Develop a Model for Selecting an Independent Auditor in Iran

Document Type : Research Paper


1 Associate Prof., Department of Accounting, Faculty of Management, University of Tehran, Tehran, Iran.

2 Ph.D. Candidate, Department of Accounting, Alborz Campus, University of Tehran, Tehran, Iran.


Objective: One important purpose of financial reporting is to provide useful information for decision making. Users of accounting information make their necessary decisions based on the information reported in the financial statements. Given the crucial role of independent auditors in the accreditation of financial statements and accounting information released by corporations, auditors play as an external organizational mechanism for controlling managers. The formation of the Society of Certified Public Accountants in Iran in 2001 has led to a rapid growth in the number of private audit firms and increased competition in the Iranian audit market, followed by a change of auditor and selection of a new auditor. Choosing an independent auditor is the most important decision that shareholders make to increase the credibility of their financial statements. In this study, the pattern of selecting an auditor in Iran is studied and it is tried to determine a complete and comprehensive pattern of selection from the viewpoint of the factors involved in this issue, including auditing profession first, then audit firms and finally the owners.
Methods: The research approach is exploratory. According to the data type, qualitative research method was used. This research is a type of developmental research. According to the qualitative research method, requirement data was collected through grounded theory and interview. Open coding, axial coding and selective coding were done as well. Finally, research model designed based on the theoretical framework.
Results: In this study, based on a systematic approach to fundamental theory, the pattern of external auditor selection with its explanatory components is explained. These components include causal conditions, context, confounding factors, strategies and consequences of selecting an external auditor.
Conclusion: In designing the auditor selection pattern, the Corporate's motivation for selecting the auditor has been identified as causal in the context of macroeconomic conditions and the general state of the capital market. Auditor selection strategies also include different forms and methods, including the legal form and the actual form. The most important factors that interfere with these strategies are the influential characteristics of the audit firm, the requirements of the rules, the communication and understanding between the employer and the auditor, and the audit fee. The most important strategies for improving auditor selection include: increasing the transparency of business activities, increasing the effectiveness of the audit committee, creating more appropriate criteria for selection, overseeing the selection of an auditor, selecting an independent auditor, enhancing academic research, and promoting a public culture that can have consequences at company level, capital market and macro level.


Alavi Tabari, S.H., & Haji Moradkhani, H. (2015). The relationship between audit quality and stock liquidity. Financial Accounting and Auditing Research, 7 (27), 93-109. (in Persian)
Banimahd, B. (2011). Investigating factors influencing the auditor’s accepted opinion. Journal of securities exchange, 4 (13), 59-83. (in Persian)
Banimahd, B., & Jafari Moafi, R. (2013). Accruals Quality and Auditor Selection. Empirical Studies in Financial Accounting, 11 (13), 81-98. (in Persian)
Banimahd, B., & Vafaei, E. (2012). The effect of client size, audit report, state ownership, financial leverage and profitability on auditor selection; evidence from Iran. African Journal of Business Management, 6 (3), 4100-4105. (in Persian)
Fadaly, D.S. (2018). Determination of auditor choice in emerging markets: evidence from Saudi arabia. The business and management review, 9 (3), 65-85.
Godard, F., & Schmidt, M. (2019). Attributes influencing Clients’ Auditor Choices: The Expectation Gaps between Auditors and Board Members. Department of Financial Reporting and Audit, ESCP Europe Berlin, 1-20. Available at SSRN:
Jafari Nasab Kermani, N., Molanazari, M., & Rahmani, A. (2019). Challenges and Opportunities of Changing the Auditor Report in Iran: Accounting and auditing review, 26 (3), 348-370. (in Persian)
Khodadadi, V., Rashidi Baghi, M. (2013). Shareholder Voting on Auditor Selection, Audit Fees, and Audit Quality. Auditor Magazine, (64), 122-168. (in Persian)
Kitiwong, W., & Srijunpetch, S. (2018). Auditor Choices and Audit Fees: Do clients select their audit firms or do audit firms choose their clients? Journal of Accounting Professions, (14) 107-128. 
Malekian, E., & Pashaie, A. (2012). The Impact of Corporate Governance on Auditor Selection in Companies Listed in Tehran Stock Exchange. Journal of Empirical Research in Accounting, 2 (5), 21-31. (in Persian)
Mande, V., Son, M., & Song, H. (2017). Auditor search periods as signals of engagement risk: effects on auditor choice and audit pricing. Advances in Accounting, 37, 15-29.
Namazi, M., & Saeedi, M. (2014). The relationship between board characteristics and auditor selection. Financial Accounting and Auditing Research, 6 (22), 1-28. (in Persian)
Nikbakht, M., Shabanzadeh, M., & Konarkar, A. (2016). The relationship between audit fees and auditor experience with audit quality. Journal of Management Studies and Accounting, 2(1), 190-208. (in Persian)
Nikkhah Azad, A., & Mojtahedzadeh, V. (2004). Investigating the Areas of Auditors' Responsibilities from the Perspective of Audit Service Users and Auditors. Accounting and auditing review, (26), 5-70. (in Persian)
Nurul Houq, M., Monem, R. M., & Van Zijl, T. (2012). Government quality, auditor choice and adoption of IFRS: A cross country analysis Advances in Accounting. Incorporating Advances in International Accounting, 28(2), 307-316.
Payne, L.J., & Jensen, L. K. (2003). Audit Pricing and Audit Quality: The Influence of the Introduction of Price Competition. Available in:
Safari Gerayli, M., & Zamani, A. (2015). Factors affecting the auditor choice. Second National Conference on Accounting, Management and Economics of Iran, Islamic Azad University, Bandar gaz. (in Persian)
Sajjadi, S. H., & Ebrahimi Mand, M. (2009). Diminishing factors of auditor independence. Journal of Accounting Advances in Shiraz University, 1 (1), 95-112. (in Persian)
Salehi, M., Mousavi Shiri, M., Nekouee, S., & Kamal Ahmadi, Sh. (2015). Prediction of auditor's selectoin by using Heuristic Algoritms in Tehran Stock Exchange. Journal management system, 4 (14), 63-74. (in Persian)
Tamoradi, A., Rostami Nia, R., & Sarkamarian, S. (2018). The effect of political communication on the relationship between auditor selection and transparency of accounting information. Journal of Accounting Research and Economical Science, 2 (2), 1-15. (in Persian)
Togbolo, U., & Ejiro, S. (2016). Factors affecting auditor’s choice in Nigeria. Ph D thesis. Department of accounting, University of Benin.
Vakilifard, H., Mohamadi, S., & Kazeminuri, S. (2015). Profit quality and auditor selection. Quarterly Financial Accounting, 6 (22), 151-168. (in Persian)
Wang, Y. (2013). Evidence on the choice of Chinese companis of external audit firms. Master thesis Department Accountancy, Tilburg University, Tilburg, Netherlands.
Zarepour, S., & Farhadi Andrabi, S. (2018). The impact of political communications on audit fees and auditor selection. Journal of Accounting and Management vision, 1 (3), 28-42. (in Persian)