Word Files
Reference for Downloading Educational Files
  2. Librarianship
  3. Investigating the effect of audit quality on the relationship between free cash flow and profit management in companies listed on the Tehran Stock Exchange.

Investigating the effect of audit quality on the relationship between free cash flow and profit management in companies listed on the Tehran Stock Exchange.

Number of pages: 217 File Format: word File Code: 32217
Year: Not Specified University Degree: Master's degree Category: Librarianship
Tags/Keywords: Accounting - audit - Audit quality - cash - Free cash - Profit management - stock exchange
  • Part of the Content
  • Contents & Resources

  • Summary of Investigating the effect of audit quality on the relationship between free cash flow and profit management in companies listed on the Tehran Stock Exchange.

    Dissertation for Master's degree

    Direction: Accounting

    Abstract:

    The main purpose of this research is to investigate the effect of audit quality on the relationship between free cash flow and profit management in companies listed on the Tehran Stock Exchange. In other words, in this research, an attempt has been made to answer the question whether the high quality of auditing in companies listed on the Tehran Stock Exchange can weaken the relationship between free cash flow and profit management. To answer this question, a sample of 64 companies admitted to the Tehran Stock Exchange was examined in the period from 1384 to 1388. In this research, the variable of audit quality is also used by using the two criteria of the size of the auditor and the expertise of the auditor in that industry, and in this research, the Len and Plesen model is used to determine the free cash flows of the business unit. The profit management variable was evaluated using the Jones, 1995 model. To test the research hypotheses, regression models have been used at a significance level of 95%. It is necessary to explain that Pearson and Spearman correlation coefficients were also used at a significance level of 95%. The findings of the research show that in general there is a significant relationship between profit management and free cash flow, then the effect of auditor size criteria and auditor expertise in the industry and finally audit quality on the relationship between free cash flow and profit management in companies admitted to the Tehran Stock Exchange were investigated. that in this research, there is a significant and direct relationship between free cash flow and profit management, and the effect of audit quality and the relationship between free cash flow and profit management is significant and inverse, which means that audit quality causes a decrease in the relationship between free cash flow and profit management. In the case of Iran, we can mention the generalization of ownership of economic enterprises, financing through public participation and privatization of public sectors and economic enterprises. In such a situation, transparency and optimal quality of financial information, which is the basis of optimal economic decisions of investors, creditors and generally users of information, is of special importance. Now, on the one hand, according to the representation theory, managers are the representatives of the company's shareholders and should act in their interests. But sometimes managers are put in situations where their decisions are not in the interest of the company's shareholders and cause financial reports to be distorted. In fact, profit management occurs when managers enter their judgment in financial reporting and in the way of recording financial reports in such a way that the change in the content of financial reports misleads some of the shareholders regarding the economic performance of the company. And on the other hand, just on the opposite point, basically in an economic enterprise, the ruling audit environment plays a fundamental role in creating the desired quality of financial information. In fact, audit creates an efficient mechanism to provide transparent and reliable information. For this reason, in this research, pointing out that audit quality increases the reliability of information, the effect of audit quality on the relationship between free cash flow and profit management in companies listed on the Tehran Stock Exchange has been discussed. He is able to recognize the incorrect presentation of financial statement items and can influence his employer to correctly present them, so that financial information can be reported reliably. Achieving this desired goal is completely dependent on the characteristics of auditing institutions, and these characteristics of auditing institutions can be positively or negatively related to the quality of auditing. Titman and Trueman[1] (1989) A higher quality auditor improves the accuracy of the information provided and allows investors to obtain a more accurate estimate of the company's value (Pourkrim, 2018, p. 3)[2].

    The general purpose of protection auditors It is in the interests of the shareholders against the significant distortions and errors in the financial statements.In order to maintain the credibility of the profession, their professional reputation and to avoid lawsuits against them, auditors seek to increase audit quality (Tendlow and Van Strealen, 2008, p. 449)[3].

    Meanwhile, managers' motivations to apply their personal interests in the quality of profit prevent auditors from reaching their goals. One of the basic goals of establishing accounting standards is that users can make relatively relevant decisions by relying on financial statements. to adopt correctness, so the need of the accounting profession is that reporting method that the interests of all users are properly observed. But as it comes from the definition of profit management, managers report profit in order to achieve certain goals that logically provide the interests of certain people, which is contrary to the purpose of providing the general interests of users. Auditors have the duty to verify the usefulness of financial statements within the framework of accounting standards, while accounting standards in some cases leave managers' hands free to choose the accounting method. In fact, the problem arises from the fact that profit management sometimes makes the financial statements misleading, while the financial statements have no problems in terms of being within the framework of accounting standards, and the auditors cannot find fault with the financial statements in this regard. Therefore, considering that profit is one of the most important factors in decision-making, users' awareness of the reliability of profit can help them in making a decision (Mashaikhi and Safari, 2015, p. 36). Free cash flow is important in that it allows the company to search for opportunities that increase shareholder value. Without having cash, it is not possible to develop new products, conduct business studies, pay cash dividends to shareholders and reduce debts. But sometimes managers are in situations where their decisions are not in the interest of the company's shareholders and cause distortion of financial reports. and enter the financial reports in such a way that the change in the content of the financial reports will mislead some shareholders regarding the economic performance of the company

