Assessment of Transparency Impact of Accounting Information on the Cost of the Audit for each Type of Industry

Document Type: Research Paper

Author

Department of Accounting, Arak Branch, Islamic Azad University, Arak, Iran

Abstract

One of the main instruments of accountability in economic activities is auditing. But despite the extent of audit work, determining the fees for this service in our country is not based on a scientific model and reasonably we cannot claim, according to firm's characteristic and with what cost, the work would be done. In this regard, we have tested the impact of transparency of accounting information on audit fees. This paper statically sample consists of 64 firms that are analysed in period of 2011-2016 which obtaining total 320 firm-years; for data analysis, we used Kolmogorov-Smirnov for normality of the data, Durbin-Watson test for test of errors independence or absence of autocorrelation, and finally with the help of t-statistical tests, calculated probability is judged and assessed for each of the hypothesis. There are five main hypotheses in present study. Testing hypotheses is taken using panel data and for data analysis we used multivariate regression estimation and SPSS19, EXCEL and Eviews7 software. After designing and testing hypotheses for each hypothesis, it was concluded that the relationship between transparency of accounting information and auditing costs is established at all levels of the company and also at the corporate level companies with low financial leverage. If the relation between transparency of accounting information and auditing costs at the corporate level with high financial leverage is high, there is no significant linear relationship between high cash and low cash.

Keywords

Main Subjects


[1] Alali, F., Audit fees and discretionary accruals: Compensation structure effect, Managerial Auditing Journal, 2011, 26(2), P. 90-113.

[2] Alavi Tabari, H., Rajabi, R., Shahbazi, M., Relationship between corporate governance and independent audit fees of company, Journal of Accounting, 2012, 5(1), P. 101-75.

[3] Andrade, C., Sandro, B., Gennaro, H., Frederick, M., SOX, Corporate Transparency, And the Cost of Debt Journal of Financial Intermediation,2009, 18(4), P. 541-558.

[4] Barth, J.R., Tong, L., Wenling, L., Tiphon, P., Glenn, Y., The rise and fall of the US mortogage and credit markets, NJ: Wiley and Sons, Inc, 2009.

[5]  Desender, K. , Aguilera, R., Crespi, R., Garcia-Cestone, M, Board Characteristics and Audit Fees: When Does Ownership Matter?, http:..Ssrn.Com.Abstract=1774684.2011.

[6] Ghaemi, M. H., Alavi, S.M., Review of relationship between transparency of accounting information and cash inventory, Management Accounting, 2012, 1(2), P. 78-67.

[7] Griffin, P., Lon, D., Sun, Y., Agency Problems and Audit Fees Further Tests of the Free Cash Flow Hypothesis, Accounting and Finance, 2010, 50(2), P.321–350.

[8] Hesarzadeh, R., Norvash, I., Dimensions of accounting transparency and its relationship with the company's properties in the Tehran Stock Exchange, Stock Exchange Quarterly, 2012, 1(2), P. 24-25.

[9] Johl, S., Khan, A., Audit Pricing in Private Firms: The Effects of Family and Foreign Control, School of Accounting Economics and Finance, Deakin University, Victoria, Australia, On line, Available at: 4T U http://www.afaanz.orgU4T, 2011.

[10] Karim, W. A., Audit Pricing, Audit Concentration and BiG4 Premium in Bangladesh, Working Paper, Saint Marys College of California, Available onwww.ssrn.com. 2010.

[11] Leventis, S., Dimitropoulos, P. E., Audit Pricing, Quality of Earnings and Board Independence: The Case of The Athens Stock Exchange, Advances in Accounting, incorporating Advances in International Accounting, 2010,2(6), P. 325–332.

[12] Lifschutz, S., Jacobi, A., Feldshtein, M., Corporate Governance Characteristics and External Audit Fees: A Study of Large Public Companies in Israel, International Journal of Business and Management, 2010, 5(3), P.126-187.

[13] Mehrani, S., Jamshidi, K., Factors influencing the determining the audit fees, CPAs, 2012, 13(5), P. 78-60.

[14] Nikbakht, M.R., Tanani, M., Examination of Factors Affecting Financial Audit Fees, Journal of Financial Accounting, 2014, 2, P. 132-111.

[15] Rahman Khan, A., Mahboob H., Siddiqui, J., Corporate Ownership Concentration and Audit Fees: The Case of an Emerging Economy, Advances in Accounting, incorporating Advances in International Account, 2011.

[16] Rajabi, R., Muhammad Khoshouyi, H., Agency costs and pricing of independent audit services, Reviews for accounting and auditing, 2012, 15(53), P. 35-52.

[17] Rashidi Baghi, M., Ramezan Ahmadi, M., Vaez, S.A., Effect of audit quality on audit fees of company, Knowledge of Financial Accounting, 2014, 1(5), P.114-192.

[18] Tanani, M., Mansouri, M., Evaluation of the stock market reaction to abnormal audit fees, Journal of Financial Accounting, 2013, 4(8), P. 120-105.

[19] Tsui, J. S., Chen, C. J. &Gul, F. A, Discretionary Accounting Accruals, Managers' Incentives and Audit Fees. Contemporary Accounting Research, 2003, 20(3), P.441 – 464.