The Relationship between the Report Signing Auditor's Work Style and Earnings Comparability: With the Emphasis on the Auditor's Characteristics

 The financial statements of a company show its financial position, which can have an impact on the investor's behavior. The information contained in the financial statements of a company can play a useful role by enabling users to compare the company with those in the same industry or the history of that company. Comparability is one of the most important qualitative characteristics of financial reporting and is defined as stickness of the earnings of two companies. It helps users to evaluate the performance of the company by facilitating the extent to which the understanding is gained. Companies listed in the same industry have the same nature of the activity and are being derived from the same economic circumstances, and due to having a similar earning structure, it is expected to go through higher comparability. Comparability through enhancing the quality of accounting information helps users to produce more effective and accurate forecasts. The concept of comparability stems from consistency affected by both accounting standards and judgment. Thus, the existence of accounting standards solely does not lead to comparability. These standards should be not only applied uniformly by accountants but also interpreted the same by auditors. Auditor's judgments can affect earnings comparability which is influenced by their characteristics including work style, expertise, and knowledge.  While current studies focus more on the role of accounting standards and turn a blind eye to the effect of auditors on information comparability, this study attempted to shed light on this issue. From this point of view, the behavior of auditors is influenced by the strategy of the audit firms and their characteristics. In this regard, comparability is a joint product of Auditor's characteristics and audit firm's reputations. The relationship between auditor's characteristics and earnings comparability was examined in this paper. It is the first time that this concept is taking into account in Iran. The result will contribute to the regulators in the auditing profession by analyzing the importance of the individual effects of auditors on audit quality and putting the side effects of the trembled relationship of auditors with their audit firm under scrutiny.

This research is considered as applied research and its method is descriptive-correlation. The population is companies listed on Tehran stock exchange (TSE) and Iran farabourse. The sample is selected based on some criteria between 2014 and 2019 (including 768 year-company). Data were analyzed using the estimated generalized least squares (EGLS) and the generalized least squares (GLS) methods which helpsto overcome on issues regarding autocorrelation or heteroscedasticity. 

The results showed that the auditor's style has significant positive relationship with earnings comparability. Moreover, increasing the teamwork experience enhances earnings comparability; However, the size of audit firm does not have a significant effect on earnings comparability. 

The work ties between auditors can provide the same work style improving the earnings comparability through the standardization of interpretation and application of accounting and auditing standards. The work style is the feature of an auditor which should be considered in the comparability assessment. Moreover, the more the teamwork experience is the higher similarity in the work style obtained through social learning and sharing knowledge and experience which results in earnings comparability. As a result, other characteristics such as expertise and knowledge can be effective in the comparability context. Investors can pay attention to the number of years auditors have been working in the same industry as colleagues when they evaluate the quality of the information. Furthermore, disclosure of the information regarding expertise and education of auditors signing the audit report provides more accuracy for investors in the determination of information reliability. Audit quality is a matter of both auditor's related and audit firm's related characteristics. In this regard, auditors have an impact on audit quality by switching their audit firms which is a prevalent issue in the audit market in Iran and should be addressed by regulators.