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Quarterly Journal of The Iranian Accounting and Auditing Review ÿ ÿÿÿ ÿ ÿÿÿ ÿ ÿ ÿ ÿ
ÿÿ ÿ ÿÿ ÿÿ ÿ ÿ

Faculty of Management, University of

Tehran, Volume 23,

Number 3, Fall 2016

333 -352 .ÿÿ

Investigating the effect of forced turnover of auditing firms on auditing fees

And competition in the auditing market

4 3 2 1

, Mohammad Farahmand Sayedabadi ÿ ÿÿÿÿÿÿÿ ÿÿÿÿÿÿÿ , Farrokh Barzideh salute your sensitivity

The purpose of this study was to investigate the effect of mandatory inspections of auditing firms on

Auditing fees and competition in the auditing market of companies listed on the stock market and

Based on the requirements of the Tehran Stock Exchange and Securities Organization, Tehran Securities. Mandatory

independent auditors of Iranian stock exchange companies are required after a maximum of 4 consecutive years

Is. Research Hypotheses Using Multivariate Regression Analysis and Mean Comparison

Were tested. The present study population consists of 95 companies listed on the stock exchange and securities markets.

The stock of Tehran is from 2006 to 2014. The results of the study show that it is difficult

Independent auditing increases due to mandatory turnover, and this increase is more than an increase

And imposes additional costs on companies. after It is common for auditors to have an optional turnover.

The requirements mentioned, the significant difference in the market share of quality auditing firms

Up and down not observed.

Institutions Market from auditing, market share Keywords:

turnover of auditing
auditing fees,
firms.competition in auditing, mandatory

1. Professor of Accounting, Allameh Tabatabai University, Tehran, Iran 2.

Associate Professor of Accounting, Allameh Tabatabai University, Tehran, Iran

3. Associate Professor, Department of Industrial Management, Allameh Tabatabai University, Tehran, Iran

4. PhD Student in Accounting, Allameh Tabatabai University, Tehran, Iran

Date of receiving the article: 16/01/1395

Date of final acceptance of the article: 05/27/1695

Corresponding author: Mohammad Farahmand Seyedabadi

Email: Muhammad.farahmand@gmail.com
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Introduction

Auditing is always out of place because of the important role it plays in accrediting financial statements.

High in the capital markets and the accounting profession. Due to the important role of auditing,

There is always the concern that the quality of the audit is large enough to play this role.

Perform high-risk well? Corporate financial scandals, to the detriment of public confidence

Regarding the quality of companies' financial reporting and the factors that supervise it, especially the quality of auditing

Independent led. In the United States, in response to these scandals and with a view to
1

Restoring Public Trust in Financial Statements Sarbins-Axley Act Passed

The provisions of Section 203 of this law have made the circulation of auditing partners mandatory and in

Section 207 also on the need to conduct further research on the issue of forced circulation of audit firms

It has been emphasized (Chi, 2011.) Forced circulation of auditing firms has always been one of the solutions.

Has the potential to improve the quality of auditing, and in particular in recent years to seek to highlight

The role of auditors in capital markets has also attracted more attention (Harris,

However, it should be noted that the imposition of such regulations may be in addition to the objectives pursued

regulation with any Satisfying them has other consequences. In general, any

The purpose to be formulated and communicated should be carefully considered in terms of increasing benefits over costs.

And Observing its consequences from different aspects, of course, this will be possible after the implementation of the

regulations and determining the extent to which its goals are achieved.

Considering the importance of the issue and the regulation of forced circulation of auditing firms in Iran and

Given the fact that so far most foreign research has been conducted in this field and completely

Domestic research has focused on the impact of such requirements on audit quality.

Present for the first time considering more consideration time in the initial audit (first year of review)

After the mandatory turnover) which naturally increases after the auditors' turnover becomes more

Expected the number of turnovers of audit firms, to study the effects of forced turnover

Auditing firms deal with auditing fees. In addition, with consideration

That the compulsory turnover of auditing firms after certain periods is a matter of auditors' efforts to

Acquisition of new owners after forced turnover makes the effect of forced turnover more serious

ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ

1. Sarbanes-Oxley Act
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Auditing firms on competition in the auditing market is another issue that the present study

As the first research in this field, it examines it. The structure of the

the theoretical and experimental background of the research,

continuation of the article is as follows; First, in continuing the review of

The basics and how to formulate research hypotheses are described. The third part introduces the methodology,

Deals with sample specifications and survey variables. In the last two sections, while presenting brief results

The obtained statistics, the test result of the hypotheses are stated and its interpretations are discussed.

