Examining the impact of stability of Earnings components on audit cost
Abstract:
The "opportunistic" perspective highlights the possibility that managers engage in earnings component sustainability as an opportunistic behavior. This view suggests that the persistence of earnings components is used to obscure information about firms' actual economic performance, which can lead to earnings obscuration and value erosion. And since the business risk of a company (i.e., the client) determines the audit fee, the stability of profit components may have a favorable effect on auditors' pricing decisions and lead to lower audit costs. On the other hand, the persistence of earnings components can be used by managers to intentionally hide information about the firm's true economic performance, which can increase the likelihood of firms engaging in opportunistic earnings management and intentional financial misreporting. Therefore, this research examines the impact of the stability of profit components on audit costs in companies listed on the Tehran Stock Exchange. To conduct this research, a sample of 103 companies was selected from the companies accepted in the Tehran Stock Exchange.
In this research, the effect of stability of profit components on audit cost in companies listed in Tehran Stock Exchange for the period of 1396 to 1401 was investigated, which has a total of 618 observations available for research. The statistical method used in this research is the multivariate regression method using panel data. The results of the research hypotheses indicate that there is an inverse relationship between the stability of profit components and audit costs.