The Accepted Audit Opinion and its Impact on the Relationship between Earnings Management and Stock Returns

Abstract

The investors need different information such as financial information about economic corporations to make decision. Financial statements are considered as the most important collection of financial information but having doubt about the reliability of aforementioned information is an important problem driving from conflict of interests. In fact, the purpose of audit is to evaluate the quality of information for users. However, with the increase in agency costs, demand for audits with high quality will be increased; this subject is voluntarily done by managers or it is imposed as a controlled performance by the investors from outside. In this study, the effect of the type of audit opinion on the relationship between earnings management and stock returns in the listed corporations in Tehran Stock Exchange is studied. In terms of research method and purpose, this study is respectively empirical and functional and Ordinary Least-Squares Regression Method has been used to evaluate research hypotheses. Research hypothesis is that studying unqualified audit opinions can influence the relationship between earnings management and stock returns. The results show that with regard to earnings management and unqualified opinion in a period, stock returns are changed. Statistical populations were studied from 2009 to 2013.