Univrsity Of Tehran Press Accounting and Auditing Review 2645-8020 32 4 2025 09 23 Determinants of Financial Statement Audit Contract Allocation and Auditor Independence Determinants of Financial Statement Audit Contract Allocation and Auditor Independence 845 869 104373 10.22059/acctgrev.2025.391235.1009089 FA Masoud Mohammadzadeh Ph.D. Candidate, Department of Accounting, Qom Branch, Islamic Azad University, Qom, Iran. 0009-0006-5973-6970 Syed Mostafa Alavi Assistant Prof., Department of Accounting, Emam Khomini Internatioal University, Ghazvin, Iran. 0009-0002-2897-9049 Nezamoddin Rahimian Assistant Prof., Department of Accounting, Khatam University, Tehran, Iran. 0000-0002-6153-6699 Hossien Moghdam Assistant Prof., Department of Accounting, Qom Branch, Islamic Azad University, Qom, Iran. 0000-0002-5025-8144 Journal Article 2025 03 28 Objective Auditing has long been regarded as a crucial function due to its role in enhancing the reliability of financial statements. The distribution of financial statement audit contracts among auditors and the factors influencing this process represent one of the most critical issues in the auditing profession. Although these issues have significant implications for auditor independence and the reliability of financial reporting, they have received limited attention and continue to pose a major professional challenge. Methods Regarding data collection, this study employed a grounded theory methodology. The necessary data were collected through semi-structured interviews with 12 accounting and auditing experts as well as university professors. The collected data were subsequently analyzed by MAXQDA software, following the three stages of open, axial, and selective coding. Furthermore, in alignment with the research objectives, the interviews were conducted using the snowball sampling method; each interviewee introduced the researcher to other individuals within the community who possessed sufficient expertise and experience related to the subject of the study. Results Based on the three-stage coding process, the data were categorized into causal, contextual, and intervening conditions. These conditions, together with structural and strategic factors, influence the outcomes and consequences. The findings indicate that causal conditions—including social factors and contract evaluation criteria—affect the optimal allocation of audit contracts. This effect, in combination with contextual conditions (environmental, regulatory, and legislative factors) and intervening conditions (audit firm and auditor-related factors, structural factors, and auditor independence), interacts with structural strategies, laws and oversight, and audit firm policies. Consequently, these dynamics affect organizational and environmental conditions, independence, professional ethics, and the quality of reporting. Conclusion Auditor independence is an inseparable element of independent auditing. In the absence of effective regulatory bodies and given the weaknesses in both concurrent and post-audit monitoring, maintaining auditor independence becomes particularly challenging. The findings of this study suggest that distributing audit contracts based on the resources and qualifications of each audit firm can help address this issue. Key factors include the number and composition of professional staff, the number of certified public accountants, industry-specific or regional expertise, and financial autonomy. Allocating contracts in this manner not only strengthens auditor independence and enhances the quality of audit reports but also helps eliminate non-standard or biased relationships. Furthermore, according to the interviewees, the most critical determinant of auditor independence is the financial independence of audit firms from their clients. As long as audit firms rely entirely on audit fees as their primary source of revenue and remain financially dependent on their clients, the concept of independent auditing loses its significance. Objective Auditing has long been regarded as a crucial function due to its role in enhancing the reliability of financial statements. The distribution of financial statement audit contracts among auditors and the factors influencing this process represent one of the most critical issues in the auditing profession. Although these issues have significant implications for auditor independence and the reliability of financial reporting, they have received limited attention and continue to pose a major professional challenge. Methods Regarding data collection, this study employed a grounded theory methodology. The necessary data were collected through semi-structured interviews with 12 accounting and auditing experts as well as university professors. The collected data were subsequently analyzed by MAXQDA software, following the three stages of open, axial, and selective coding. Furthermore, in alignment with the research objectives, the interviews were conducted using the snowball sampling method; each interviewee introduced the researcher to other individuals within the community who possessed sufficient expertise and experience related to the subject of the study. Results Based on the three-stage coding process, the data were categorized into causal, contextual, and intervening conditions. These conditions, together with structural and strategic factors, influence the outcomes and consequences. The findings indicate that causal conditions—including social factors and contract evaluation criteria—affect the optimal allocation of audit contracts. This effect, in combination with contextual conditions (environmental, regulatory, and legislative factors) and intervening conditions (audit firm and auditor-related factors, structural factors, and auditor independence), interacts with structural strategies, laws and oversight, and audit firm policies. Consequently, these dynamics affect organizational and environmental conditions, independence, professional ethics, and the quality of reporting. Conclusion Auditor independence is an inseparable element of independent auditing. In the absence of effective regulatory bodies and given the weaknesses in both concurrent and post-audit monitoring, maintaining auditor independence becomes particularly challenging. The findings of this study suggest that distributing audit contracts based on the resources and qualifications of each audit firm can help address this issue. Key factors include the number and composition of professional staff, the number of certified public accountants, industry-specific or regional expertise, and financial autonomy. Allocating contracts in this manner not only strengthens auditor independence and enhances the quality of audit reports but also helps eliminate non-standard or biased relationships. Furthermore, according to the interviewees, the most critical determinant of auditor independence is the financial independence of audit firms from their clients. As long as audit firms rely entirely on audit fees as their primary source of revenue and remain financially dependent on their clients, the concept of independent auditing loses its significance.

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