A Composite Index for Audit Opinion Shopping Based on Discriminant Analysis Technique

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Amiri Esmaeil; FAKHARI HOSSEIN

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Title

A Composite Index for Audit Opinion Shopping Based on Discriminant Analysis Technique

Author(s)

Amiri Esmaeil | FAKHARI HOSSEIN | Issue Writer Certificate

Keywords

Audit opinion shoppingQ1

Agency theoryQ2

Discriminant Analysis techniqueQ1

Composite indexQ1

Abstract

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.

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APA: Copy

Amiri, Esmaeil, & FAKHARI, HOSSEIN. (2020). A Composite Index for Audit Opinion Shopping Based on Discriminant Analysis Technique. THE IRANIAN ACCOUNTING AND AUDITING REVIEW, 27(1 ), 1-31. SID. https://sid.ir/paper/357135/en

Vancouver: Copy

Amiri Esmaeil, FAKHARI HOSSEIN. A Composite Index for Audit Opinion Shopping Based on Discriminant Analysis Technique. THE IRANIAN ACCOUNTING AND AUDITING REVIEW[Internet]. 2020;27(1 ):1-31. Available from: https://sid.ir/paper/357135/en

IEEE: Copy

Esmaeil Amiri, and HOSSEIN FAKHARI, “A Composite Index for Audit Opinion Shopping Based on Discriminant Analysis Technique,” THE IRANIAN ACCOUNTING AND AUDITING REVIEW, vol. 27, no. 1 , pp. 1–31, 2020, [Online]. Available: https://sid.ir/paper/357135/en

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