Analyzing the Impact of Client Bankruptcy Risk on Auditor Conservatism

Foroughi Abari, Meysam; kazemi, iraj

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year 14, Issue 54 (2022)

fa 2022, 14(54): 52-68

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Analyzing the Impact of Client Bankruptcy Risk on Auditor Conservatism

Meysam Foroughi Abari ^*

¹, Iraj Kazemi²

1- Department of Accounting, Mobarakeh Branch, Islamic Azad University, Isfahan, Iran.
2- Department of Statistics, University of Isfahan, Isfahan, Iran.

Abstract: (2874 Views)

Considering the auditors' responsibility and mission in the accreditation of financial statements and the adverse effects of corporate bankruptcy on society and the users of financial statements, this study aims to investigate the auditors’ conservatism hypothesis in responding to the client bankruptcy risk by estimating the bankruptcy risk. For the purpose of this study, data of 110 companies listed on Tehran Stock Exchange during the period 1386 to 1396 are collected from audited financial statements, official website of Tehran Stock Exchange and also Iranian Association of Certified Public Accountants. In order to test the research hypotheses, this study applies the multiple regression analysis as well as probit regression. This study finds that client bankruptcy risk has a significant positive effect on the conservative behavior of the auditors, which is reflected in auditor's report in the form of going concern uncertainty. However, the results indicate that audit fees has not affected by the client bankruptcy risk. In other words, auditors consider the effect of client bankruptcy risk on the audit risk. Therefore, auditors publish conservative reports in order to carry out their legal, social and professional responsibilities and to prevent the audit failure.

Article number: 4

Keywords: Going Concern Opinion, Bankruptcy Risk Estimation, Audit Fees, Audit Risk, Auditor Conservatism.

Full-Text [PDF 515 kb] (99 Downloads)

Type of Study: Research | Subject: Special

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Foroughi Abari M, kazemi I. Analyzing the Impact of Client Bankruptcy Risk on Auditor Conservatism. fa 2022; 14 (54) : 4
URL: http://qfaj.mobarakeh.iau.ir/article-1-2621-en.html

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