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Article
Publication date: 18 November 2020

Mojtaba Golmohammadi Shuraki, Omid Pourheidari and Masoud Azizkhani

Type of audit opinion is important for all stakeholders. Firm-specific characteristics have a direct impact on the type of audit opinion. The purpose of this study is to examine…

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Abstract

Purpose

Type of audit opinion is important for all stakeholders. Firm-specific characteristics have a direct impact on the type of audit opinion. The purpose of this study is to examine the association between accounting comparability (as a micro level characteristic), financial reporting quality (as a macro level characteristic) and audit opinions.

Design/methodology/approach

This study uses a multivariate regression analysis to tests it hypotheses to a sample of firms listed in Tehran Stock Exchange during 2015–2019. To measure accounting comparability, the authors use De Franco et al. (2011) model, and Hutton et al. (2009) model to measure financial reporting quality. The authors use type of audit opinion, and auditor's remarks (explanatory notes) as the measure for audit opinions.

Findings

The authors find a negative association between accounting comparability, and the proxies for audit opinion. The authors also find that a negative association between financial reporting quality and audit opinions. These results suggest that higher accounting comparability, and higher financial reporting quality (proxied by earnings quality) increases auditor tendency to issue unmodified audit opinion.

Originality/value

To the authors' best knowledge, this is the first study that empirically examines the association between accounting comparability, financial reporting quality and audit opinion. This study provides empirical support for the theoretical views on the association between financial reporting quality and audit opinion. The results could be of interest of both auditors and managers, especially in emerging capital markets, who seek to improve financial reporting quality.

Details

Asian Review of Accounting, vol. 29 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 3 April 2019

Mojtaba Safipour Afshar, Omid Pourheidari, Bakr Al-Gamrh and Asghar Afshar Jahanshahi

The purpose of this paper is to study whether diverting auditors to erroneous accounts leads to higher effectiveness and detection of errors. Also, this paper investigates the…

Abstract

Purpose

The purpose of this paper is to study whether diverting auditors to erroneous accounts leads to higher effectiveness and detection of errors. Also, this paper investigates the effect of the need for cognitive closure of auditors on audit effectiveness and detection of errors in the presence of audit management.

Design/methodology/approach

The authors used a financial statement containing a diverting statement and several errors for measuring audit management and used a survey to measure auditors’ need for closure. Research sample consisted of 79 independent auditors having above three years of audit experience. The set of financial statement and questionnaire (measuring the need for closure of auditors) was given to auditors and they had enough time to fill them.

Findings

Results show that diverting auditors to accounts containing error does not lead to higher effectiveness and detection of errors. Also, auditors need for closure character does not affect their effectiveness and detection of errors in the financial statements.

Practical implications

Diverting auditors to erroneous accounts leads to higher detection of earning management. With this regard, the results increase the awareness of auditors that diverting auditors away from important errors to easy-to-detect erroneous accounts leads to their belief of achieving the audit objectives by detecting phony errors and misstatements. In other words, the results alert auditors of managers’ techniques of audit management.

Originality/value

This study contributes to the literature on audit management and need for cognitive closure of auditors in Iran’s audit environment and introduces these concepts to this environment. The paper will be of value to Association of Iranian Certified Public accountants to include stricter measure in appraisal of audit firms’ quality and educate its participants about audit management and mediating effect of the need for closure of auditors on the detection of errors and misstatements in financial statements.

Details

Journal of Accounting in Emerging Economies, vol. 9 no. 2
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 21 December 2022

Hamzeh Hosseinpour, Ahmad Khodamipour and Omid Pourheidari

This study aims to investigate the relationship between return and liquidity risk and the impact of the prospect theory value (PTV) as a moderator variable on this relationship.

Abstract

Purpose

This study aims to investigate the relationship between return and liquidity risk and the impact of the prospect theory value (PTV) as a moderator variable on this relationship.

Design/methodology/approach

The statistical population of this study is the companies listed on the Tehran Stock Exchange during the years 2006–2019. In this research, the portfolio construction method and alpha analysis of the factor models and the cross-sectional regression of Fama and Macbeth have been used to analyze the data.

