Islamic Religious Atmosphere and Audit Pricing: Evidence from Iran

Abstract

AbstractThis study examines whether the Islamic religious atmosphere of local communities influences audit pricing. We use a comprehensive survey conducted by Iran's Ministry of Culture and Islamic Guidance to measure the Islamic religious atmosphere. Using a sample of 1,204 observations from firms listed in Iran's capital market, we find that firms located in regions with a strong Islamic religious atmosphere pay significantly lower audit fees. Furthermore, the study reveals that family ownership (auditor size) strengthens (weakens) the aforementioned relationship. However, we did not find a significant moderating role for the local community's social capital. We contribute to the ethics literature by providing a better understanding of the economic consequences of the religious atmosphere and offering policy, practical, and educational implications.