Presenting a Model for Reducing Low Balling in the Initial Auditing Using the Method of Grounded Theory

One of the main challenge of the auditing profession is the low balling of some auditing firms. Low balling reduces the quality of the audit and damages the credibility of the profession. Therefore, the purpose of this study is to present a model for reducing low balling in the initial audit.

In this study, with using a qualitative approach and using the method of grounded theory, the model has been developed. Data were analyzed using 39 interviews with member of Iranian Association of Certified Public Accountants (IACPA), in the years 2019 and 2020, using open, axial and selective coding methods and MAXQDA 10 software, and causal conditions, intervening conditions, context, implications, and model strategies for reducing low balling are presented.

According to the results, the most important low balling factors in the audit services market are: unhealthy competition among audit firms, increasing the number of small audit firms, the large structure of the state economy, has not become auditing a real need in Iran, determining auditing fees based on mandatory rates and weak implementation of approved laws.

As a result, strengthening the quality control group work of the Iranian Associaion of Certified Public Accountants and conducting periodic monitoring, development and expansion of the audit market, merger of small audit firms, implement the bylaws of strategies to increase the executive guarantee and strengthen the auditing, emphasis on specialization, develop strict regulations, determining the minimum rate and competition of audit firms for higher than that, elimination of monopoly on government and institutional auditing, defining competition in service quality levels instead of price levels ,the extent and effects of low balling in the audit services market can be reduced.