Research Background

Theoretical

Background According to the theoretical background of the subject, forced turnaround of auditing firms can have both benefits and

Have. One of the most common benefits expected from these regulations can be: Expenditures following

the audit of financial statements from a new perspective, excluding the economic link between the auditor and

An employer that could potentially affect the auditor's impartiality as well as increase

The degree of competition in the auditing market (auditing firms change after a certain period and

Have to compete with other auditing firms to acquire new owners) and as a result

Improved the performance of independent auditing noted. Opponents, on the other hand, oppose the forced rotation of institutions

Auditors believe that such requirements impose costs on both auditors and their owners.

Imposes that one of the most important costs of forced turnover of auditing firms is based on

Opponents claim that auditors' ability to oversee opportunistic management behaviors can be reduced.

Due to the loss of owner-specific information following repeated changes by the independent auditor,

Increase audit fees due to the timeliness of the initial audit and decrease in market share

Large auditing firms pointed out (Harris, 2012).

On the next page, a summary of the most important views presented in this regard with

Reference is made to the various stakeholders and supporters of each view (Table 1).

In Iran, based on the requirements of the "Stock Exchange and Securities Organization" announced in August 2007,

Listed companies can be independent from one auditor for a maximum of four consecutive years.

And after the end of the four-year period, is obliged to change its independent auditor; Therefore, companies

that have used an auditor for four consecutive years before August 2011
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ÿÿÿ ÿ ÿÿÿ ÿ ÿ ÿ ÿ ÿ ÿÿÿ ÿ ÿ ÿÿ

Is held after the mentioned date, Should meet in the ordinary general meetings of the year

to change their auditor (Supreme Council of Stock Exchange and Securities, 2007).

Table 1. Views on the mandatory circulation of auditing firms

Forced turnover proponents • Opponents of forced circulation

Increase auditor independence • • Lack of information on the new auditor

Create a new perspective for the auditor • • Loss of previous auditor information • Increased

Pay attention to the presence of the next material misstatement in the first year of tenure • Auditor
Arguments
auditor • Create a dynamic market for the auditing professionreputation (auditor's economic incentive) • Increased

• Breaking the monopoly in the auditing profession audit costs

Availability of a suitable auditor and •

• Investors and consumers (institution federation • Professional Associations: AICPA European

Investment Consulting) • Some Accountants, Association of Certified Public Accountants

Stock Exchanges and Securities Organization England and Wales, Australian Association of Certified Public Supporting parties

Countries including Iran, China and the law Accountants • Large Auditing Institutions

"Sarbans-Exley"

Source: Summarized from Hamilton (2012)

The main issue in this study is to examine the costs imposed on independent auditors and

Their owners, due to the implementation of the mandatory circulation regulations of auditing firms in Iran

Is. The need to study this issue stems from the fact that due to the experience of a small number of countries in

Worldwide on such requirements as well as the lack of consensus among experts on whether or not

The disadvantages of this radical proposal are small.

It is not possible. The present study tries to reduce this gap in particular

And to examine its effects on The costs of the mandatory circulation regulations of auditing firms should

focus on auditing fees (costs for owners) and competition in the auditing market and market share.

Audit firms (pay for auditing firms). Obviously, the results of this

In addition to providing empirical evidence on the effect of forced turnover of auditing firms on research

Audit fees and competition in the Iranian auditing market, as one of the few countries that

Such requirements have taken effect, can provide important feedback to the Exchange and Securities Organization

Tehran in relation to the ancillary costs imposed on auditors and owners due to this situation
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Provide requirements. These results also serve as empirical evidence in completing the audit literature and requirements.

It can also pave the way for future revisions to these requirements. It is ruled that the other necessity of

examining this issue arises from the fact that according to the above-mentioned requirements.

In a few countries, the data needed to examine the appropriateness or inappropriateness of this type of tour are vast.

And previous research often on voluntary and limited forced circulation. Little has

been studied; Hence, in the literature of this field, there is little empirical evidence to support or refute the views.

There are opponents of forced circulation, and this study could be an attempt to reduce this gap

In the literature on the subject, especially with regard to the compulsory rotation of hard-working auditing firms.

