Influence of Auditor Characteristics on Earnings Quality of Companies Listed on Tehran Stock Exchange Using Discretionary Accruals Method

Accounting profession researchers and practitioners consider earnings as one of the most importantcriteria for evaluating the performance and determining the value of the company, and they are forced toevaluate the reported earnings by economic units. To assess the earning a concept called quality ofearnings is used. This study seeks to investigate the impact of certain factors, including the auditcharacteristics (size of audit firm, switch of auditors and auditor opinion) on the quality of earningsthrough the variable of discretionary accruals. In addition, other factors such as control variables ofoperating leverage, profitability, firm size, and the operational risk were examined. Thus the sample dataconsisted of 130 participants were collected for a five year period (2008-2013) and using modelexplanation, three proposed hypotheses in this study were tested. Regression analysis was used to test thehypotheses. The results indicate a significant negative correlation between the size of audit institutionand discretionary accruals. This means that there is a negative and significant relationship between thevariable of the audit institution size and earnings quality. Also, there is a non- significant positiverelationship between the variables of the type of auditor opinion and discretionary accruals. Thisindicates a non- significant positive relationship between the variables of the type of auditor opinion andearnings quality. Finally, there is a negative and non- significant correlation between the variable of theswitch of audit and the index of discretionary accruals. This represents a negative and non- significantrelationship between the switch of auditor and earnings quality variables.

Keywords:

Earnings Quality , Discretionary Accruals , Jones Modified Model , Auditor Characteristics