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Firm Size and Audit Regulation and Fraud Detection : Empirical Evidence From Iran

Title Firm Size and Audit Regulation and Fraud Detection : Empirical Evidence From Iran
Author Dr. Mahdi Salehi, Dr. Ali Mansoury, and Dr. Reza Pirayesh
Years 2009

 

Theoretical Basis An auditor has the responsibility for the prevention, detection and reporting of fraud, other illegal acts and errors is one of the most controversial issues in auditing, and has been one of the most frequently debated areas amongst auditors, politicians, media, regulators and the public (Gay et al 1997).

To the bases of important factor we conducted three hypotheses

including:

  1.  the rule and regulation oversees activity of IPCA members’ effects on their  willingness to explore and report important distortions neutrally.
  2. The lack of Contras benefit affects IPCA members’ willingness to explore and report important distortions neutrally.
  3. Market mechanism affects IPCA members’ willingness to explore and report important distortions neutrally.
  4. The size of auditing firms affects IPCA members’ willingness to explore and report important distortions neutrally.
Methods and Subjects Out of 240 questionnaires 180 respondents completed the research. Among these 180 participants, there were 29 expert in accounting and auditing (16.10 per cent) worked as independent auditors, 30 participants (16.80 per cent) worked as internal auditors, 60 were financial and banking managements (62.40 per cent participants), 30 were faculty members and 31 were accounting students.
Main Result
  1. The result revealed that rule and regulations that oversees on the auditor practices have significant effects on auditor willingness to reporting important distortions neutrally (p<0.05). 119 participant (66 per cent) agreed with this hypothesis which according to our results this hypothesis is confirmed (H1) with the mean degree of agreement equal to 1.8 (S.D. = 2.1, 95 per cent of confidence interval from 1.2 to 2.4).
  2. The results shows that this hypothesis is rejected (H2) while 105 participants did not agree to this hypothesis (61 per cent), the mean degree of disagreement was -0.49 (S.D. = 1.91, 95 per cent of confidence interval from -1.6 to 0.084).
  3. Further, there were 159 participants (88 per cent) strongly agreed that the effects of market mechanism on auditor willingness to report important distortions neutrally (H3). The size of audit firms was the final hypothesis that didn’t confirmed according these results.
  4. There were126 participants (70 per cent) disagreed that the effect of audit firms size on auditor willingness to report important distortions (H4).
Conclusion To provide this ideal environment accordingly, the results of this survey from the view point of the participants audit roles and regulations, and market mechanism may help Iranian corporate sector to this audit final goal, it is highly suggested Iranian audit legislators improve audit roles and regulation