The Effect of Auditor Tenure and Auditor Type on the Reporting of Conservative Earnings

Subject Areas :

Azita Jahanshad ¹ , Morteza Navaei Lavasani ²

1 - استادیار دانشکده اقتصاد و حسابداری دانشگاه آزاد اسلامی واحد تهران مرکزی
2 - کارشناس ارشد حسابداری دانشگاه آزاد اسلامی واحد تهران مرکزی

Received: 2015-05-08 Accepted : 2015-05-08 Published : 2013-08-23

Keywords: Auditor Tenure, Auditor Type, Conservatism, Auditor Rotation,

Abstract :

In Iran, according to "the rule of the trustworthy audit firms of the stock and exchange organization(2007)", after 4 years of audit services, audit firms are not allowed to accept the position of the CPA of the listed companies. The purpose of legislators is to increase the independence of auditors, because they believe the independence of auditors will be decreased in long auditor tenure. This subject was attractive for Researchers to study the effect of auditor tenure on the accounting conservatism to know what will happen in a long tenure. We also test the effect of the auditor type(Audit Organization or other Firms) on the conservatism Index and we used the model of Givoly and Hayn(2000) to measure the conservatism. The statistical society includes the listed companies in Tehran Stock Exchange 2003 to 2010. The result of the study indicated that, there is a positive significant relationship between auditor tenure and accounting conservatism, in our opinion, mandatory auditor rotation does not help to increase the accounting conservatism, and therefore we feel the necessity of the revision in the law of mandatory auditor rotation. On the other hand we found that the relationship between auditor types and accounting conservatism is not significant and it means there is no significant difference in accounting conservatism between audit organization and other firms.

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