Document Type : Research Paper
Abstract
Purpose: This research aims to study the mediator effect of earnings management on the relationship between the economic policy uncertainty and audit fees.
Method: The information related to 148 firms at the Tehran Stock Exchange during the years 2006 to 2022 has been analyzed and the results of the hypothesis test have been strengthened according to the type of earning management, the corporate governance quality and the type of industry.
Results: The findings showed that economic policy uncertainty has an effect on audit fees through earning management. Also, supplementary findings have shown that in the conditions economic policy uncertainty, managers are more inclined to manage declining earning. Also, the effect of economic policy uncertainty and earning management on audit fees of firms with weak corporate governance structure has been intensified. In addition, the effect economic policy uncertainty on audit fees in political industries is less, but the amount of earning management is more than in non-political industries.
Conclusion: When there is economic policies uncertainty, firms may use earnings management as a tool to distort and manipulate information, and auditors assess the audit risk higher than expected due to the change and fluctuation of performance as well as the complexity of performance measurement and increase audit fees.
Contribution: This study has sought to expand the factors affecting audit fees to the macro level and provide new insight into the effect of economic policy uncertainty and contribute to the existing heterogeneous research in this field.
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