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The relationship between managerial ability, earnings management and internal control quality on audit fees in Iran

Mahdi Salehi (Ferdowsi University of Mashhad, Mashhad, Iran)
Mahmoud Mousavi Shiri (Payame Noor University, Tehran, Islamic Republic of Iran)
Seyedeh Zahra Hossini (Imam Reza International University of Mashhad, Mashhad, Islamic Republic of Iran)

International Journal of Productivity and Performance Management

ISSN: 1741-0401

Article publication date: 22 July 2019

Abstract

Purpose

The purpose of this paper is to emphasize the relationship between managerial ability, earnings management, internal control quality and audit fees to establish whether or not there is a significant relationship between the variables of managerial ability, earnings management, internal control quality and the audit fees.

Design/methodology/approach

The study sample includes 190 listed companies on the Tehran Stock Exchange during 2009–2016. Research hypotheses were tested using the statistical methods of multivariable linear regression and data envelopment analysis pattern.

Findings

The obtained results indicate that there is a significant and direct relationship between managerial ability and internal control quality as well as real earnings management and internal control quality. Based on the results obtained from the second hypothesis, the authors could claim that there is an inverse and significant relationship managerial ability and audit fees. The third hypothesis also revealed that in companies with lower audit fees, there is a stronger relationship between managerial ability and internal control quality. The results of related tests show no significant relationship between accrual-based earnings management and internal control quality.

Originality/value

This paper is the first study in Iran whose main focus is on the relationship between managerial ability, earnings management, internal control quality and audit fees.

Keywords

Citation

Salehi, M., Mousavi Shiri, M. and Hossini, S.Z. (2019), "The relationship between managerial ability, earnings management and internal control quality on audit fees in Iran", International Journal of Productivity and Performance Management, Vol. 69 No. 4, pp. 685-703. https://doi.org/10.1108/IJPPM-07-2018-0261

Publisher

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Emerald Publishing Limited

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