Audit Fee and the Basis of its Determination and Reasons for Dumping in Iran and the Effect of that on Financial Reporting Quality

Subject Areas : Emerging technology in Accounting

Shahram Chahrmahali ¹ , Roya Darabi ² , Abolfazl Gharani ³ , Hassan Chenari ⁴

1 - دانشگاه آزاد اسلامی واحد تهران جنول
2 - دانشیار دانشگاه آزاد اسلامی واحد تهران جنوب
3 - Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran
4 - گروه آموزشی حسابداری، واحد تهران جنوب، دانشگاه آزاد اسلامی، تهران، ایران

Received: 2023-09-01 Accepted : 2023-09-18 Published : 2023-09-22

Keywords: Audit Fee, Financial Reporting Quality, Audit Quality,

Abstract :

Objective: This study investigates the audit fee and the basis for determining that and the reasons for dumping in Iran and the impact of dumping on the quality of financial reporting. Methodology: The research method in the first stage to analyze the qualitative data - a questionnaire from interviews with experts – is to test the research hypotheses and the structural equation model with the help of Smart PLS Software. In the second stage, to analyze the quantitative data - information obtained from financial statements in the period 2015 to 2020 in 100 companies listed on the Tehran Stock Exchange - is to test the research hypotheses, multivariate regression with panel data. Results: The results of testing the qualitative data showed that audit quality, expertise in the industry of the auditing firm, reputation of the auditing firm, type of audit comment, length of the auditor's tenure, size of the client, dependence of the client on business groups, having several companies by one client, large number of auditing firms, lack of work in the auditing profession, elimination of Article 272 of the Law on Direct Taxes, exemption of small companies from auditing, low income of auditing firms, loss of auditing firms, lack of adherence of members of the community to professional conduct, lack of auditor expertise and the auditor's lack of knowledge of the profession, lack of accuracy in selecting certified public accountants by relevant authorities, the size of the auditing firm, being a single product and focusing only on auditing services and not paying attention to non-auditing services, economic crisis, lack of specific and compiled principles to determine the audit fee by the Society of Certified Public Accountants of Iran and other relevant authorities, the factor of reputation and credibility of the client’s company, audit risk, ownership structure of the client’s company, lack of supervision of audit services rates by relevant organizations are those critical factors that according to the theory of auditing professionals and activists in Iran, affect the audit fee and price breaking in auditing contracts. The results obtained from the effect of dumping on audit fees and competition between audit firms on the quality of financial reporting indicate that dumping in audit fees and competition between audit firms reduce the quality of financial reporting. Innovation: The research results can be helpful for investors, creditors, policymakers, standards and regulatory bodies. It can also effectively develop and improve the quality of auditing and economic development by identifying existing weaknesses and challenges and explaining theoretical frameworks.

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