The Moderating Effect of Auditor's Reputation on the Relationship between Audit Fee and the Incidence of Accounting Misstatements

The present study was conducted to investigate the moderating effect of auditor' reputation on the relationship between audit fee and the incidence of accounting misstatements. In this regard, we analyzed financial statements of 107 companies listed in Tehran Stock Exchange (TSE). The present study is an applied research and was conducted by descriptive-correlation method. In this study, Dependent variable is accounting misstatements and equals 1 if the firm subsequently restates its current year financial statements, otherwise zero. The audit fee and the auditor's reputation are the independent and moderating variables of the research, respectively.Hypothesis testing was carried out through logistic regression model.The results indicated thataudit feehas a negative and significant relationship with the incidence of accounting misstatements and charging high (low) audit fee by auditor reduces (increases) the incidence of accounting misstatements and these findings is stronger in relation to audit firms that have a high reputation. In other words, the auditor's high reputation exacerbates the negative relationship between audit fee and the incidence of accounting misstatements.