial information users in determining the effective factors on audit fees.

Objective: Considering the importance of the issue of professional judgment in auditing, the purpose of this study is to design a model for auditor's professional judgment, considering the environmental characteristics, attributes and conditions surrounding the audit profession in Iran. Methods: This research used a qualitative research method and a grounded theory approach. By reviewing the opinions of 18 experts in the audit profession, the factors affecting the professional judgment of the auditors were examined and, finally, the "integrated model of professional judgment, " including the causal conditions, intermediary factors and the context, as well as strategies related to professional judgment and their implications are presented. The results of the research led to the formation of a paradigmatic model of research. Results: The model resulted in the identification of 13 categories of causal conditions, 5 categories of phenomena/context, 8 categories of intervening conditions, 4 categories of action strategies and 5 categories of consequences related to the main phenomenon of research (professionalism of judgment). Conclusion: This model can define the variables used in future research by referring to the literature of the auditor's professional judgment. Since the professional judgment of independent auditors has a complex and multifaceted nature, and in addition to the personal characteristics and performance of the auditors, they are influenced by the attributes of the company, the stakeholders, legal and regulatory environment, thus, for a more comprehensive examination of the subject, the modeling of auditor's professional judgment have review from different aspects.

Objective: The goal of this study is to investigate the mediating variables affecting investors’ judgments. Methods: We conduct a 2. 2. 2 between-subject experiment with accounting students as participants to test our hypotheses. Independent variables that have been manipulated or measured are Language sentiment (positive vs. neutral), Readability (less vs. more) and investor sophistication level (less vs. more sophisticated investors). The dependent variable is investors’ forecasts of firm future earnings. The mediating variables are understanding, processing fluency and credibility of an earnings press release. Results: Path analysis shows that understanding and processing fluency mediate the influence of positive language sentiment and low readability of an earnings press release on less sophisticated investors’ earnings judgments. Results further show that earnings press release credibility has the same effect on more sophisticated investors’ earnings judgments. Conclusion: The results of this study show that the use of language sentiment which is compatible with a firm’ s quantitative performance together with increasing the readability of qualitative disclosures can play an important role in improving understanding and enhancing the processing fluency of less sophisticated investors. It can be also a cautionary notice to management and warn them that more sophisticated investors’ perception of disclosure credibility may be impaired by manipulating the language sentiment and readability of qualitative disclosures.

Objective: The aim of the current research is to identify Marketing Strategies in Auditing profession and ranking Strategies using entropy technique. Methods: This research is an applied in terms of research purpose, exploratory in terms of nature and Mix Method (qualitative and quantitative) research in terms of approach. In-depth interviews were used for developing the scale of marketing activities; to this end, the researcher made telephone interviews with 28 certified public accountants (CPA) in two turns. The statistical population includes private sector auditors. Using a simple random sampling, a questionnaire distributed among 289 auditors working in Tehran. Results: The results indicate the eight following strategies as marketing strategies and influencing to impress client in auditing profession; lowballing (dumping or price reduction policy), presenting diversified services more than assurance services, presenting job resume to decision makers, influencing (attracting) clients by influencing board of directors, boards of parent companies, holdings, influencing clients by having joint benefits with meeting intermediaries, performing a high quality auditing intended to job persistence for the present and future clients, interacting clients for the persistence of job and maintaining and influencing client by rotation among auditing firms. Conclusion: In ranking of marketing activities, high quality auditing has the highest rank in order to maintain its work and dumping or price reduction policy.

Objective: The purpose of this study is to examine the relationship between financial statement comparability on cash holdings and the mediating role of financial reporting quality in firms listed on the Tehran Stock Exchange (TSE). Methods: Using data from TSE-listed firms from 2011 to 2017, this study employs multiple regression models and Sobel test to testing the research hypotheses. Results: The results show that financial statement comparability significantly reduces corporate cash holdings. The results also suggest that financial reporting quality (disclosure quality and discretionary accrual) does not have a significant mediating effect on the relationship between comparability and cash holdings. These findings are robust to alternative measures of comparability and cash holdings. Also, additional test shows that trade credit has no mediating role in relationship between financial statement comparability and cash holdings. Conclusion: The results show that investors and creditors rely on financial statements in their economic decision making, thus it is appropriate for regulators, supervisor institutions, and corporate governance bodies to place particular importance on the comparability of financial information. According to the Iranian capital market context and high inflationary economy, firms with high financial statement comparability have easy access to bank loans with low cost. Thus, firms with high financial statements comparability hold low cash. Also, the Iranian capital market context has different context, because of low agency problem and information asymmetry and financial reporting quality has not significant effect on information asymmetry. Thus, financial reporting quality has not mediating role on the relationship between comparability and cash holdings.