The Effect of XBRL on Audit Fee in Listed Companies in Tehran Stock Exchange

Transcription

1 The Effect of on Audit Fee in Listed Companies in Tehran Stock Exchange Abstract Ehsan Tangestani M.S., Accounting, Islamic Azad University, Nour Branch, Iran Javad Ramezani Faculty Member, Islamic Azad University, Nour Branch, Iran Ahmad Ahmadpour Faculty Member, University of Mazandaran, Babolsar, Iran This article aims to study the effect of Extensible Business Reporting Language () on audit fee in listed companies in Tehran Stock Exchange (TSE). In this regard, we designed two hypotheses. The statistical population consisted of all listed companies in TSE. Data were collected using a desk study. The data were collected through sample company data by referring to the financial statements, explanatory notes, and TSE weekly and monthly reports. Simple and multiple linear regressions were employed for hypothesis testing by Eviews 7. The comparison of results indicates that is inversely related to audit fee which is positively correlated with firm size. is determined to be the mediator in firm size-audit fee relationship. Keywords:, Audit Fee, Firm Size. Page 2048

2 Introduction Based upon one of accounting definitions, it is the development and use of a system for recording and analyzing the financial transactions and financial status of a business firm or other organizations for internal and external users in order to facilitate the economic decisionmaking and accountability. Providing certain type of information, in particular external users, is impossible through financial statements. Therefore, the emphasis is on common needs because each group of users is interested in different aspects of financial condition, financial performance, and financial flexibility of entity. On the other hand, essential features for efficient transmission of information to users and their capabilities to access information have traditionally been the subject of debate. The staggering pace of supplying large amount of information released via the World Wide Web has created a large information gap for companies, managers, and other users of financial information who do not have adequate knowledge to use it. To cope with this problem, familiarity with the updated global science and keeping pace with global IT seem essential. Extensible Business Reporting Language () is one of new technologies in the field of financial information and reporting in order to provide information for users all around the world. is rooted in Extensible Markup Language (XML). It is, in fact, the financial version of XML. This article aims to study the effect of on audit fee in listed companies in TSE. The objective outlined here is based on the following issues: The effect of on reduced agency costs and audit fee Literature Review The rapid changes taking place in the field of information and communication technology (ICT), especially the Internet, have influenced all aspects of human societies so that, for instance, it has led to the introduction of a modern and revolutionary method for financial reporting in accounting. This modern financial reporting is known as web-based reporting. is the use of financial information exchange with interested parties via the Internet (Arab Mazar Yazdi, 2005, 32). Commercial information is created by business deals and it is used in many parts of the organization that are not often related to each other. Management and commercial reporting unit do not follow an open and agreed approach. The distribution of such information is limited on some factors such as the organization`s ability to use business information in order to use business information and sharing information among departments (Bozorg Asl, Vali Pour Rokni, 2006, 83). In other words, the major difference between traditional financial information (printing version) and web-based reporting is that there is no border with the Internet to realize who uses such information. The scope of this method, in fact, is the world. The second difference lies in the fact that the publication of opinions of third parties is similar to analysts. This was not possible in printing version. Another difference is the publication of company information in the third-party websites, yet there is no financial reporting in the initial website (Tehmina, 2006, 4). Fig. 1 shows the general. Business units are required to report business information to multiple users especially regulatory authority. Most of this information is common among users; however, the shape of data might differ. Some other users may also need other types of information. Here, common information is, however, discussed. This diagram expresses some examples of need for different reported based upon equal data. Reducing reporting burden is one of objectives required to meet the needs of each of users. If all needs are met by XML, or by converting similar data to different types of data, then many repetitive reporting processes are ignored. Page 2049

