Document Type : Original Research


1 Accounting Department, Islamic Azad University, Khoy Branch, Iran

2 MSc in Accounting Department, Islamic Azad University, Khoy Branch, Iran.

3 MSc in Accounting Department, Islamic Azad University, Khoy Branch, Iran


The purpose of this study was to investigate the effect of audit quality and debt financing on earnings management. In this research, the quality of audit and debt financing is considered as an independent variable and profit management as an associated variable. The criteria for measuring the audit quality of the auditor's tenure, the size of the audit firm, the auditor's specialty, and the independence of the auditor are to measure the financing of both short-term financing (short-term debt to total assets) and long-term debt financing (Long-term debt to total assets). Also, for measuring earnings management as a dependent variable, the modified Jones model was used. The spatial domain of the research includes companies admitted to the Tehran Stock Exchange and the realm of time from the beginning of 2010 to 2016, totally due to the restrictions imposed, 134 companies were selected as samples. Testing the research hypotheses using aggregated least squares regression showed that none of the audit quality criteria studied in this research and debt financing had any effect on the management of profit.


 Abrahamid Kurdler, Ali and Seidi, Seyed Aziz (2009); "The role of independent auditors in reducing discretionary accruals", Quarterly Journal of Accounting and Auditing, Volume 16, Issue 1.
Alavi Tabari, Seyyed Hossein, Sultan Khalifa, Sayed Ahmad and Shahabandian, Neda (2009); "Audit Quality and Profit Earnings", Accounting Research, No. 3.
Cormier, D., Sylvain, H., and Marie, L, (2013). The incidence of earnings      management on information asymmetry in an certain environment: Some Canadian evidence. Journal of International Accounting, Auditing and Taxation, 22: 26– 38.
Davidson, R.A., and Neu, D. (1993). A note on the association between audit firm size and audit quality. Contemporary Accounting Research, 9, 479-488.
DeAngelo, L. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3, 183-199.
DeAngelo, L. (1986). Accounting numbers as market value substitutes: A study of management buyouts of public stockholders. Accounting Review, 61, 400-420.
Ebraheem Saleem Salem Alzoubi (2017) ), Audit quality, debt financing, and earnings management: Evidence from Jordan, Journal of International Accounting, Auditing and Taxation . journal homepage:
Ebrahimi, Seyyed Kazem, Bahramini Nasab, Ali and Ahmadi Moghadam Mansour (2016); "The Relationship between Financing Decisions and Types of Earnings Management", Financial Accounting and Audit Research, Vol. 8, No. 30, pp. 83-102.
Eshleman, J.D. and Guo, P. (2014). Abnormal audit fees and audit quality: the importance of considering managerial incentives in tests of earnings management. Auditing: A Journal of Practice & Theory, 33 (1), 117-138.
Foroughi, Dariush and Mohammadi, Hajar (2011); "How to relate debt financing and quality of profit, Journal of Accounting Research, No. 1, pp. 137-154.
Hajiyah, Zohreh, Hassanzadeh Baradaran, Rasool and Ahmadzadeh, Younes (2012); "The Impact of Specialty in Industry and Auditory Period on Profit Management;" Audit Knowledge, No. 49, pp. 69-85.
Harford, Jarrad, Li, Kai, and Xinlei Zhao, (2007), Corporate Boards and the Leverage and Debt Maturity Choices, available,
Healy, P. M. and. Wahlen, J. M. (1999). "A Review of the Earnings Management Literature and Its Implications for Standard Setting", Accounting Horizons, Vol.13, 365-383.
Izadinia, Nasser, Rabiei, Hamed and Hamidian, Narges (2013); "Investigating the Relationship between Financial Leverage and Real Profit Management of Companies Accepted in Tehran Stock Exchange", Journal of Accounting Progress, Volume 1, Issue 5, Pages 33 -54
Jensen, M. (1986). Agency costs of free cash flow, corporate finance and takeovers. American economic review, 76(2), 323- 329.
Khajavi, Shokraleh and Gorgani Firouz Jah (2014); "Investigating the Relationship Between the Features of the Board of Directors and the Methods of Financing the Companies Accepted in Tehran Stock Exchange", Journal of Accounting and Auditing Research, 21, pp. 24-47.
Mehrbani, Mehdi, Zelli, Hassan, Malihei Ali (1394); "Reviewing the Board of Directors' Characteristics on Accounting Conservatism in the Companies Accepted in Tehran Stock Exchange, Audit Knowledge, Vol. 14, No. 58, pp. 171-188.
Mojtahedzadeh, Vida and Aghaei, Parvin (2004); "Factors Affecting the Quality of Auditing Independent from the Perspectives of Independent Auditors and Users"), Accounting and Auditing Reviews, No. 38, pp. 53-76.
Mojtahedzadeh, Vida and Baba'i, Zahra (2012); "The Impact of Independent Audit Quality on the Management of Profit and Cost of Capital Investments," Financial Accounting Knowledge, No. 6, pp. 9-28.
Moradi, Mahdi (2007); "The Relationship between Financial Leverage and Earning Smoothing in Companies Accepted in Tehran Stock Exchange", Financial Research, No. 24, pp. 99-114.
Namazi, Mohammad and Gholami, Reza (2014); "The Effect of Accrual-Based Earnings Management on the Investment Efficiency of Companies Accepted in Tehran Stock Exchange", Journal of Accounting Knowledge, Year 5, Issue 17, pp. 29-48.
Namazi, Mohammad, Bayazidi, Anvar and Jabarzadeh, Kangrolouei Saeed (2011); "The Relationship between Audit Quality and Earnings Management of Companies Accepted in Tehran Stock Exchange, Accounting Research, Third Year, No. 9, pp. 4-24.
No Nahal Nahr, Ali Akbar, Ali Nejad Saraklaya, Ali and   Khezri, Parisa (2013); "Assessment of the Effect of Auditor Quality on Earnings Management in Newly Accepted Companies in Tehran Stock Exchange", Volume 2, Knowledge Management Accounting, , No. 7, pp. 103-114.
Nor Farhana Selahudin, Zuraidah Mohd Sanusi and Pornanong Budsaratagoo. (2014) Monitoring financial risk ratios and earnings management: evidence from Malaysia and Thailand. Procedia - Social and Behavioral Sciences 145, 51 – 60.
Norhayati Zamri Rahayu Abdul Rahman, Noor Saatila Mohd Isa (2013). The Impact of Leverage on Real Earnings Management. Procedia Economics and Finance 7 .86 – 95.
Nourvash, Iraj, Mashayekhi, Bita and Berehavi, Zahra (2009); "The study of the effect of accruals on the quality of profits in companies admitted to Tehran Stock Exchange", Financial Accounting, Fall 2009, pp. 31-53.
Palmrose, Z.V. (1988). An Analysis of auditor litigation and audit service quality. Accounting Review, 63, 55-73.
Ronen, J., & Yaari, V. (2008). Earnings management insights in theory, practice and research. New York: Springer