THE IMPACT ON EARNINGS QUALITY AUDIT AND INTERNAL CONTROL WEAKNESSES IN COMPANIES LISTED ON THE TEHRAN STOCK EXCHANGE

Year 2016, , 285 - 298, 31.12.2016

Mohammad Esmaeili Mahmoud Abolpour Hashem Valipour

https://doi.org/10.17261/Pressacademia.2016.344

Abstract

Forecast accounting earnings and economic change has long time that has attracted investor’s interest, managers, financial analysts, researchers and creditors.  And is counted the most important source of information for investors, creditors and other users, especially on the stock exchange. Therefore, this study examines the impact of earning quality audit and internal control weaknesses in companies listed on the Tehran Stock Exchange. The target population included all companies listed in Tehran Stock Exchange during the period of 2008- 2014, respectively. For statistical analysis used the descriptive statistics and inferential statistics and regression. We used the F index at the error level of 5% and P-Value, for the Significance test of independent variables used the T index 90%, 95% and 99% to evaluate the significance of regression models. The results showed that auditor industry specialization have direct impacts with profit and earnings quality will be increased significantly. Also, the results showed that auditor industry specialization has an impact on earnings quality and as well as weaknesses in internal controls effect on earnings quality and auditor industry specialization, the impact on earnings quality moderated weak internal controls. 

Keywords

Earnings quality, Tehran, Stock Exchange, weak internal controls

References

• Al‐Najjar, B. 2010, “Corporate governance and institutional ownership: evidence from Jordan, Corporate Governance”, The international journal of business in society, 10(2), 176 – 190.
• Al Mutairi, M. E., Tian, G. G. & Tan, A. 2009, “Corporate Finance Practice in Kuwait: A Survey to Confront Theory with Practice”, 22nd Australasian Finance and Banking Conference.
• Bhattacharya, N., Desai, H. & Venkataraman, K. 2013, “Does Earnings Quality Affect Information Asymmetry? Evidence from Trading Costs”. Journal of Contemporary Accounting Research, 30: 482–516.
• Caskey, J. & Hanlon, M. 2005, “Do dividends indicate honesty? The relation between dividends and the quality of earnings”, working paper, University of Michigan, Ann Arbor, MI.
• Chen, S., Shevlin, T. & Tong, Y. 2007, “Does the pricing of financial reporting quality change around dividend changes”, Journal of Accounting Research, 45(1), 1-40.
• Dechow, P. & Dichev, I. 2002, “The quality of accruals and earnings: the role of accrual estimation errors”, The Accounting Review, Vol. 77, s-1, pp. 35-59.
• Diamond, D., & R. Verrecchia. 1991, “Disclosure, liquidity and the cost of capital”. Journal of Finance. 46 (4): 1325–359.
• Febriela, S. & Sylvia V. S., “2014,” Dividend payment and earnings quality: evidence from Indonesia, International Journal of Accounting and Information Management, Vol. 22 Iss: 2, pp.103 – 117.
• Francies, I., Lafond, R., Olsson, P. & Schipper, K. 2005, “The market pricing of accruals quality”, journal of accounting and economics, 39(2), 295-327.
• Foster, N. 2003, “The FASB and the Capital Markets”. The FASB Report. Norwalk, CT: FASB.
• Kim, O., & R. E. Verrecchia. 1994, “Market liquidity and volume around earnings announcements”. Journal of Accounting and Economics. 17 (1): 41–67.
• Krishnan, J. 2005, “Audit Committee Quality and Internal Control: An Empirical Analysis”, the Accounting Review, Vol. 80 (2), 649-675.
• Jamei, N, & Khedri, N. 2016, “Investigation of the relationship between Corporate Governance, Earnings Management and Tax management in Tehran stock exchange”, International Journal of Humanities and Cultural Studies, v 3 (2), p 2073-2081.
• Ge, W, & McVay, S. 2005, “The Disclosure of Material Weaknesses in Internal Control after the Sarbanes‐Oxley Act”. Accounting Horizons, 19 (3), 137-158.
• Hanlon, M., Myers, J. & Shevlin, T. 2007, “Are dividends informative about future earnings”, working paper, University of Washington, Seattle, WA.
• Hassan, S. U. 2013, “Financial Reporting Quality, Does Monitoring Characteristics Matter? An Empirical Analysis of Nigerian Manufacturing Sector”, The Business & Management Review, 3(2): 147-161.
• Imam, M. O., & Malik, M. 2007, “Firm Performance and Corporate Governance through Ownership Structure: Evidence from Bangladesh Stock Market”, International Review of Business Research Papers, 3(4), 88-110.
• Lambert, R., Leuz, C. & Verrecchia, R. E. 2007, “Accounting Information, Disclosure, and the Cost of Capital”, Journal of Accounting Research, 45: 385–420.
• Poorheidari, O, & Borhaninejad, 2012, “The impact of corporate governance features on tax management of companies listed on the Tehran Stock Exchange”, Auditing Knowledge, 49, 1-18.
• Rajgopal, S., & M. Venkatachalam. 2011, “Financial reporting quality and idiosyncratic volatility over the last four decades”, Journal of Accounting and Economics, 51 (1-2): 1–20.
• Setayesh, M. H, Ghorbani, A. & Golmohammadi, M, 2010, “Surveying the effect of corporate governance on smoothing the earnings of companies listed in Tehran stock exchange”, Audit Researches. 2(7): 34-51
• Shirinbakhsh, Sh, & Hassan Khansari, Z. 2005, “Eviews applications in econometrics”, Economic Affairs Research Institute, Tehran.
• Tong, Y.H. & Miao, B. 2011, “Are dividends associated with the quality of earnings”, Accounting Horizons, 25(1), 183-205.
• Ziaee, M., 2014, “The effect of audit quality on the performance of listed companies in Tehran Stock Exchange”, International Letters of Social and Humanistic Sciences, 21, 36-43.