The optimal pattern of selecting audit institutions with an emphasis on independence based on the fuzzy Delphi approach

Document Type : Research Paper

Authors

Department of Accounting, Semnan Branch, Islamic Azad University, Semnan, Iran

Abstract

The independence of audit institutions has an effective role in the quality of audit institutions' reports, the fees of audit institutions, and the disclosure of frank and open opinions of audit institutions, away from any financial and kinship relationships, etc. So far, the independence of the auditor and its criteria have been discussed more than the independence of the auditing institutions. In the current situation, the appearance of the auditor's choice is based on legal criteria, and this choice is often made by the managers who are responsible for the company's performance. Although the commercial law leaves the selection of the auditor to the general assembly and the charter of the audit committee of the Securities and Exchange Organization entrusts the task of examining and recommending the auditor to the audit committee, but the selection is made by the board of directors, the managing director, the director of the affairs of assemblies and companies and sometimes it is done in lower organizational levels, such as financial managers, which brings many problems. Therefore, our goal is to provide the optimal model for the selection of audit institutions by an independent institution and authority, with an emphasis on independence. For this purpose, we used the fuzzy Delphi method to collect the opinions of experts in this regard. The selection of the audit institute and the assignment of work to the audit institutes by an independent and reference body will increase the independence of the audit institutes. The results of this study show that we can increase and maintain the independence of the audit institutes and not the auditor in this way. Choosing audit institutions with this approach can have many positive effects, including proper distribution of work between audit institutions, increasing the quality of audit institutions' reports, increasing investors' trust and as a result increasing investment, preparing a reliable and independent report without the influence of the manager and the company, for the institutions to carry the executive and supervision of the country.

