Auditing quality characteristics and accounting conservatism: an empirical study of the listed companies in Egypt

Abstract

The growing issues on the quality of audit and accounting conservatisms have long been regarded and seemed as a hot debated since both could impact on the capital market efficiency. This study aims to investigate the impact of the audit quality which is characterized by audit firm size, auditor specialization, and auditor tenure on accounting conservatisms in the financial reports of the more active 50 non-financial companies listed at Egyptian stock exchange across four years of period from 2007 to 2010. After controlling for company size, leverage and profitability, the results show that auditing quality characteristics (audit firm size, auditor specialization, and auditor tenure) have significant positive relation with accounting conservatism. On the other hand, no significant relationship is found between company size and accounting conservatism. Based on these results, the study provided recommendations to the interested parties.

أثر جودة المراجعة على جودة التقاریر المالیة(باللغة الانجلیزیة)

“…The first group of studies (Soliman, 2014;Ndubuisi and Ezechukwu, 2017;El Guindy and Basuony, 2018) provided evidence that there is a positive relationship between audit firm tenure and financial reporting quality. Soliman (2014) investigated the effect of audit quality characteristics on accounting conservatism in Egypt. He used 50 active non-financial companies in the Egyptian stock market for four years starting from 2007 to 2010.…”

دور جودة المراجعة فی تخفیض تکالیف الوکالة وتکلفة رأس المال -دراسة تطبیقیة علی الشرکات المسجلة فی البورصة المصریة(باللغة الانجلیزیة)

“…These findings indicate that audit quality is a substitute for alternative monitoring mechanisms that reduce information asymmetry between agents (managers) and investors (principals); hence enhance investors' confidence. Soliman (2014) provided evidence that audit quality increases the degree of accounting conservatism. Boubaker et al (2018) provided evidence that firms which hire Big 4 auditors and engage auditor specialized in the industry to verify their financial statements are more likely to invest more efficiently.…”

تأثیر خصائص جودة المراجعة على التحفظ المحاسبی: دراسة مطبقة على بیئة الاعمال المصریة (باللغة الانجلیزیة)

“…Also, financial leverage is sometimes called Debt ratio which is a solvency ratio that measures a firm's total liabilities as a percentage of its total assets, so companies with higher levels of liabilities compared with assets are considered highly leveraged and more risky for lenders; as a result, financial leverage re-presents other cr-editors' claims on the assets of the company. Based on that, many authors, for example Kim and Jung (2007), Scott (2012) and Soliman (2014) asserted that these claims may lead creditors to force company's management to apply m-ore conservatism practices.…”