Managerial Overconfidence and Unqualified Audit Opinion

Overconfidence is one of the most important personal characteristics of managers. Theoretically, Manager’s riskiness is directly related to this characteristic. The Possibility of unqualified opinion increases, if the auditor recognizes this personality trait of the managers and overestimates financial reporting risk due to Managerial Overconfidence. This study is aimed to determine the relationship between Managerial Overconfidence and Unqualified Audit Opinion in firms listed in Tehran Stock Exchange. This research uses the library research to collect theoretical basics and data and applies correlation method to test the hypothesis. The statistical population includes all listed companies in Tehran Stock Exchange and the sample consists of 66 companies during the period from 2007 to 2014. The logistic regression method is used to test the hypotheses of the research. The results show that Managerial Overconfidence has significant and negative relationship with Unqualified Audit Opinion. That means any increase of Managerial Overconfidence decreases the possibility of Unqualified Audit Opinion