    On the other hand, by increasing the quality of the audit, auditors can discover the management of profits by the managers and put the managers in a dilemma in the implementation of profit management. According to the above, our main goal in this research is to investigate the effect of audit quality on the relationship between free cash flow and profit management in companies listed on the stock exchange. Bahadar is from Tehran. In other words, in this research, an attempt has been made to answer the question whether the high quality of auditing in companies listed on the Tehran Stock Exchange can weaken the relationship between free cash flow and profit management or not? , 1993, have concluded in their research that, when more quality (less quality) auditors are selected, managers have less (more) ability to manipulate earnings in order to realize anticipated earnings. According to the results of their research, they argue that managers are motivated to minimize the difference between predicted profit and reported profit and use accruals and other precautionary accounting procedures to manipulate reported profit and minimize this difference (Porkrim, 1388, p. 65)1.

  • Contents & References of Investigating the effect of audit quality on the relationship between free cash flow and profit management in companies listed on the Tehran Stock Exchange.

    List:

    Abstract: 1

    Introduction: 2

    Chapter One: General Research

    1-1) Introduction. 4

    2-1) study history. 5

    3-1) statement of the problem. 7

    4-1) research hypotheses. 11

    5-1) research objectives. 11

    6-1) Importance and necessity of research. 12

    7-1) study limits. 13

    1-7-1) Subject area. 13

    2-7-1) Time domain. 13

    3-7-1) spatial territory. 13

    8-1) Key words and terms. 14

    Chapter Two: Review of Research Literature

    1-2 Introduction. 17

    2-2) Audit quality: 17

    1-2-2) Audit quality framework. 18

    2-2-2) Theoretical discussions and empirical evidence about audit quality. 20

    1-2-2-2) Demand for audit quality. 22

    2-2-2-2) Audit quality supply. 23

    3-2-2-2) Relationship between audit quality components. 24

    4-2-2-2) audit quality products. 26

    5-2-2-2) Summary of audit quality products. 33

    3-2) The size of the auditor. 35

    4-2) specialization in the industry. 37

    5-2) Tenure of the auditor. 39

    6-2 Definition of free cash flow. 40

    1-6-2 Free cash flow calculation. 40

    2-6-2 Free cash flow and agency problems arising from it. 41

    2-7 Profit management theory. 43

    1-7-2 value relationship of profit and theories of profit management. 44

    2-7-2 selected competing theories. 46

    3-7-2 Theory of the company. 47

    4-7-2 Contract cost approach. 49

    5-7-2) profit management. 51

    1-5-7-2) Reward plan hypotheses. 53

    2-5-7-2) Hypotheses of the debt contract. 53

    3-5-7-2) Hypotheses of political expenses. 53

    6-7-2) profit management incentives. 54

    1-6-7-2) meeting the expectations of financial analysts. 54

    2-6-7-2) in order to avoid the problems of borrowing obligations and trying to reduce political costs. 55

