Auditors Reaction to Companies Earnings Volatility

Document Type : Original Article

Authors

1 Instructor, Department of Accounting, Faculty of Accounting, Payame Noor university, Ramhormoz, .Iran.

2 Ph.D. Student, Department of Accounting, Faculty of Accounting, Sari branch.Islamic Azad University .Sari, Iran.

3 Assistant Professor, Department of Accounting, Faculty of Accounting,Shoushtar branch. Islamic Azad University, Shoushtar, Iran.

4 M.Sc.of Accounting , Faculty of Accounting,, Islamic Azad University, Ahvaz branch. Ahvaz,. Iran

Abstract

 The purpose of this study is to investigate the reaction of auditors to Earnings volatility, for which the effect of earnings fluctuations on the audit report lag and auditing fees of companies listed on the Tehran Stock Exchange was investigated.
In this study, to test the hypotheses, the required information related to the research variables was collected from the financial statements of 150 companies listed on the Tehran Stock Exchange during the period 1390 to 1399. To test the two research hypotheses, two multivariate regression models with panel data using random effects method were used.
The findings of the test of research hypotheses indicate that in companies listed on the Tehran Stock Exchange, Earnings volatility has a significant positive effect on the audit report lag. Also, the research findings showed that Earnings volatility also have an effect on audit fees. Positive has meaning. The results indicate that in Tehran Stock Exchange, with the increase of Earnings volatility, the audit report lag increases. In fact, as profit volatility increases, the inherent risk of auditing increases, and auditors will conduct more content tests to reduce overall risk. Performing more tests by auditors will also increase the delay in submitting the audit report. The results also showed that with increasing Earnings volatility, the audit fee increases. As profit fluctuations increase audit risk, auditors should also be more diligent in their audit process, so increasing Earnings volatility leads to increased audit fees.

Keywords


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