Auditor distraction and Report Audit Quality

The main objective of this study is to investigate the impact of auditor distraction to the audited companies in shock on Audit quality.

The sample consists of 103 firms listed in Tehran Stock Exchange during 2017 to 2022, which are selected using the systematic removal method. In this research, the audit quality has been measured by using two criteria of beating earnings forecast and earnings restatement. Finally, the hypothesis of this research was tested through logistic regression using Eviews software.

Results of the study indicate that clients of distracted auditors are more likely to meet earnings forecasts or the actual earnings per share will be geater than earnings forecasts (beating earnings forecast) and also, clients of distracted auditors exhibit a higher probability of restating their earnings in subsequent years.

Overall, auditor distraction to the audited companies in shock reduces the audit quality.           

Contribution: 

Considering the impact of the auditor distraction on audit quality, it is very important to pay attention to the quality of auditors’ report in preventing their clients’ opportunistic financial reporting.