The Effect of Information Asymmetry on Audit Quality

Document Type : Original Article

Authors

1 Professor of Accounting, Alzahra University, Tehran, Iran

2 Assistant Professor of Accounting, Islamic Azad University, Shar-e-Qods Branch, Tehran, Iran

3 M.A. in Accounting, Islamic Azad University, Kish International Branch, Iran

Abstract

It is expected that audit quality decrease information asymmetry. However, audit quality has different proxies and their effect will be different. Among these proxies this research reviews the effect of audit size, auditor tenure and turn, on agency costs as a proxy of information asymmetry in Tehran Stock Exchange. In this way, this research uses multivariate regression for a sample of 888 companies between 2007 and 2015 and controls factors known to impact information asymmetry. According to the results, among three proxies of audit quality, only audit turn shows positive and meaningful relationship with information asymmetry. In addition، among control variables, company size and debit ratio have same effect on it. As such, in order to increase audit quality and improve available informations, it is recommended that Iran Stock Exchange Organization pay more attention to agency costs.

Keywords

Journal of Iranian Accounting Review
Volume 3, Issue 10
June 2016
Pages 1-18

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