The relationship between product diversification and audit errors in Tehran Stock Exchange

Audit risk arises when auditors give an unfavorable opinion on financial statements containing material misstatements. This risk is a combination of the risk of errors or significant distortions in the process of preparing financial statements (inherent and control risk) and the risk of not being discovered through the auditor's proceedings (non-discovery risk). The purpose of this research is to investigate and explain the relationship between product diversification and audit errors. This research was observed during the period of 2015 to 2019 and was carried out using logistic regression. The results of this analysis on the statistical sample of 143 companies that were selected by systematic elimination method indicate that there is a significant and positive relationship between product diversification and audit errors. It means that, when product diversification increases, the company is associated with information complexity, which according to agency theory will lead to an increase in information asymmetry, which will lead to audit errors.