Managerial ability and earnings quality: Evidence from Tehran Stock Exchange

Auditor independence is associated with the independence of the internal/external auditor from various parties who may have some financial interest in the business being audited. Many countries have set up different rules forcing firms to change their auditors every few years. This helps business retain healthy business. This paper presents an empirical investigation to study the effect of change in auditing system on 90 selected firms from Tehran Stock Exchange over the period 2007-2011. Using a regression model developed earlier by Demerjian et al. (2012a) [Demerjian, P. R., Lev, B., Lewis, M. F., & McVay, S. E. (2012a). Managerial ability and earnings quality. The Accounting Review, 88(2), 463-498.], the study determines a positive impact of change in auditor system on business development.