Factors Affecting Quality of Audit; Empirical Evidence from Iran

Abstract

This study examines factors affecting quality of audit using empirical evidence from Iran Quality of audit was seen as the degree to which an audit report is free from deficiencies and distortions which show up later on. The quality of an audit was measured in terms of an auditor’s ability to report financial distortions willingly and neutrally. The study acknowledges the positive association between audit quality and audit firm size in existing literature. Though cost of quality has been used as surrogate for measuring quality of audit, this study explores and examines three other variables. The study therefore measures four variables by testing four hypotheses namely,
H1: how the existing rules and regulations affect the auditor’s willingness to report distortions neutrally
H2: how the lack of contract benefits (cost) affects the auditor’s willingness to report distortions neutrally
H3: how market mechanisms in the operational environment affects the auditor’s willingness to report distortions neutrally
H4: how audit firm size relates to the auditor’s ability to report financial distortions neutrally.
The results of the study indicated that oversight rules and regulations as well as market mechanisms in the operational environment affected the auditor’s willingness to report important distortions neutrally (p). Furthermore, (H2) the lack of contract benefit (cost) did not significantly affect the auditor’s willingness to report distortions neutrally.