Assessing the moderating role of the quality rating of audit institutions on the relationship between the independence of the board of directors and the change in classification in the Tehran Stock Exchange.

Document Type : Original Article

Authors
Fraydoon Rahnamay Roodposhti 1
anahita zandi 2
1 Professor, Department of Accounting, Faculty of Management and Economics, Science and Research Branch, Islamic Azad University, Tehran, Iran.
2 Assistant Professor, Department of Accounting, Shahr-e-Qods Branch, Islamic Azad University, Tehran, Iran
10.22034/jmaak.2025.77688.4297
Abstract
This research attempts to analyze the extent to which independent directors and the quality rating of audit institutions can prevent the misclassification of expenses. Using the considered limitations, 152 companies were selected as the research sample in the period of 2013-2022. In order to test the research hypotheses, multivariate linear regression based on panel data has been used. In this research, Board independence is measured by taking the proportion of independent directors on a firm’s board and classification change is measured from the core earnings expectation model. The results of research hypotheses show that companies that have a higher proportion of independent directors in their board of directors are more efficient in limiting the change of cost classification. In addition, the companies that A-level auditors audit have a significant role in controlling the change in cost classification. Overall, the results also show that A-rated audit firms have a significant effect on the relationship between board independence and classification change. The results of this research have applications for investors, management, analysts, and policy makers. Also, the findings of this research show a new method of profit management to the board of directors and internal and independent managers; A method that is difficult to detect.
Keywords
Profit management
classification change
Board independence
quality rating of audit firms
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