Journal of Accounting and Management Vision

Journal of Accounting and Management Vision

The role of management's optimistic expectations in the relationship between audit tenure and information uncertainty

Document Type : Original Article

Author
Master of Auditing, Dehaqan Branch, Islamic Azad University, Dehaqan, Iran.
Abstract
This study aims to explain the mechanism of the effect of auditor tenure on companies' information uncertainty and to examine the moderating role of management's optimistic expectations. The statistical population includes non-financial manufacturing and service companies listed on the Tehran Stock Exchange during the period 2019-2024, and 125 companies were ultimately selected as a sample. The mixed data regression model and the generalized least squares method were used to test the hypotheses. The results show that increasing the auditor's tenure is significantly related to reducing information uncertainty; in other words, continuing cooperation with the auditor leads to a better understanding of the auditor's economic characteristics of the company and improving the quality of the information provided. In addition, the findings of the study show that management's optimistic expectations moderate the effect of the aforementioned relationship; in such a way that in companies where management is more inclined to provide optimistic estimates, the positive effect of auditor tenure on reducing information uncertainty is weakened. This result indicates that managerial optimism can neutralize some of the benefits of auditor experience and knowledge. The overall findings support the combined role of management behavioral characteristics and audit structure in shaping the quality of financial information.
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