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Auditors’ response to readability of financial statement notes

Author

Listed:
  • Mahdi Salehi
  • Mahmoud Lari Dasht Bayaz
  • Shaban Mohammadi
  • Mohammad Seddigh Adibian
  • Seyed Hamed Fahimifard

Abstract

Purpose - The main objective of the present study is to assess the potential impact of readability of financial statement notes on the auditor's report lag, audit fees and going concern opinion (GCO). Design/methodology/approach - The statistical population of this study includes all listed firms on the Tehran Stock Exchange (TSE) for the period of 2012–2017. The systematic elimination method is used for sampling and multiple regression and EViews software are used for testing the hypothesis models. Findings - The obtained results show that there is a significant and positive relationship between audit report lags and readability of financial statements. Moreover, it is also revealed that readability of financial statements is positively associated with audit fees. Furthermore, the findings suggest a negative correlation between readability indexes and issuing GCOs, denoting hard-to-read statements is considered as a risk factor by auditors. Finally, the observations of our robustness tests suggest that the association between audit report lag and readability of financial statements is robust. Originality/value - This is the first conducted investigation concerning auditor's response to the readability of financial statement notes in TSE. The outcome of current paper may pave the way for revising and developing Iranian accounting standards in order to give a fairer and clearer picture of financial reports.

Suggested Citation

  • Mahdi Salehi & Mahmoud Lari Dasht Bayaz & Shaban Mohammadi & Mohammad Seddigh Adibian & Seyed Hamed Fahimifard, 2020. "Auditors’ response to readability of financial statement notes," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 28(3), pages 463-480, June.
    • Handle: RePEc:eme:arapps:ara-03-2019-0066
    DOI: 10.1108/ARA-03-2019-0066
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    Citations

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    Cited by:

    1. Wei Qian & Yuemeng Ge, 2021. "The implementation of leisure tourism enterprise management system based on deep learning," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 12(4), pages 801-812, August.
    2. Imen Fakhfakh & Anis Jarboui, 2022. "Earnings Management and Audit Report Lag: The Role of Audit Risk-Tunisian Evidence," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 21(1), pages 113-135, March.
    3. Orman Hamedi Ilkhechi & Saeid Anvar Khatibi, 2020. "The Impact of Earnings Persistence on the Operating Cash Flows with Emphasis on Financial Constraints," International Journal of Business and Administrative Studies, Professor Dr. Bahaudin G. Mujtaba, vol. 6(5), pages 265-274.
    4. Aditya Aji Prabhawa & Iman Harymawan, 2022. "Readability of Financial Footnotes, Audit Fees, and Risk Management Committee," Risks, MDPI, vol. 10(9), pages 1-21, August.
    5. Shaimaa Abdulazeez Sahib & Asaad Mohammed Ali Wahhab, 2023. "The Experience of the Internal Auditor in Reducing the Penetration of Computerized Data and its Effect on the Bank Continuity: Evidence from the Emerging Markets," Technium Social Sciences Journal, Technium Science, vol. 45(1), pages 106-126, July.

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