Keywords

[1] S. Aqel, The perceptions of loan officers and auditors of factors affecting auditor independence: Evidence from Palestine, Accounting 7 (2021), no. 4, 845–854.
[2] T. Arniati, D.A. Puspita, A. Amin, and K. Pirzada, The implementation of good corporate governance model and auditor independence in earnings’ quality improvement, Entrepreneur. Sustain. Issues 7 (2019), no. 1, 188.
[3] T. Bahrami, B. Terah Jamal, S. Jabarzadeh Kangarloui, and M. Haqvirdizadeh, The effect of stress on auditors’ professional independence, Profess. Audit Res. Quart. 1 (2021), no. 2, 84–104.
[4] J. Bakhtiari, Z. Pourzmani, and R. A. Royai, Social capital and independence of auditors; the approach of professionalism, Manag. Account. 13 (2018), no. 47, 13-36.
[5] J. Bakhtiari, Z. Pourzmani, and R. A. Royai, Ordinary relationship and independence of the auditor: a test of the theory of social bonds, Knowledge Account. Manag. Audit 8 (2017), no. 30, 27–40.
[6] V. Bekhardi Nasab, The role of downward pressure on the auditor in deviations in financial reporting based on the theory of audit fee pressure, the theory of the auditee and the auditor, Profess. Audit Res. 1 (2021), no. 2, 156–185.
[7] R. Darabi, B. Pasandideh Parsa and M. R. Haji Reza, Explaining the relationship between audit quality, auditor independence, audit fee, and the quality of financial reporting in insurance companies, Profess. Audit Res. 1 (2021), no. 2, 132–155.
[8] A. Desoky and H. A. Khasharmeh, Does the provision of non-audit services affect auditor independence and audit quality?, Evidence from Bahrain, Asian Acad. Manag. J. Account. Finance 14 (2018), no. 1, 25–55.
[9] N.T. Doan, C.D. Pham, T.T.U. Nguyen, M.P. Vu and L.H. Pham, The effect of non-audit services on auditor independence: Evidence from Vietnam, J. Asian Finance Econ. Bus. 7 (2020), no. 12, 445–453.
[10] I. Elizaei, M. Tamimi, and H. Shalal Nejad, Iranian investors’ perception of auditor independence, Account. Audit. Stud. 3 (2012), no. 10, 22–37.
[11] H. Fakhari and I. Amiri, Causes and consequences of purchasing auditor’s opinion, Account. Audit. Stud. 9 (2018), no. 36, 5–26.
[12] Y. Hassas Yeganeh, Philosophy of Auditing, 12th Edition, Scientific and cultural publications, Tehran, Iran, 2018.
[13] V. Hatamian, Investigation of the effect of auditor’s tenure and independence on the number of paragraphs in the auditor’s report, Account. Manag. Perspect. 2 (2018), no. 8, 41–55.
[14] J.G. Jenkins and J.D. Stanley, A current evaluation of independence as a foundational element of the auditing profession in the United States, Current Issues Audit. 13 (2019), no. 2, 17–27.
[15] S.M. Kang, I.T. Hwang, and K.S. Hur, Non-audit services and auditor independence depending on client performance, Aust. Account. Rev. 29 (2019), no. 3, 485–501.
[16] M.C. Knapp, Audit conflict: An empirical study of the perceived ability of auditors to resist management pressure, Account. Rev. 60 (1985), no. 2, 202–211.
[17] E. Malekian, H. Ghorbani, and M. Saleh Abadi, The effect of auditor independence on the weakness of internal controls after the approval of internal controls directives, Audit Knowledge 18 (2017), no. 73, 55–77.
[18] B. Marx and M. Harber, Auditor independence and professional scepticism in South Africa: Is regulatory reform needed?, South Afr. J. Econ. Manag. Sci. 23 (2020), no. 1, 1–12.
[19] R.K. Mautz and H.A. Sharaf, The philosophy of auditing, Amer. Account. Assoc. 10 (1961).
[20] M. Mohammadi, M. Pourkashani, N. Rahimian, and M.H. Rahmati, Identifying the factors that threaten the independence of the auditors of the State court of audit, Audit Knowledge 20 (2018), no. 81, 57–85.
[21] M. Moradiv and M. Yahyaei, Development of independent auditor selection model in Iran, Account. Audit. Rev. 2 (2019), no. 27, 258–287.
[22] Z. Nikbakht, S.A. Khalifa Soltani, S.A. Hosseini, A. Madhagi, and A.A. Wadadhir, Compilation of auditor independence model, Financ. Account. 10 (2017), no. 38, 112–190.
[23] P.N. Onulaka, M.F. Shubita, and A. Combs, Non-audit fees and auditor independence: Nigerian evidence, Manag. Audit.J. 34 (2019), no. 8, 1029–1049.
[24] P. Mousavi, R. Yousefi Zenouz, and A. Hasanpour, Identifying organizational information security risks using the fuzzy Delphi method in the banking industry, IT management 22 (2014), 184–163.
[25] F. Saeedi, B. Jamshidinavid, A. Taherabadi, and M. Asgharou Ghanbari, The influence of individual characteristics on disclosure tendencies of independent auditors, Health Account. 7 (2017), no. 2, 42–66.
[26] S.H. Sajjadi and M. Ebrahimimand, Increasing factors of independent auditor’s independence, Account. Audit. Rev. 40 (2015), no. 12, 61–80.
[27] S. Soleimani, M.R. Shurvarzi, and Z. Nouri Topkanlou, The effect of threats on the independence of auditors, Knowledge Financ. Account. 5 (2017), no. 3, 69–80.
[28] A. Soroush, B. Bani Mahd, M.R. Vakili Fard, and H. Amiri, The effect of competition in the audit market on auditor independence and the quality of financial statements of companies listed on the Tehran Stock Exchange, Stock Exchange Quart. 7 (2013), no. 28, 77–94.
[29] E. Tawakolnia, Y. Hassas Yeganeh, and E. Malekian Kale Basti, A model to estimate the fear of losing the auditors’ employer, Audit knowledge 19 (2018), no. 77, 111–140.
[30] N.T.H. Yen, N.V.H.N. Thuy, N.H. Tien, and D.B.H. Anh, Enhancing auditors’ independence in auditing enterprises in Vietnam, Cogent Econ. Finance 7 (2019), no. 1, 1–16.
[31] M.A. Yousefi Sharmai and B. Bani Mahd, The effect of individual emotions on the auditor’s impartiality, Knowledge Financ. Account. 6 (2018), no. 1, 163–185.
Volume 15, Issue 12
December 2024
Pages 425-434
  • Receive Date: 03 September 2023
  • Revise Date: 12 December 2023
  • Accept Date: 23 December 2023