Supervisory Challenges in Capital Markets: Investigating the Supervisory Role of Audit Firm Size and Auditor Tenure in Controlling Earnings Management and Improving the Quality of Financial Reporting

Document Type : Original Article

Authors
MOOstafa Khadem Al-Husseini
ali baghani
asgar askari
Department of Accounting, South Tehran Branch, Islamic Azad University, Tehran, Iran.
10.22034/jmaak.2026.24509
Abstract
This study aims to analyze the role of auditor characteristics on financial reporting behaviors and examines the effect of "type of audit firm" and "auditor tenure" on earnings management in 162 companies listed on the Tehran Stock Exchange (2018-2024). Data from financial statements were analyzed using the multivariate regression method. The findings indicate a significant and positive relationship between independent variables and earnings management; such that audit firms in the sample studied did not have an effective deterrent role in reducing earnings management. Also, the lengthening of the auditor's tenure, relying on the theoretical explanation of "familiarity threat", has led to a decrease in regulatory strictness and an increase in earnings management. Among the control variables, return on assets was identified as the strongest driver of earnings management. The results indicate the need for supervisory institutions to review their control mechanisms, because the quality of financial reporting is not only dependent on apparent criteria, but also affected by the dynamics of the relationship between the auditor and the client.
Keywords: Profit, Earnings Management, Type of Audit Firm, Continuity of Auditor Tenure
Keywords
Profit
Earnings Management
Type of Audit Firm
Continuity of Auditor Tenure
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