Auditor style, auditor changes and financial statements comparability

Abstract

The term auditor style to determine a unique set of internal working rules each audit firm to perform audit standards and application generally accepted accounting principles between their clients are used. Audit style implies that two companies audited by the same auditor, subject to the same audit style, are more likely to have comparable earnings than two firms audited by two different audit firms with different styles. The sample consists of 44 companies listed in Tehran Stock Exchange for the period 2002 to 2013. The tests are based on pairs of firms and a total of 1958 pairs of firms as observations are used. In the present study used correlation method and multiple regression and is performed regression analysis for hypothesis test. The findings show that the clients of audit firms in the same industry and year than to their non-clients have more similar in accruals and earnings structure. Also the auditor style has an effect on clientele accruals, and that a change to the same auditor leads to more similar accruals. However, there is no evidence that a change to different auditors reduced comparability in the post-switch period. Finally the findings show that audit style is effective to comparability of financial statements.