The investigation of audit quality on the cost of financing

Abstract

Audit quality and its components are factors that play an important role in the financing costs of firms, and consider many studies regarding financial decisions about methods of financing. In this study, we will investigate the relationship between audit quality and cost of financing in Listed Companies in Tehran SEC with examining the importance of financing costs (interest expense) . Naturally, Audit quality creates a trust and confidence in investors, which in turn reduces the information risk and certainly will affect the cost of financing of firms. This study examines the relationship between audit quality (size of the audit firm) and the cost of financing in Iran. Therefore, members of certified public accountants for auditing the auditor considered small audit firms and the audit staff of auditors is much more ancient one. The results of the survey of 221 companies listed in Tehran Stock Exchange during the years 2006 to 2011 show that audit quality has a significant effect on the cost of financing.