The Role of Audit Risk on the Relationship between Auditor Size and Audit Quality: At listed companies in Tehran Stock Exchange

As the privatization process and the expansion of the capital market and the orientation of investing in corporate stocks, the importance of corporate information and financial statements has attracted the attention of a large number of stakeholder groups and increased attention to the audit profession and auditor reports. In Iran, despite the fact that auditors have four types of law enforcement, contractual, civil, and criminal liability under the laws and regulations, no official statistics are available on complaints against auditors, and no detailed statistics on lawsuits against auditors are currently available. Quality auditing requires that auditors obtain sufficient and appropriate evidence and to make sound judgments about the evidence. This requires auditors to identify the controls for the auditor and adjust the amount of evidence based on the findings. Quality auditing will reduce the likelihood of distortion and reduce claims against the auditor. The present study attempts to investigate the relationship between auditor size and audit quality with the variable of audit risk. Accordingly, in order to collect the required information, all listed companies in Tehran Stock Exchange were surveyed as the statistical population of which 82 companies were selected as statistical sample. The number of years considered for the study was 5 years (2014-2018). In terms of purpose-based classification, this research falls into the applied category. It is also descriptive-correlational in nature, which uses the post-event method to discover the correlation between variables. The model to test the hypothesis is multivariate regression which has been analyzed using panel data method. The results indicate that when there is a risk of litigation among companies, increasing the size of the auditor does not diminish the quality of the audit.