Investigating the Relationship between Earnings Quality and Prior Period Adjustments of the Listed Companies in Tehran Stock Exchange

Document Type : Original Article

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Abstract

Considering the prevalence of annual adjustments between Iranian companies the main purpose of this study is to empirically investigate the relationship between earnings quality and prior period adjustments for listed companies in Tehran Stock Exchange (TSE). Therefore, a sample of 102 listed companies in TSE between 2008 and 2013 were investigated. Accruals quality and earnings smoothing were selected as earnings quality proxies. In conducting this study, one main hypothesis was proposed. To test this hypothesis multiple linear regression analysis were conducted. The results of the hypothesis testing demonstrated that there is a significant negative relationship between proxies of earnings quality and magnitude of prior period adjustments. In other words, the more the earnings quality, the less prior period adjustments in future years.

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Journal of Iranian Accounting Review
Volume 1, Issue 3 - Serial Number 3
September 2014
Pages 19-39

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