Explanation of Income Smoothing in terms of Financing and Auditor's Judgment in Companies with Different Investment Opportunities

Subject Areas :

Omid  Sabaghiyan Toosi ¹ (Department of Accounting, Damavand Branch, Islamic Azad University, Damavand, Iran)
zahra  moradi ² (Department of Accounting, Damavand Branch, Islamic Azad University, Damavand, Iran. (Corresponding Author))
Shohreh  Yazdani ³ (. Department of Accounting, Damavand Branch, Islamic Azad University, Damavand, Iran)

Received: 2023-04-13 Accepted : 2023-06-20 Published : 2023-06-22

Keywords: financing, Income Smoothing, investment opportunities, Materiality, Keywords: Professional Judgment,

Abstract :

AbstractThis study explaining the income smoothing in terms of financing and auditor's judgment in companies with different investment opportunities.The data of 320 companies have been analyzed using eviews econometric software. Through the median value in each investment opportunity criteria, the population was classified into two groups of companies with high and low investment opportunities. Then hypotheses were tested using unstructured estimation with (OLS) and (ARMA) methods.Findings shows in companies with high investment opportunities there is a positive relationship between income smoothing and financing that are separated by the MEQLDTA criteria but in the GROWTHPPE criteria was observed a negative relationship. In companies with low investment opportunities there isn't a relationship between income smoothing and financing that are separated by the MB criteria, but in PPEQGMEQLD criteria was observed a negative relationship. The explanatory variables of the auditor's judgment in both groups have an effect on the control of income smoothing.The findings can be used to identify companies with high investment opportunities. In order to achieve the expected return, it is recommended to pay attention to the auditor's judgment and experience in controlling income smoothing and financing method of companies.By comparing the determination coefficients and Durbin Watson's statistics, it was found that in companies with high investment opportunity, the MEQLDTA criteria and in companies with low investment opportunity, the MB criteria are optimal criterias for distinguishing investments opportunities.

References:

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