The impact of audit quality on the relationship between earnings management and financial performance of companies during the COVID-19 pandemic

Subject Areas :

Maryam Davarzani ¹ , Malektaj Maleki Oskouei ² , Mohammad Hassani ³

1 - Master in Accounting, Department of Accounting, North Tehran Branch, Islamic Azad University, Tehran, Iran
2 - Department of Accounting, North Tehran Branch, Islamic Azad University, Tehran, Iran
3 - Department of Accounting & Auditing, North Tehran Branch, Islamic Azad University, Tehran, Iran

Received: 2024-10-05 Accepted : 2024-12-10 Published : 2024-12-20

Keywords: Audit quality, COVID-19 pandemic, earnings management, financial performance.,

Abstract :

Purpose: In recent years, the COVID-19 virus has brought significant consequences to various fields, including capital markets and the global economy. The purpose of this paper is to investigate the impact of audit quality on the relationship between earnings management and financial performance of companies listed on the Tehran Stock Exchange during the COVID-19 pandemic.

Methodology: To test the hypotheses of the research, a sample consisting of 106 companies listed on the Tehran Stock Exchange was collected for the period 2011 to 2021, and the results were analyzed based on the multiple regression model and using panel data.

Findings: The findings showed that the COVID-19 pandemic has an impact on the financial performance of companies, accrual earnings management and auditor reputation, but it has not had a significant effect on real earnings management and auditor tenure. Earnings management also has a significant relationship with the financial performance of companies. Auditor reputation does not affect the relationship between accrual earnings management and financial performance of companies, but it has a negative and significant effect on the relationship between accrual earnings management and financial performance of companies. Auditor tenure has a positive and significant effect on the relationship between accrual earnings management and financial performance of companies, but it does not affect the relationship between real earnings management and financial performance of companies.

Originality: This research covers the existing gap regarding the impact of financial crises, the last of which was the COVID-19 pandemic, on the financial performance of companies and the audit quality in this era as much as possible. It also investigates the motivations of earnings management. Managers tend to present a favorable image of themselves to investors therefore this research examines the relationship between earnings management and financial performance during the pandemic.

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