Effects of Audit Fee Adjustment on Relationship between Auditor Time Pressure and Quality of Earnings

Audit time pressure may cause auditors to work harder in an attempt to improve audit efficiency. However, if the time pressure is unreasonable, negative consequences will occur. In fact, unreasonable time pressure can have an adverse (negative) influence on audit effectiveness, diminish audit quality, and raise the likelihood of audit errors and major material misstatement in financial statements, either directly or indirectly. Consequently, managers exhibit more opportunistic behavior. The quality of earnings (QoE) will eventually deteriorate. Moreover, increasing the load of audit work can help to prevent earnings manipulation and increase QoE. Furthermore, auditors demand higher fees for larger loads of work; hence, the QoE is expected to improve when the audit fee increases. The purpose of this study was to investigate the effects of audit fee adjustments on the relationship between auditor time pressure and QoE. The regression analysis was performed to test hypotheses using panel data obtained from 105 companies listed on the Tehran Stock Exchange between 2014 and 2019. According to the findings of the research hypothesis, auditor time pressure reduced QoE. According to the findings, the audit fee mitigated the negative association between auditor time pressure and QoE.