Audit and competition in the auditing market. And considering

the fact that Iran, as Considering the remarks made by one of the few

countries that have enacted regulations on the mandatory circulation of auditing firms,

With unique environmental features such as not operating in large auditing firms

Internationally, in this study, specifically seeking appropriate and scientific answers to questions

The following are basic:

• Does the mandatory turnover of auditing firms affect auditing fees?

• Is the mandatory turnover of auditing firms on the market share of auditing firms with

How different degree dard effect?

Experimental

Background of Lou and Sivarama Krishnan (2009) Investigating the Impact of Compulsory Circulation on Auditing Firms

Corporate investment decisions paid off. The results showed that in a situation where companies

In order to obtain the desired opinion of their independent auditor, the auditors' mandatory turnover in some

Cases improve decision making and in some situations lead to disruption of decisions.

Becomes a corporate investment; But in companies that seek to obtain the desired opinion of the auditor

Are not independent, the forced rotation of auditing firms always leads to inappropriate decisions

Owners are invested in the field.

Chi (2011) The effect of benefits and costs of forced turnover of auditing firms in a situation

That there is an independent audit committee, has analyzed. The results of his research showed in

The requirement for the circulation of auditing firms and the existence of an audit committee with an appropriate structure in

The client company, the cost of supervision of the audit committee and the fee paid to the auditor more than
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There will be a time when there is no requirement for the auditor to circulate. What to claim in the interpretation of your findings

A legal requirement for the auditor to circulate to help safeguard the public interest can incur costs.

Impose extras on companies.

Daniels and Booker (2011) Examining Auditors' Independence and Audit Quality in the Circulation

Auditing firms, from the perspective of lending officials in US banks

they paid. The results of the study showed that in case of forced turnover of auditing firms,

The independence of auditors will increase.

Vaughn, Lim & Cement (2014) The effect of forced turnover of Korean auditing firms on quality

Audit and auditing fee, on a sample of 5679 years - the company during the year

2000 to 2009 surveyed. The results of this study on audit quality showed turnover

Mandatory auditing firms have no significant effect on audit quality. Based on the result

In this study, the average audit fee after the imposition of mandatory circulation regulations

Auditing firms in Korea have increased significantly. Kamran, Francis, Mara and

Petinichio (2015) with the latest state of forced circulation

Audit firms in the EU (maximum 10 years) and in the process of reviewing this situation

Requirements in the United States, to examine the real consequences of such requirements in Italy - that

The mandatory turnover of auditors has been in place since 1976. They received

Audit fees are relatively lower in the first year after mandatory turnover, but in some years

Then this effect is reversed and leads to an increase in remuneration on average. They are also

They found the quality of auditing after the mandatory turn of auditors, especially in the first three years of tenure

The new auditor is reduced; This is while the increase in auditors' fees is inevitable

Forced turnover of institutions is justified only if it compensates for the improvement of quality.

Be audited.

Corbella, Florio, Gatti and Mastrolia (2015) to study the relationship between forced turnover of institutions

Audit with auditing fee and audit quality on samples containing 1583 years -

The Italian company paid for a long period from 1998 to 2011. The results of the study showed quality

Auditing has been upgraded from small to large institutions after the mandatory rotation. According to another

result of this study, auditing fees after forced turnover from institutions

Large decreases to small, but does not change from small to large institutions.
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Although it has been more than three years since the implementation of the first compulsory inspections of institutions

An audit is underway in Iran regarding the effects of this issue on remuneration and the audit labor market, until

No internal research has been conducted to date. However, here is a summary of the research

Internal implementation of the mandatory circulation of auditing firms and audit fees

it is

possible. Mojtahedzadeh and Aghaei (2004) studied the factors affecting the quality of independent auditing and

Found factors such as auditor tenure, industry expertise, completion of audits based on budget

Time, Customer Reputation, Audit Fees, Supervision of Partners and Audit Managers

Audit activities affect the quality of independent auditing.

Sajjadi and Ebrahimimand (2005) to study the factors that increase the independence of auditors, including competition

Among the audit firms, the audit committee, the size and history of the audit firm and the size of the company

The employer paid. The results of their research showed that in the opinion of independent auditors, the audit committee,

The size and history of the auditing firm and the size of the client company, the factors that increase independence and competition in

They are considered as auditing professionals.

