Accounting and Auditing Research

Accounting and Auditing Research

The Relationship between Importance of Business Groups and the Audit Quality of the parent company: with Emphasize on auditor’s characteristics

Document Type : Original Article

Authors
Mehnoosh Shahraki 1
Hamideh Asnaashari 2
Abolfazl Kargozar 1
1 MSc., Faculty of Management and Accounting, Shahid Beheshti university, Tehran, Iran
2 Assistant Prof., Faculty of Management and Accounting, Shahid Beheshti university, Tehran, Iran
10.22034/iaar.2023.185376
Abstract
Objective: The purpose of this study is to examine the relationship between the importance of business groups and audit quality with regard to auditor’s characteristics.
Method: The research hypotheses were tested by estimated generalized least squares (EGLS) method. 27 business groups listed on Tehran Stock Exchange (TSE) in the period of 2012 to 2018 were selected as the sample of the research.
Results: The importance of the business group for auditors is positively and significantly related to audit quality of the parent company. In addition, the auditor's reputation weakens the positive relationship between the importance of business groups and audit quality.  Furthermore, while auditor's experience affects this relationship positively, the auditor's specialization in the industry does not show any effect.
Conclusion: Increasing the financial dependency of independent auditors to business groups improves the audit quality.  This improvement is affected by the auditor's reputation and experience.
Contribution: In this research, the concept of auditor’s benefits in business groups and audit quality is put under scrutiny for the first time in Iran. Since auditors can investigate some subsidiaries beside the parent, their independence and understanding’s scope are impacted simultaneously. Auditor’s independence and factors affect it is one of important subject in auditing field. In this research, the auditor’s benefits in business groups as an interested factor is examined.
Keywords
Audit Quality
Auditor’s Characteristics
Importance of Business Group
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Accounting and Auditing Research
Volume 15, Issue 59
Autumn 2023
Pages 161-180