Organizational capital and company auditor selection

Subject Areas : Ethics and accounting

Mohsen Khaniyan ¹ (Master's Degree, Department of Accounting, Qom Branch, Islamic Azad University, Qom, Iran)
Reza Gholamijamkarani ² (Associate Professor, Department of Accounting, Qom Branch, Islamic Azad University, Qom, Iran )

Received: 2023-10-30 Accepted : 2024-06-14 Published : 2024-07-19

Keywords: Organizational capital, Intangible assets, Information asymmetry, Auditor, company capital.,

Abstract :

Purpose: The present study investigates whether companies with high organizational capital are more likely to use high-quality audits or not. Method: In line with the research's purpose, panel data of Tehran Stock Exchange companies from 2012 to 2021 was utilized. Logistic regression, considering the effects of year and industry, was employed to test the hypotheses. Findings: Organizational capital has a positive and significant impact on auditor selection based on size and expertise. Given that high-quality auditing can effectively mitigate information asymmetry, organizations with greater organizational capital will likely have a higher demand for top-notch auditing services. Organizational capital, being an intangible asset, can contribute to information asymmetry, which in turn raises the company's capital costs. Consequently, companies with substantial organizational capital are inclined to conduct superior quality audits to diminish information asymmetry and enhance investor trust by delivering reliable information. Conclusion: Given the significance of corporate capital reporting and its audit, it is recommended that accounting and financial reporting regulators focus on corporate capital requirements and enhance and standardize the rules and regulations concerning corporate capital reporting. Furthermore, investors, professors, researchers, and other stakeholders should recognize organizational capital as a crucial factor influencing the quality of financial reports utilized by managers.

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