Audit Quality and Financial Constraints

The objective of this research is to study the relationship between audit quality and financial constraintsof the companies Listed on Tehran Stock Exchange. Financial constraints were calculated by localizedindex measured by Tehrani and Hesarzadeh (2009). To measure the audit quality, three criteria wereused: the size of auditing firm, auditor`s tenure and the auditor`s expertise in industry. In order to testthe research hypotheses, 100 companies listed on Tehran Stock Exchange, in the period of 2006 – 2013,were selected as samples. Multiple logistic regression model was used to test the research hypothesis.Data analysis was performed using Eviews software version 7. The results revealed that there was asignificant and positive relationship between auditing firm size and auditor`s tenure, and financialconstraints. Otherwise, there was a significant negative relationship between auditor`s expertise inindustry and financial constraints. In general, the findings of the research indicated that audit qualityaffects financial constraints.