Subscribe to our Newsletter and get informed about new publication regulary and special discounts for subscribers!

ILSHS > Volume 46 > The Effect of Overvalued Equity on the...
< Back to Volume

The Effect of Overvalued Equity on the Relationship between Audit Quality and Earning Quality (Evidence from Iran)

Full Text PDF


The purpose of this article is to investigate the effect of overvalued equity on the relationship between audit quality and earning quality. In this article audit firm size, auditor industry specialization and auditor tenure were used as audit quality variable. The sample population consists of 189 companies listed in Tehran stock Exchange during the period 2008 to 2012. To test the hypotheses, OLS in Eviews has been used and investigation method of data is panel. The results show a reverse relationship between all audit quality variables and absolute discretionary accruals indicating that high audit quality causes higher earning quality. But the existence of overvalued equity cause decreasing or reversing of these relationships, in other words, when a firm is highly valued the accruals’ decreasing effect of high quality auditors is reduced.


International Letters of Social and Humanistic Sciences (Volume 46)
S. K. Ebrahimie et al., "The Effect of Overvalued Equity on the Relationship between Audit Quality and Earning Quality (Evidence from Iran)", International Letters of Social and Humanistic Sciences, Vol. 46, pp. 119-128, 2015
Online since:
Jan 2015

Antle R., Nalebuff B., Journal of Accounting Research 29 (1991) 31-54.

Anderson K., Brooks C., Journal of Business Finance & Accounting 7 (2006) 10631086.

Azibi J., Rajhi M. T. Auditor's Choice and Earning Management after Enron Scandals: Empirical Approach in French Context. The Business & Economics (EABR) and Teaching & Education (TLC) Conferences, Rothenburg, Germany (2008).

Abdul Rahman R., Ali F. H. M., Managerial Auditing Journal 21(7) (2006) 783-804.

Becker C. L., Defond M. L., Jiambalvo J., Subramanyam K. R., Contemporary Accounting Research 15 (1998) 1-24.

Beatty R., The Accounting Review 4 (1989) 693-709.

Carcello J. V., Nagy A. L., Auditing: A Journal of Practice & Theory 23 (2004) 55-69.

Chen J. Earning management and the performance of seasoned equity offerings: A new looks based on agency costs of overvalued equity (2007). Available: https: /server1. tepper. cmu. edu/gsiadoc/WP/2007-E38. pdf.

Chi J. D., Gupta M., Journal of Banking & Finance 33 (2009) 1652-1663.

Chen K. Y., Lin K. L., Zhou J., Managerial Auditing Journal 20(1) (2005) 86-104.

DeAngelo L. E., Journal of Accounting and Economics 3(2) (1981) 113-127.

Davis L. R., Soo B., Trompeter G,. Auditor Tenure, Auditor Independence and Earnings Management. Working Paper, Boston College, Boston, MA, (2000).

Houmes R., Skantz T., Journal of Business Finance & Accounting 37 (2010) 60-92.

Houmes R., Dickins D., O'Keefe R., Advances in Accounting 28 (2012) 235-242.

Houmes Robert, Foley Maggie, Cebula Richard., Accounting Research Journal 26(1) (2013) 56-74.

Jensen M., Financial Management 34 (2005) 5-20.

Memis M. U., Cetenak E. H., International Journal of Economics and Financial Issues 2(4) (2012) 460-469.

Mansi S. A., Maxwell W. F., Miler D. P., Journal of Accounting Research 42 (2004) 755-793.

Renas S. M., Cebula R. J., American Journal of Economics and Sociology 64 (2005) 743-756.

Zgarni I., Hlioui K., Zehri F., International Journal of Accounting and Financial Reporting 2(2) (2012) 17-33. ( Received 09 December 2014; accepted 18 December 2014 ).

Show More Hide