Effect of discretionary accruals and corporation size on auditor's opinion

Abstract

This research aims to examine the effect of income manipulation and size of corporations on audit opinion. The corporations under study include the ones registered in the Tehran Stock Exchange for the period of 2006 to 2011. The logistic regression statistical method and the Wald test have been used to test the research hypotheses. The corporations have been selected by the systematic random sampling. The results indicate that in all the studied corporations, the income figures have been manipulated and auditor's opinion is unqualified opinion with explanatory paragraphs. The effect of manipulating income figures on auditor's opinion was negative and significant and in corporations with higher income manipulation, the auditor's opinion was qualified opinion. Furthermore, the impact of the size of corporations on auditor's opinion has been confirmed as being positive. In corporations with bigger size, the independent auditors have modified their opinion and they have mostly expressed unqualified opinions. Key words: Auditor's opinion, corporation size, discretionary accruals.