    3-6-7-2) Profit smoothing over a long period of time with appropriate growth. 55

    4-6-7-2) meeting the requirements of the bonus plan. 56

    5-6-7-2) Changing management. 56

    7-7-2) Good profit management against bad profit management. 56

    8-2) Different concepts of profit. 58

    1-8-2) profit. 58

    2-8-2) Purposes of profit reporting. 58

    3-8-2) Profit forecast and profit forecast users. 59

    4-8-2) Profit benefits for investors. 60

    5-8-2) Representation theory. 62

    6-8-2) types of contracts and agency theory. 65

    1-6-8-2) contract based on behavior or time. 66

    2-6-8-2) contract based on result or trigger. 67

    7-8-2) Profit smoothing. 67

    1-7-8-2) Types of profit smoothing. 69

    2-7-8-2) profit smoothing methods. 71

    8-8-2) accounting of comprehensive adjustments. 71

    9-8-2) Calculation. 72

    9-2) Explaining the relationship between profit management and audit quality. 72

    10-2) General discussion. 76

    11-2) Researches conducted in the field of the current research. 81

    1-11-2) Research conducted outside the country. 81

    2-11-2) The research done inside the country. 90

    Chapter 3: Research implementation method

    1-3) (Introduction). 96

    2-3) research method. 96

    3-3) research questions. 96

    4-3) Research analytical model. 97

    5-3) Society and statistical sample. 101

    1-5-3) Statistical population. 101

    2-5-3) statistical sample. 102

    6-3) research hypotheses. 102

    7-3) Gathering information. 103

    8-3) Statistical functions used in this research. 103

    1-8-3) Kolmogorov-Smirnov (K-S) test 103

    2-8-3) Durbin-Watson (DW) test 104

    3-8-3) Scatter diagram and line equation. 105

    4-8-3) Regression analysis. 105

    5-8-3) Pearson correlation coefficient. 106

    Chapter Four: Data Analysis

    1-4 Introduction. 108

    2-4 descriptive statistics. 109

    3-4 normality test. 110

    5-3 Examining the correlation coefficient between variables. 111

    6-3 Checking the model using regression analysis. 112

    4-7 Interpretation of the model: 115

    4-8 Multiple regression resulting from the step-by-step method. 115

    9-4 Interpretation of the model: 117

    10-4 Hypothesis testing. 117

    11-4 Checking the validity of the model. 119

    Chapter Five: Conclusion and Suggestions

    5-1 Introduction. 122

    2-5) Hypothesis test results.122

    1-2-5) The result of the first main hypothesis test: 122

    2-2-5) The result of the first sub-hypothesis test. 123

    3-2-5) The result of the second sub-hypothesis test: 124

    3-5) Conclusion. 125

    4-5) suggestions. 125

    1-4-5) suggestions based on research results. 125

    2-4-5) Suggestions for future research. 126

    5-5) research limitations. 127

    Appendixes

    Software output. 130

    Sources and sources

    Persian sources: 140

    Latin sources: 141

    English abstract. 146

    Source:

    Pourhaidari, A. and Daud Hammati, 2013, "Effects of debt contracts, political costs, reward and ownership plans on profit management", Journal of Accounting and Auditing, Faculty of Management, University of Tehran, year 11, number 36, pp. 47-64.

    Tehrani, R. and Ramin Hesarzadeh, 2018, "The effect of free cash flows and restrictions on financing on overinvestment and underinvestment", Accounting Research Quarterly, first year, number three. pp. 50-67.

    Thaqafi, A., and Armin Pouria Nasab, 1389. "Profit Management Theory", Accounting Research Quarterly, Year 2, Number 6, p. 60.

    Shabahang, R., 1387, "Accounting Theory", Specialized Research Center for Accounting and Auditing, Audit Organization.

    Kamali, A., 1387, "The Effect of Increasing Leverage" Finance, the amount of free cash flow and the growth of the company on the profit management of companies listed on the Tehran Stock Exchange", Master's Thesis, University of Isfahan.

    Mashaikhi, B. and Maryam Safari, 2016, "Cash from operations and profit management in companies listed on the Tehran Stock Exchange", Accounting and Auditing Review Quarterly, Faculty of Management, Tehran University, 13th year, number 44, pp. 35-54.

    Mehrani, S. and Bahram Bagheri, 1388, "Investigation of the effect of free cash flows and institutional shareholders on profit management", Accounting Research, No. 2, pp. 50-71.

    Norush, A. and Ali Ebrahimi Teder, 1384, "Investigation and explanation of the relationship between the composition of shareholders with information symmetry and the usefulness of performance accounting criteria", Journal of Accounting and Auditing, Faculty of Management, Tehran University, Year 12, No. 42. 124-97.

    Henderkson, A. and Michael Van Breda, translated by Ali Parsaian, 1385, "Accounting Theories", Terme Publications, first and second volumes.

    Accounting Standards Development Board, 1386, "Theoretical Foundations of Accounting and Financial Reporting in Iran", Specialized Research Center for Accounting and Auditing of the Audit Organization.

    Volk. Dad.T, translated by Ali Parsaian, 1377, "Accounting Theory", Terme Publications, first and second volumes.

     

    Latin sources:

     

    Agrawal, A., Jayaraman, N., 1994. "The dividend policies of all-equity firms: a direct test of the free cash flow theory". Managerial and Decision Economics 15, 139–148.

    Bebchuk, Lucian Arye and Jesse M. Fried. (2003). "Executive compensation as an agency problem". Journal of Economic Perspectives, 17, 3 (Summer): 71-93.

    Bebchuk, Lucian Arye. (2005a). "The case for increasing shareholder power". Harvard Law Review,118,3(January): 833-914.

