The Effect of Audit Quality on Managerial Over Confidence and the possibility of Fraudulent Reporting: Multi-Dimensional (Hybrid) Approach

This paper investigates the effect of audit quality on managers' over confidence and the possibility of fraudulent reporting of Iranian company's by panel data technique. In this concern, financial data of 174 listed shared corporations in Tehran Stock Exchange during 1388 -1394 [1218 observation] proceeded. The study identifies some proxies for audit quality index which includes the degree of accountant specialization on industry, audit reliability, auditor experience time duration and finally audit independence index. Regarding operationally indication of audit quality the research applies multi-dimensional approach in adverse with last literature studies. Then the probability of fraudulent reporting measured by two indices including the probability of fraudulent and earning management. Research findings by multivariate regression method indicates that by 95 percent confidence, the audit quality has negative and significant effect on probability of fraudulent and earning management but there is no significant relationship between audit quality and management overconfidence.