Sajjadi and Zarei (2007) in a Survey Study, Factors Affecting Audit Fees

From the perspective of the partners of auditing firms in Iran. The results of the study showed

Auditing firm industry expertise, quality of audit reports, amount of client legal claims and

Audit reporting process bottlenecks are effective in determining audit fees, but the firm's reputation

Audit, the independence of the auditors of the auditing firm, and the reputation of the owner, an effect on payroll

There is no auditing of companies.

Rajabi and Mohammadi Khashoei (2008) Investigating the Relationship between Agency Costs and Pricing

Independent auditing services address and address some of the characteristics of corporate governance and

There is a significant relationship between audit fees. Karami,

Bazrafshan and Mohammadi (2010) The effect of the auditor's tenure on conservatism in

Financial reporting on 58 companies listed on the Tehran Stock Exchange in 2002

They studied until 2006. Based on the research findings, between the tenure of the auditor and the writer

Conservatively, there is a positive and direct relationship.

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340 ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ

Sensitive and Jafari (2010) in a survey study, the effect of the rotation of institutions

They audited the quality of the audit report and concluded that the audit

Auditing firms do not have a significant effect on the audit quality of companies.

Nikbakht and Tanani (2010) in a comprehensive study found variables in operations volume or company size,

Complexity of company operations, type of audit firm and inflation, significant relationship with audit fees

have. Based on another result of this study, audit risk variables and education and experience

The person in charge of preparing the financial statements has no statistical relationship with the dependent variable (audit fee).

Azizkhani and Aghabigi (2013) in a study entitled "Study of the relationship between hard work"

"Audit, the first audit and the subsequent years of the audit tenure", showed payroll

The first audit is higher than the audit fee for subsequent years of the audit tenure, but

There is no significant relationship between the future years of the tenure and the auditing fee. They according to

Their findings did not observe the rate-breaking phenomenon in the first audit. Waez,

Ahmadi and Rashidi Baghi (2014) by examining the effect of audit quality on hard work

Audit, found a negative relationship between the expertise of auditing firms and auditing fees and

There is significance, while auditing fees have a positive and significant relationship with the continuance of selection.

Establishes the auditor and the size of the audit firm. Rahimian

and Janfada (2014) The Effect of Forced and Optional Circulation of Auditing Institutions on

Audit quality (type of auditor comment) on 110 companies listed on the stock market and

Tehran securities were examined from 2007 to 2012. As a result of this research, the relationship

No significance was observed between mandatory and optional turnover of auditors with the quality of the audit report.

Research Hypotheses

The arguments put forward by the opponents of forced circulation of auditing firms can be divided into two parts.

Arguments focused on not improving the quality of auditing and arguments related to upliftment

Classified the costs of implementing such requirements. In this research on the study of foreign costs

Mandatory turnover of auditing firms means a possible increase in auditing fees and changes

Accordingly, in this study in order to clarify Competition is concentrated in the auditing market.

Economic Impact of Forced Circulation of Auditing Institutions in Iran, This aspect from the perspective of two owners

(Audit Fees) and Auditing Institutions (Audit Institutions Market Share)

it is possible.
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Compulsory turnover and auditing fees

Opponents of forced turnover believe that if the turnover of auditors becomes mandatory, auditing firms

For reasons such as unfamiliarity with the new employer and the need for a more extensive study of the work process

The client (to maintain the quality of the audit work), in the first years of the audit tenure, must have the time and

Spend more. The result of this process is an increase in auditor fees and costs.

It is an audit. On the other hand, because in forced circulation, auditors after certain periods of owners

They lose themselves, they have to compete with other auditors to get new owners.

To; As a result, in order to receive the amount of remuneration and in order to acquire new owners, they have to

Have more flexibility (Lam, 2011.) Given that the hours budget is typically

Expenditure spent on auditing is considered a basis for determining remuneration.

Forced turnover of auditors due to spending more time in the initial review, to increase payroll

Lead audit. Accordingly, in the present study, in particular, the effect of forced rotation

Auditing firms review the remuneration of independent auditors in the form of the following hypothesis:

Hypothesis 1: Forced turnover of auditing firms leads to increased audit fees

it is

possible. In order to test the first hypothesis of the research, the method of multivariate linear regression analysis

below in the model introduction section. Has been used, the details of which are described

Forced turnover and competition in the independent audit

market One of the most important consequences of forced turnover of auditing firms that must be considered.

