Abstract
This study examines the mediation effect of audit quality on the relationship between agency problems and financial reporting quality among the listed firms of Tehran Stock Exchange during the years 1383-1389. For this purpose in addition to panel regression analysis, the structural equation modeling method is used to test the proposed hypothesis. Research findings indicate that free cash flow has negative and significant relationship and Financial Leverage and Ownership Board of Directors has positive and significant relationship between financial reporting quality. The effect of audit quality as a mediator variable in the relationship between agency problems and the financial reporting quality has not been confirmed by using panel data analysis, but findings of structural equation modeling indicate that audit quality play as a mediation variable on the relationship between agency problem and financial reporting quality.
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