Authors : Mohsen Keymanesh and Abbas Alimoradi Sharifabadi
Abstract: Accounting earnings and its components is considered such information that can be used by decision makers. The reliability of financial statements including profit, greatly depends on the quality of audit performed. Audit could play a prominent role in reducing disturbance in discretionary accruals by preventing opportunistic manipulation of accruals. So audit quality somewhat affect pricing of discretionary accruals. Accordingly the usefulness of discretionary accruals information will increase and as a result, the market positively prices earnings and its components. The results of investigating 80 companies among companies listed on Tehran Stock Exchange during the years 2008-2013 show that audit quality does not affect pricing of cash component of earnings and non-discretionary accruals but has significant and positive effect on the pricing of discretionary component of accruals. Based on these results it can be argued that the quality of the audit affects the earnings pricing solely via affecting the pricing of discretionary accruals.
Mohsen Keymanesh and Abbas Alimoradi Sharifabadi, 2016. The Impact of Audit Quality on Pricing of Earnings Components. International Business Management, 10: 5802-5808.