Its effects are on competition in the audit labor market. This aspect has not been paid much attention so far.

Forced circulation of auditing firms in this respect is a double-edged sword that can also

Improving the audit labor market and the efficiency of this market and can also lead to improper market distribution

Leading quality and quality institutions (Kamran, Merloti, & Vincenzo, 2009).

Forced to rely on the more dynamic auditing labor market, they claim in the forced circulation of institutions

Audit The market situation for the auditing profession will be such that the monopoly in the auditing market will be

broken. This situation, in addition to making the auditing market more dynamic,

Improve the quality level of the profession in general and the ability of auditing firms to perform operations.

Auditing to a higher level. This, in addition to benefiting the auditing profession, causes

Investors also benefit (Steinley and Dysort, 2007). Accordingly, in this study
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Relationship between forced turnover of auditing firms and auditing labor market in the form of hypothesis under test

Has been:

Hypothesis 2: Forced turnover of auditing firms to noticeable changes in market share

Auditing firms lead with varying degrees of quality.

In order to investigate the relationship between auditors' forced turnover and competition in the audit market, the average

Market share of institutions with high and low quality rank in the two time periods before and after the turnover

Compulsory auditor has been compared.

Research Methodology

Necessary information about companies and their auditors through New Rahavard software and website

Officially collected by the Stock Exchange Organization. Audit fee data

And rank quality Independently, it was extracted from the financial statements and reports of the board of directors of the

companies. The institutions were also removed from the official website of the Iranian Society of Certified Public Accountants. Finally, after

And Data were prepared using Excel software and final analysis was performed using SPSS Eviews 21 statistical software.

This research consists of two main hypotheses that to analyze the first hypothesis of the method of analysis and

and Bray Prairie hypothesis Dom-Nez, Osmon assay Multivariate linear regression analysis was used. Pair mean

was performed. The statistical

population of the present study is limited to companies listed on the stock exchange market.

It is Tehran. Although the requirements discussed were enacted in 2007 (after the implementation of many

Assemblies related to the year 1385 (and according to which the maximum tenure of four years was determined, in practice the year

Mali 2012 was the first period that most companies in the statistical community based on the above-mentioned instructions

They were required to change their independent auditor. Therefore, the time frame of the present study is from years

It is from 1385 to 1393 that in order to perform comparative tests, the average is two periods before

Compulsory circulation of auditing firms (2006-2001) and after being compulsory

Turnover of auditing firms (years 1391 to 1393) were separated. Statistical sample of this

The study includes all companies listed on the Tehran Stock Exchange and that for

For homogenization purposes, all of the following conditions are met:

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Until the end of the year • Have been listed on the Tehran Stock Exchange before 2006 and have not been

listed on the stock exchange in 2014;

• In terms of increasing comparability, their financial period should end in March and during the period

Have not changed their fiscal year;

• Part of companies active in the financial industry (due to differences in the nature of operations and items

Financial statements) are

not; The necessary information about them should be available during the study period to •

conduct research. According to the above criteria, 95 companies listed on the Tehran Stock Exchange for

Research samples were selected.

Model and research

variables To test the first hypothesis of the research, multivariate regression method was used.

The method of measuring the variables used in accordance with the literature is as follows:

Model 1 (ÿ ÿ, ÿ ÿ + ÿÿ ÿ ÿ + ÿÿ ÿ, ÿÿÿ ÿ ÿ + ÿÿ ÿ, ÿÿÿ ÿ ÿ + ÿ ÿ = ÿ ÿ, ÿ

ÿÿ,ÿÿÿÿÿ + ÿÿÿÿÿ,ÿÿÿÿÿ + ÿÿÿ,ÿÿÿ ÿ ÿÿÿÿÿ +
ÿÿ,ÿ + ÿÿÿ,ÿÿÿÿÿÿÿÿÿÿ + ÿÿÿ,ÿÿÿÿ +

How to measure the variables of Model 1 by type of variable is as follows:

Audit fee

-dependent variable (Fee :) The natural logarithm of the independent audit fee fee of the current period.

Independent variable (test

variable) Auditor forced turnover (MAFR:) is an artificial variable that is used for forced turnover of the institution.

Otherwise it is zero. Audit number 1

Control variables

according to the results of previous studies on the factors affecting audit fees (including Nikbakht and

Tanani, 1389; Azizkhani and Aghabigi, 2013; Waez and others, 2014; Kamran Others, 2015; Hey and
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Others, 2006, (The most important factors affecting the remuneration of independent auditors in this study

Used as control variables are: VAFR : An artificial variable for an

entity's rotation.

