Abstract
This study investigates the relationship between adjusted audit opinion and earnings management of firms listed in Tehran's Stock Exchange. Also, the modulatory effect of firm's financial distress on this relationship is examined and tested. For this purpose, the data of 135 firms listed in Tehran's Stock Exchange over 2010 to 2014 period and logistic regression were used. The results showed that a reversed relationship exists between earnings management and unacceptable audit opinion, and firm's financial distress cannot adjust this relationship.
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