The Impact of Some Corporate Governance Mechanisms on the Auditor’s Report Content

Document Type : Research Paper



The financial information audit is a tool for reducing the investment risk and for improving the internal and external organizational decision making quality. The aim of this study is the impact of some corporate governance mechanisms on the auditor’s report content between Tehran Stock Exchange (TSE) listed companies. The population of the study is 81 firms (486 observations) during the years of 2006 to 2012. The results show that the probability of receiving unqualified reports in companies with larger audit firms and institutional owners is more. Also, by separating the functions of Chairman and CEO (Duality), the probability of receiving unqualified reports is reduced. Institutional owners and large audit firms reduce the number of paragraphs before the opinion paragraph. Also, the results show that CEO dual responsibility and large audit firms reduce the number of paragraphs after the opinion paragraph. On the other hand, institutional owners and large audit firms reduces the disagreement clauses numbers and the independence of the board of directors increases the number of disagreement clauses.


Amini, P., Mohammadi, K. & Abbasi, SH. (2011). Factors affecting the issuance of qualified audit report, the application of neural networks. Journal of Management Accounting, 4 (11): 25-39. (in Persian)
Baradaran Hasanzadeh, R., Badavar Nahandi, Y. & Hossein Babaei, Gh. (2012). A Survey of the Relationship between Corporate Governance with Created Shareholder Value (CSV) and Economic Value Added (EVA). The Iranian Accounting and Auditing Review, 19(68): 1-16. (in Persian)
Barizah, N., Baker, A., Rahim, A., Rahman, A. & Rashid, A. (2005). Factors influencing -auditor independence. Managerial Auditing Journal, 20(8): 273-356.
Beasley, M. (1996). An empirical analysis of the relation between the board of director composition and financial statement fraud. The Accounting Review, 71(4): 433-465.
Craswell, J. & Laughton, S. (2002). Auditor independence and fee dependence. Journal of Accounting and Economics, 33(2): 253-275.
Elson, C. M., Helms, P. M. & Moncus, J. R. (2002). Corporate Governance Reform and Reemergence from Bankruptcy: Putting the Structure Back in Restructuring. Vanderbilt Law Review, 55(1): 1917-1932.
Emby, R. & Davidson, A. (1998). The effects of engagement factors on Auditor independence. Journal of International Accounting, Auditing & Taxation, 7(2):163-179.
Fama, E.F. & Jensen, M.C. (1983). The separation of ownership and control. The Journal of Law and Economics, 26(2): 301-325.
Farrugia, J. & Baldacchino, J. (2005). Qualified audit reports in malta. Managerial Auditing Journal, 20(8): 823–843.
Gul, F.A., Lee, D.S. & Lynn, M. (1992). A note on audit qualification and switches: some further evidence from a small sample study. Journal of International Accounting, Auditing & Taxation, 1(1): 111-120.
Habibzadeh Baygi. S J., Najriyan, M., Najari, H. & Kholousi, A. (2012). The Effects of Corporate Governance Mechanism on the Audit Report: Applying Fuzzy Regression, International Journal of Business and Management Tomorrow, 2(7): 1-12.
Hassas Yeganeh, Y. & Azinfar, K. (2010). Relationship between audit Quality and audit firm size. The Iranian Accounting and Auditing Review, 17 (61): 85-98. (in Persian)
Hassas Yeganeh, Y. & Dadash, I. (2010 A). Effect of corporate governance on the independent auditor's opinion. Journal of Management Accounting, 3(5):  65-73. (in Persian)
Hassas Yeganeh, Y. & Dadash, I. (2010 B). The effect of corporate governance on auditors' decisions about risk and planning. The Iranian Accounting and Auditing Review, 2 (5): 39-63. (in Persian)
Hudaib, M. & Cooke, T.E. (2005). The impact of managing director changes and financial distress on audit qualification and auditor switching. Journal of Business Finance & Accounting, 32 (9/10): 1170–1210.
Jahankhani, A. (1994). Strategies of Long-term corporate financing. Journal­ of­ Financial Research, 1(2): 5-36. (in Persian)
Jamil Al-Sufy, F., Almbaideen, H., Al- Abbadi, H. & Makhlouf, M. (2013). Corporate governance and Its Impact on the Quality of Accounting Information in the Industrial Community Shareholding Companies Listed in Amman Financial Market-Jordan. International Journal of Humanities and Social Science, 3(5): 184-195.
Lin, J. & Liu, M. (2009). The impact of corporate governance on auditor choice: Evidence from China. Journal of international Accounting, Auditing and Taxation, 18(1): 44-59.
Lin, W.J. & Hwang, I. M. (2010). Audit Quality, Corporate Governance, and Earnings Management: A Meta-Analysis. International Journal of Auditing, 14(1): 57-77.
Mashayekhi, B. & Jalali, F. (2012). Cultural values ​​and corporate governance. Journal of Financial Research, 4(14): 51-61. (in Persian)
Maug, E. (1998). Large shareholders as monitors: Is there a trade-off between liquidity and control? Journal of Finance, 53(1): 65-98.
Moustafa, S. & Abd Elsalam, M. (2012). Corporate Governance Practices and Audit Quality: An Empirical Study of the Listed Companies in Egypt. World Academy of Science, Engineering and Technology, 71(1): 1292-1297.
Namazi, M., Bayazidi, A. & Jabbarzadeh Kangarlue, S. (2011). Relationship between audit quality and earnings management of Listed companies in Tehran Stock Exchange. Journal of Accounting Research, 3(9): 1-9.
(in Persian)
Nikbakht, M. & Taheri, Z. (2014). Investigating the Relationship between Corporate Governance and Systematic Risk. The Iranian Accounting and Auditing Review, 21(1): 109-126. (in Persian)
Noravesh, I. & Ebrahimi Kordlar, A. (2005). Survey of the relation ship between Composition of shareholders with information asymmetry and usefulness of the accounting performance criteria. The Iranian Accounting and Auditing Review, 4 (42): 97-124. (in Persian)
Norvesh, I., Karami, G. & Vafi Sani, J. (2009). Surviving the relationship between corporate governance mechanisms and agency costs of firms listed in Tehran Stock Exchange. Journal of Accounting Research, 1 (1): 4-27. (in Persian)
Pereira, A. N. (2009). Corporate governance and quality of Accounting Information: The Relation of content and logit between fiscal board and independent auditor opinion in Brazilian companies listed at BOVESPA (2006). Working paper, Social Science Research Network Electronic Paper Collection.
Ramazan-Ahmadi, M. & Jamali, K. (2014). The Effect of Audit Quality on Future Stock Returns of Listed Companies in Tehran Stock Exchange. The Iranian Accounting and Auditing Review, 20(4): 1-20. (in Persian)
Setayesh, M., Jamaliyanpour, M. (2009). A Survey of the Relationship between financial ratio and non-financial variables on auditor opinion. Journal of Accounting Research, 1(2): 130-157. (in Persian)
Spathis, T. (2003). Audit Qualification, Firm Litigation, and Financial Information: An Empirical Analysis in Greece. International Journal of Auditing, 7(1): 71-85.