Otherwise it is equal to zero. According to the research literature, waiting Audit equals 1 In the

initial audit, auditors generally pay more because they spend time on

Ask for the knowledge of their owners.

Customer Company Size (TA :) Natural logarithm of total company assets at the end

Current period. Due to the cost-oriented process of determining the audit fee, any owner

Larger, the expected time budget of the auditor's audits and consequently the remuneration

Audit it more. Audit firm quality

(Rank :) Audit firm score in the current period, according to the evaluation

Reforms 4, 3, b, c and Iranian Society of Certified Public Accountants, which provides auditors with quality categories A

2
1 is assigned, the higher the quality of the auditor, the greater the reputation and influence in the labor market and

Auditing and more bargaining power to determine fees, on audit fees

Will be added. Audit

firm size (Size_Aud:) The ratio of sales revenue of the firm's stockholders to the firm

Total sales revenue of all listed companies in the current period. The larger the auditing firm

Is less dependent on the client and is more capable of increasing audit fees.

Claims and Inventories Ratio (InvRec:) The ratio of receivables and inventories to total assets. This ratio is an

indicator of the complexity of the client's operations that is expected to be directly related to

Have an audit fee. Leverage (Lev :

(ratio of total liabilities to total assets. Return on assets ) (Roa : (ratio of

net profit to total assets. Of these two variables as an index)

Customer risk is used, so the lower the risk of the owner, the lower the risk.

Auditors will tend to receive less auditing fees from their owners.

Annual Inflation Percentage: Annual Inflation Percentage Announced by the Central Bank of the Republic

services, follow And Islamic Iran. Part of the change in the price of auditing services, like other goods, is the

percentage of annual inflation in the country.

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Research Findings

Descriptive

statistics and more familiarity with research variables before analysis

In order to better understand the

statistical population of statistical data, this data must be described. Descriptive statistics of the variables used in this

The research for 95 sample companies is described in Table 2.

Table 2. Descriptive statistics of research variables (n = 855)

Maximum Minimum standard deviation Middle average Variable symbol Variable name

8/259 3/401 0/815 5/886 5/930 Fee The audit of rights

- -
0/259 0/000 0/073 MAFR Mandatory Circulation Auditor

- -
0/428 0/000 0/241 VAFR Optional turnover auditor

19/009 9/880 1/355 13/141 13/26 PER Company size

4 2 0/517 4 3/759 Rank Quality auditor

0/547 0/000 0/074 0/004 0/017 Aud_Size Size auditor

0/931 0/000 0/211 0/501 0/478 InvRec Inventories and ratio claims

1/443 0/044 0/202 0/589 0/581 Lev pyramid grade

0/710 -0/246 0/133 0/123 0/147 Long Return on assets

0/347 0/108 0/081 0/184 0/201 Inflation Annual inflation percentage

The average audit fee of sample companies is 526 million Rials and the average of this figure is about

358 million rials. Less than the average forced turnover of auditors (0.073) compared to turnover

Optional (0.241), mainly due to optional rotations before 2012. Average quality

Auditor (quality rating of institutions) at 3.759, indicates that most companies

3( And And b (with scores of 4 respectively reviewed by auditing firms, with quality grade a)

And the main reason is the regulations of the Tehran Stock Exchange and Securities Organization, which according to They have been

audited. The large companies that make up the bulk of the research present should be audited only.

Be audited by high quality auditing firms. The reason for the large size of the variable
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Leverage is also the presence of high accumulated losses in some of the companies examined, but

The mean of this variable between the research sample was about 58%.

Data modeling tests and selecting the

appropriate method for Before fitting the regression model, we must first determine the data pattern
2 1

ÿÿÿÿÿ Or tableau Fit each of the research models. For integrated diagnosis

effects of constant or The research data model used F -Limer test (Chow test) to determine the

Random effects of data model, Hausman test were performed, the results of which are observed in Table 3.

it is possible. According to the value-P column related to the F - Leimer test, the data pattern used in

The regression model of this study is panel. Also the value-P column related to the test

Hausman shows that the model pattern has fixed effects.