Findings

The results obtained through the portfolio construction method and the cross-sectional regression of Fama and Macbeth show that there is no significant relationship between return and Amihud (2002) criterion (ILLIQ) as liquidity risk. The PTV also does not affect this relationship, but there is a positive and significant relationship between returns and the turnover ratio (TOR) as liquidity risk. In other words, the lower the TOR (higher liquidity risk), the lower the return. On the other hand, the results showed that the PTV affects this relationship.

Originality/value

To the best of the authors’ knowledge, this study is the first to examine the effect of the PTV on the relationship between return and liquidity risk. It is expected that the results of this study can help investors explain returns better through a deeper understanding of the behavior of investors and their decision-making methods. In other words, by examining the PTV as a proxy for behavioral dimension, we can understand that the relationship between return and liquidity risk can be affected by other dimensions like PTV, so when evaluating risk and return, other influential factors should also be considered.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 16 no. 4
Type: Research Article
ISSN: 1753-8394

Keywords

Book part
Publication date: 28 October 2024

Behrooz Badpa, Omid Pourheidari, Ahmad Khodamipour and Venkataraman Iyer

The purpose of this study is to examine if evidence weighting has any effect on auditor's judgment and its relationship with advocacy attitudes. We collected data from 181…

Abstract

The purpose of this study is to examine if evidence weighting has any effect on auditor's judgment and its relationship with advocacy attitudes. We collected data from 181 practicing auditors employed in audit institutions certified by Tehran Stock Exchange in Iran. Our structural equation analysis on these data show that auditor's advocacy attitudes and client identification are related to evidence weighting which in turn affects auditor's judgment. Auditors with higher (lower) advocacy attitudes and client identification overweight client-favorable (client-unfavorable) evidence leading to more (less) acquiescence to client-preferred position. This is tempered by auditor's experience and professional identification. Specifically, we show that auditor advocacy impacts auditor judgment directly as well as indirectly through auditor's evidence weighting process. The findings of the present study add to the literature on auditor judgment and decision-making and highlight the possible benefits of awareness training to tackle the effects of advocacy attitudes on judgments and evidence weighting.

Content available
Book part
Publication date: 28 October 2024

Abstract

Details

Advances in Accounting Behavioral Research Volume 28
Type: Book
ISBN: 978-1-83608-285-9

Article
Publication date: 11 June 2020

Hamid Zarei, Hassan Yazdifar, Mohsen Dahmarde Ghaleno and Ramin azhmaneh

The purpose of the paper is to investigate the extent to which a model based on financial and non-financial variables predicts auditors' decisions to issue qualified audit reports…

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Abstract

Purpose

The purpose of the paper is to investigate the extent to which a model based on financial and non-financial variables predicts auditors' decisions to issue qualified audit reports in the case of companies listed on the Tehran Stock Exchange (TSE).

Design/methodology/approach

The authors utilized data from the financial statements of 96 Iranian firms as the sample over a period of five years (2012–2016). A total of 480 observations were analysed using a probit model through 11 primary financial ratios accompanying non-financial variables, including the type of audit firm, auditor turnover and corporate performance, which affect the issuance of audit reports.

Findings

The results demonstrated high explanatory power of financial ratios and type of audit firm (the national audit organization vs other local audit firms) in explaining qualifications through audit reports. The predictive accuracy of the estimated model is evaluated using a regression model for the probabilities of qualified and clean opinions. The model is reliable, with 72.9% accuracy in classifying the total sample correctly to explain changes in the auditor's opinion.

Research limitations/implications

This study contains some limitations. First, it is likely that similar researches in developed countries set a large sample (e.g. over 1,000 firms) including more years, but the authors cannot follow such a trend due to data access restrictions. Second, banks and financial institutions, investment and holding firms are removed from the sample, because their financial structure is diverse. The third limitation of the study represents the different economic and cultural conditions of Iran compared to other countries. Future studies could focus on internal control material weaknesses or earnings management to predict audit opinion in emerging economies including Iran.

Practical implications

The paper has practical implications and can assist auditors in identifying factors motivating audit report qualifications, mainly in emerging economies.

Originality/value

The paper contributes to auditing research, since very little is known about the determinants of audit opinion in emerging markets including Iran; it also constitutes an addition to previous knowledge about audit opinion in the context of TSE. The paper is one of the rare studies predicting auditor opinions using both financial variables and non-financial metrics.

Details

Journal of Accounting in Emerging Economies, vol. 10 no. 3
Type: Research Article
ISSN: 2042-1168

Keywords

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