Investigating the impact of auditor expertise in accounting estimates on the accounting estimates intensity and management deviations

The role of accounting estimations in the quality of financial data has become challenging nowadays and has made it difficult for managers to make reliable forecasts. The continuous use of estimates has damaged the quality of financial information. The purpose of this research is to investigate the impact of auditor expertise in accounting estimates on the accounting estimates intensity and management deviations.

The subject of the study is based on the regression model of combined and logit data and in the period of 2014 to 2021, the data of 960 companies admitted to the Tehran Stock Exchange were collected and used to test the research hypotheses.

The results of the first hypothesis test of the research that the intensity of accounting estimation has a positive relationship with the desire of the owner's management to reach the target profit have not been rejected. The second hypothesis of the research showed that the intensity of the accounting estimate has a positive and significant relationship with the audit fee. The third hypothesis of the research is that the audit expertise has a significant effect on the relationship between the accounting estimate intensity and the willingness of the owner's management to achieve the target profit. Finally, the significant impact of the auditor's expertise on accounting estimates on the relationship between the accounting estimates intensity and audit fees has been confirmed.

Based on the research result, it can be stated that the intensity of accruals leads to a change in the management approach in achieving the target profit. Therefore, the auditor's expertise in relation to accounting estimates can indicate the ability of auditors to evaluate the assumptions of the company's management, which can affect the quality of the presented report.

Contribution: 

In this research, by presenting a new approach to measuring the auditor's expertise, the achievement of the target profit has been described. On the other hand, the findings of this research have been potentially taken into consideration by the legislators and investors in suggesting that the auditor's expertise in accounting estimates can be effective in preventing earning management.