    Bebchuk, Lucian Arye. (2005b). "The myth of the shareholder franchise". Harvard Law and Economics Discussion Paper No. 565.SSRN.com/abstract=829804.

    Christensen, Peter ave and Jerald A. Feltham. (2002). "Economics of Information, Volume I: Information in Markets". New York, LLC: Springer-Verlag.

    Chung, R., Firth, M. and Jeong-Bon Kim. 2005. "Earnings management, surplus free cash flow, and external monitoring". Journal of Business Research, 58, 766-776.

    Coase, Ronald H. (1937). "The nature of the firm". Economica, New Series, 4, 16. (November): 386-405.

    Coles, J.W., McWilliams, V.B. and Sen, N. 2001." An Examination of the Relationship of Governance Mechanisms to Performance", Journal of Management, 27, 23 – 50.

    Core, John E., Wayne R. Guay, and David F. Larcker.(2003). "Executive equity compensation and incentives: A survey". Economic Policy Review, 9, 1(April): 27-50.

    DeAngelo, Linda Elizabeth (1986). "Accounting numbers as market valuation substitutes: A study of management buyouts of public stockholders". TheAccounting Review, 61, 3 (July): 400-420.

    Donaldson, T.L. and Preston, L.E. (1995).

Investigating the effect of audit quality on the relationship between free cash flow and profit management in companies listed on the Tehran Stock Exchange.
How To Access The File
Related Contents:
Number of pages: 114 Category: Librarianship

Dissertation for receiving a master's degree, specialization: accounting, is an abstract of the present research and research work in order to determine the effective factors in the selection of accounting methods for the inventory of materials and goods and its effect on the quality of profitability of companies admitted to the stock exchange. This thesis prepares a framework ...

Number of pages: 134 Category: Librarianship

Dissertation for M.A. degree in Accounting Abstract One of the times when management's motivations are triggered for profit management is the initial public offering. Any public offering of securities that is offered to the public and investors for the first time is called an initial public offering (IPO). One of the ways to reduce profit management is to improve audit quality. ...

Number of pages: 115 Category: Librarianship

Dissertation for receiving a master's degree in the field: accounting. Abstract One of the existing mechanisms in order to reduce the agency problem and reduce the information asymmetry between shareholders and managers in the capital markets is the corporate governance system. The role of institutional shareholders in corporate governance and their presence in companies has ...

Number of pages: 145 Category: Librarianship

Dissertation for Master's degree (M.Sc) Major: Accounting Abstract The main purpose of this research is to examine the relationship between stock liquidity and real profit management of companies listed on the Tehran Stock Exchange. The statistical population of the present research is the companies admitted to the Tehran Stock Exchange during the years 1382 to 1391, and the ...

Number of pages: 138 Category: Management

Thesis for obtaining a master's degree in the field: business management-financial orientation. Abstract: The purpose of this research is to investigate the role of accruals in evaluating and forecasting cash flows of companies. This research is a library and analytical-causal study and is based on panel data analysis. In this research, the financial information of 103 companies ...

Number of pages: 120 Category: Librarianship

Dissertation for receiving master's degree in accounting, accounting orientation, the abstract of profit information content, has been widely tested in accounting and financial texts. Since in most cases, including financial reporting and evaluation models, profit plays a fundamental role, it is very important to determine the financial items and variables related to accounting ...

Number of pages: 65 Category: Librarianship

Master's thesis in the field of accounting, abstract of the study of the relationship between the renewal of financial statements and the growth of companies admitted to the Tehran Stock Exchange. The renewed financial statements clearly and explicitly send a message and a sign to the users about the unreliability of the financial statements of the past periods. Therefore, ...

Number of pages: 167 Category: Librarianship

Dissertation for Master's Degree in Accounting Abstract Determining the performance of a business unit using a limited number of financial ratios has been an interesting and challenging issue for most researchers. Identifying the factors that can correctly predict the performance of the business unit is very interesting for every decision maker. In recent years, more traditional ...

Number of pages: 152 Category: Librarianship

Dissertation for Master's Degree in Accounting Abstract Accepted principles of accounting have a lot of flexibility in some methods, which potentially makes managers make accounting estimates based on their personal judgments. This flexibility may affect the reliability of accrual items and consequently the stability of these items in successive periods. The main goal of the ...

Number of pages: 139 Category: Librarianship

Master's Thesis in Accounting, Auditing, Abstract The purpose of this research is to investigate the relationship between tax avoidance and abnormal delay in financial reporting of companies listed on the Tehran Stock Exchange. In terms of the research method, this research is a descriptive-analytical research of the type of correlation, regression analysis and based on panel ...