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Audit Quality under Influences of Audit Firm and Auditee Characteristics: Evidence from the Romanian Regulated Market

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  • Mihai Carp

    (Department of Accounting, Business Information Systems and Statistics, Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iasi, 700506 Iasi, Romania)

  • Costel Istrate

    (Department of Accounting, Business Information Systems and Statistics, Faculty of Economics and Business Administration, Alexandru Ioan Cuza University of Iasi, 700506 Iasi, Romania)

Abstract

We have estimated the impact of some characteristics of the auditors and of the audited companies on audit quality for the Romanian listed firms (943 observations for the 2007–2019 period), using as a proxy for the audit quality the level of discretionary accruals, measured following the Jones (1991) model, and the accruals quality, estimated through the Dechow and Dichey (2002) model. These dependent variables have been related to variables that reflect both the characteristics of the audit firm (for example, Big 4 membership) and the characteristics of the audited firms (dimension, financial leverage, accounting standards applied, growth and profitability). Our results show that the auditor’s Big 4 membership contributes to an increase in discretionary accruals, decreasing the quality of the audit. The transition to IFRS did not have a significant influence on the quality of the audit. The audit opinion may have an effect on the discretionary accruals and the accruals quality in the sense that a modified opinion leads to an increase in the quality of the audit in the following financial year(s).

Suggested Citation

  • Mihai Carp & Costel Istrate, 2021. "Audit Quality under Influences of Audit Firm and Auditee Characteristics: Evidence from the Romanian Regulated Market," Sustainability, MDPI, vol. 13(12), pages 1-16, June.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:12:p:6924-:d:578107
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