Table 3. Results of F -Limer and Hausmann tests

Cross – sections P (VALUE) Chi-square Data Pattern P (VALUE) Limer F

Random effects 0/ 000

80/ 003 Tablo 0/0000 9/ 0092

The results of testing the

hypotheses of forced turnover and auditing

fees The results of regression model fit the relationship between auditing fees and types of mandatory rotation and

The auditors' discretion is as described in Table 4. The modified coefficient of determination of the model is 72%

This means that the descriptive variables used in this model can account for about 72% of the variation.

Based on the results in Table 4, given that Explain the fees of independent auditors. Acceptable

acceptable error level for the forced turnover variable of auditing firms (0.013)

At the 95% confidence level is below the acceptable level (5%), the coefficient is adjusted for

Accordingly, the first hypothesis of the research is confirmed at a 95% confidence level. This variable is significant.

it is possible. The coefficient obtained for the variable of forced turnover of auditing firms, positive number and

Is equal to 0.215, which means that the mandatory turnover of auditing firms in confirmation of the claim

ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ

1. Pooled data
2. Panel data
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Investigating the effect of forced turnover of auditing firms on wages ... _____________ 347

Opposition to forced turnover leads to increased audit fees and additional costs

Imposes on companies. This

result is similar to the findings of Chi (2011) and Won et al. (2014), but with findings

Corbella et al. (2015) and Kamran et al. (2015) are not consistent in Italy.

It is important to note that two recent studies have interpreted their findings on the issue of service pricing.

Independent auditing in the first period after the mandatory rotation of auditors in Italy and with

Evidence has shown that auditors increase their remuneration in the first year of their tenure in

The following years will compensate; While in Iran Azizkhani and Aghabigi (2013) showed

Independent auditors do not use the rate-breaking technique, and the fee is the first in the audit.

(Instead of allocating to future courses) increases.

Table 4. Results of regression model fitting (by fixed effects method)

A symbol
Possibility emirate t ÿÿÿÿÿ Fixed
***
0/000 3/537 1/006 C variable

2/484 amount ** 0/013

Compulsory turnover auditor 0/215 Sorry

2/691
Optional turnover auditor ** 0/007 0/138 VAFR
***
0/000 16/373 0/282 PER Company
***
0/000 4/146 0/174 Rank Audit Size Institute Quality
***
0/000 7/639 2/305 Aud_Size Auditor
0/602 0/521 0/058 InvRec Inventory Size and Claims Ratio
0/763 -0/302 -0/041 Lev pyramid grade

0/831 -0/214 -0/044 Long Return on assets

***
0/000 7/789 2/188 Inflation Annual Fisher

0/000 Inflation F Statistics *** Significant Model of Camera Statistics

Percentage 70/087 - Watson

865/1

Number of views: 855 Dependent variable: Audit fee

Determination coefficient: 73% Modified determination coefficient: 72%

**
Significance at 95% confidence level (maximum acceptable error 5%)
***
Significance at 99% confidence level (maximum acceptable error 1%)

Examination of the significance of other variables shows that the auditors' voluntary turnover, the size of the company

Employer, Auditor quality, Audit firm size and general price index (inflation rate)

Annually), all have a significant relationship with the fees of independent auditors. Findings mentioned in
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Regarding control variables, in accordance with the results of research by Hay et al. (2006) (Azizkhani and

Beigi (2013) and Vaez and others (2014).

Forced turnover and market share of auditing firms

To test the second hypothesis, test the pairwise average of the share of the market of auditing firms

Quality and quantity in the two time periods before (1385 to 1390) and after (1391 to 1393)

The requirements discussed were implemented, the results of which are described in Table 5. This table

It consists of two parts; In Section A, the market share of auditing firms based on sales

based on the total assets of stockholders Stockholders obtained in Section B,

Has been calculated and is the basis of mean comparison tests. According to the results listed in

Table 5 shows the average market share of auditing firms with quality grade A (indicating high quality) from

About 2.9% to 2.4% (from 2.6% to 2.4% if the market share is calculated

Institutions have decreased based on the total assets of stockholders. In contrast, share

From the market of auditing firms with quality grades B and C (definition of medium and low quality)

Implementation of these requirements from 0.5% to 0.6% (from 0.7% to 1.2% if

Calculation of the market share of institutions based on the total assets of stockholders) increased

Is. At first glance, these ratios indicate the transfer of part of the market share of institutions with

High quality refers to medium and low quality institutions. However, on a trial basis

Paired comparison, difference in market share of high quality institutions, according to the obtained t -statistic

0.420 for market share in terms of assets of stockholders), in none 0.348) and one of the

conventional confidence levels (99, 95 or 90%) is not statistically significant. Increase in

The average market share of institutions with medium and low quality, as well as with regard to

and 0.863 for market share in terms of assets of stockholders) in terms of Statistics ( t 696 )

It is not statistically significant. Based on this, it can be concluded that the forced rotation of institutions

Audit does not have a significant effect on the market share of auditing firms, as a result of the second hypothesis.

