The Relationship between Audit Quality and Fraud in Listed Companies in Tehran Stock Exchange

Abstract: The present study examines the relationship between audit quality and fraud in listedcompanies in Tehran Stock Exchange. The study tries to found that to what extent the annualadjustments and restatements of balance sheet figures and restatements of profit and lossfigures, which are called fraud here, can mislead auditors and reduce the audit quality. Researchup to now has been done on the basis of audit firm size and firm size. We sought to analyze thesevariables and come to conclusions according to previous research. The research sample consistsof 122 companies in Tehran Stock Exchange in the period of 2007 to 2011. The research statisticalmodel is logistic regression (stepwise). For this study, three hypotheses have been considered.Comparison of dependent variables averages indicate that the restatements rate of balance sheetfigures, relative to the other dependent variables, is more. This means that restatement of balancesheet figures influences audit quality more than other dependent variables (fraud) and has aninverse relation with it. That is to say, the lower the value of these items, the higher is the qualityof audit. Thus, audit quality cannot explain the fraud alone, so that after entering the controlvariables a significant relationship between fraud and audit quality can be found.

Keywords:

Fraud , Audit Quality , Audit Firm Size , Firm Size , Restatements , Annual Adjustments