The research is rejected. According to high statistical analysis, in terms of economic consequences of the tour

Compulsory auditors for auditing firms, the above requirements can be said to have no effect

Significance on the distribution of work between quality auditors and medium and low quality institutions

Do not have. This result confirms the findings of Rahimian and Janfada (2014) which showed

Mandatory auditing firms do not have a significant effect on audit quality.

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Investigating the effect of forced turnover of auditing firms on wages ... _____ 349

. Market share results of auditing firms Table 5

95% reassurance interval Dispute Market share

average
High limit Low limit average Statistical value t Significance level period of auditing firms

A) Based on the share of customer sales

0/029 Before
Institutions with a level
-0/013 0/018 0/003 0/348 0/756
0/024 distance
high quality

0/005 before- 0/017 Quality institutions

0/008 0/004 0/696 0/162
0/006 distance Medium and low

B) Based on the share of total customer assets

0/026 Before
Institutions with a level
-0/009 0/014 0/002 0/420 0/010
0/024 distance
high quality

0/007 before- 0/014 Quality institutions

0/006 0/004 0/863 0/229
0/012 distance Medium and low

Conclusions and Recommendations

The issue of forced circulation of auditors is one of the regulations that has been the subject of controversy in recent years.

It has become professional and legal all over the world. Iran is one of the few countries that is forced to move

Audit firms in the interests of investors and improve the quality of auditing, through

Increased independence of executive auditors; however, these requirements may be

Achieving its goals has economic consequences for both auditors and audiences.

Have owners with; On this basis, it can sometimes be considered as a reasonable obligation and in

In the public interest, he agreed that the benefits of implementing it would outweigh the costs.

In this study, the issue of forced circulation of auditing firms in Iran, specifically from the aspect

Its relationship with auditing fees and auditing labor market was investigated. In short, the results of this

Research shows that auditing fees are followed by mandatory turnover of auditing firms (to

More than optional turnover) increased and led to the imposition of additional costs on companies

Has been. Another finding of the present study shows the forced turnover of auditing firms, the effect

It does not pay much attention to the distribution of audit work in institutions with different quality levels.
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These findings, along with studies that showed the forced turnover of auditing firms, are effective.

There is no significance on the quality of auditing (including Firth, Roy and Wu (2012, Kamran et al.)

(2015, Sensitive and Jafari (2010) and Rahimian and Janfada (2014) show (requirements)

In the few years that have passed since its implementation, it has not only achieved its goals of

Improving the quality of auditing in order to protect the rights of investors not achieved, but costs

It has also imposed more on companies (and investors).

Suggestions for applying research results Any

new requirements and regulations, after a period of implementation, need feedback that

Feedback shows both the extent to which the goals have been achieved and the other side effects of the regulations.

Turns on. The results of the present study can clarify the consequences of forced circulation regulations

Audit firms assist in practice.

According to the results of the present study on increasing the audit fee following the mandatory turnover

Auditing institutes and previous research on the relationship between forced circulation and audit quality

Which showed that the forced circulation of auditing firms has no effect on improving the quality of auditing,

Developers of these requirements are advised to avoid the additional cost imposed on

Companies are looking for forced turnover of auditing firms, other alternative ways to promote

ÿÿÿÿ. Audit quality The main limitation

of this study is the short time elapsed from the date of implementation of the circular regulations.

Mandatory auditing firms (3 years). Perhaps in case of re-implementation of this research in

Longer time periods, different results are obtained. The main

focus of this study was to investigate the forced turnover of auditing firms. In accordance with the principles

Theoretically, the turnover of auditors is not limited to the turnover of the institution and to the partner of the person in charge.

Auditing is also relevant. Accordingly, similar studies in particular are suggested

Optional turnover of audit partners should also be made to provide evidence in this regard.

Provide developers of these requirements.

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