3 Wac XML Recommendati ons Characteristics Classifications Tax Affairs Stock Exchange Creating sample documents XBRl Sample Documents Compatible Accounting Software with Providing Financial Statements Financial Statements )WORD( Financial Statements )EXCEL( SXL files Compatible Accounting Software with Third Party Software Website documents Fig.1 : Process Brown et al. (2013) stated that litigation risk is one of important structures which can explain the relationship between audit quality and its economic value. Audit quality value can be influenced by the assurance offered by auditors to cover potential losses resulting from the manipulation of financial statements. Such manipulation can include fundamental manipulation and malpractice. Leventis et al. (2011) studied the agency costs and. They concluded that measurable agency costs are influenced by audit fee. Reduced audit fee shows that agency costs have reduced and audit fee represents agency costs. This shows that audit fee is influenced by agency costs. Saeedi (2011) studied the effect of on qualitative characteristics of information. The results show that influences qualitative characteristics of information for decision making. also leads to decline in qualitative characteristics of information reliability for decision making. He found out that increases the qualitative characteristics of information for decision making. Beig Moradi and Salehi (2012) studied the online financial reporting in listed companies in Tehran Stock Exchange. To this end, they made a list of 84 items divided into two sections (financial information (36 items) and non-financial items (48 items)). The results show that online reporting has improved in Iran. Financial and accounting information disclosure of Page 2050

4 these companies is still weak when compared with important studies in this field. These companies tend to non-financial information disclosure compared with financial information disclosure. Research Method Concerning the objective, an applied and development study was performed. Taking the nature of the study into account, the study is descriptive-analytic research, meaning that the results are generalized in to the whole statistical population. Studying the correlation coefficient, the researcher studies the hypothesis testing. Therefore, the study is also correlational. Since historical data and information is used for calculation, it is an Ex post facto research. The statistical population consisted of all active industrial groups in TSE from 2009 to The listed companies need to meet the following criteria: They are listed before 2009 in TSE (considering the study period) They are active from 2009 to 2013 in Stock Exchange (considering the study period) Essential financial information especially notes accompanying financial statements are accessible such as discretionary accruals accounts. They are not banks and financial institutions (investment companies, financial intermediaries, holding companies, banks and leasing institutions) because their financial information disclosure and corporate governance structures are different. Screening method was employed. Considering the above mentioned criteria, 91 companies were selected. The literature and theoretical discussions were collected from national and international articles. The data were collected from Rah Avard Novin, Tehran Stock Exchange website, financial statements, and published reports by Stock Exchange. Eviews and regression models were employed to analyze the data. Data Analysis The following table shows descriptive statistics of research variables. Mean Median Maximum Minimum Standard Deviation Skewness Kurtosis Jarque-Bera stat. Stat. Probability No. of Observations Table 1: Descriptive statistics of Research variables Audit Fee Firm Size Financial Tobin's Q * Leverage Firm Size E Table 2 shows the Pearson correlation coefficients. The correlation is between firm size and audit fee. Since the significance level is significant at 5%, the correlation is claimed to be significant. Page 2051

5 Audit Fee Audit Fee Firm Size Financial - Leverage Tobin's Q * - Firm Size Table 2: Pearson correlation coefficient Firm Financial Tobin's Q Size Leverage * Firm Size In order to study the heterogeneity of variance of residuals, ARCH LM Test is performed. Table 3 shows the results of ARCH LM heterogeneity of variance test. Description F-statistic Obs*R-squared Table 3: Results of heterogeneity test Stat. Value Probability According to table 3, F statistic is not significant at 5% level. Therefore, homoscedasticity is verified and heterogeneity of variance is rejected. In order to ensure the research results, artificiality of existing relationships in the regression, and the significance of variables, stability test and the calculation of unit roots were performed in EGLS model. Eviews 8 was employed. Levin, Lin and Chu, Im-Pesara- Shin, augmented Dicky Fuller, and Fisher-Phillips-Perron tests were performed using Bartlett scale. Table 4 shows the results of stability tests. Therefore, null hypothesis, the existence of unit root, is not verified. Table 4: Stability test for Research Variables Levin, Lin and Chu Im-Pesara- Shin Fisher- augmented Dicky Fuller Fisher-Phillips-Perron Statistic Probability Statistic Probability Statistic Probability Statistic Probability Audit Fee Firm Size *Fir m Size Page 2052

6 Financial Leverage Tobin's Q Hypotheses First Hypothesis: H 0 : does not reduce the audit fee. H 1 : reduces the audit fee. Second Hypothesis: H 0 : is not determined to play the mediating role in firm size-audit fee relationship. H 1 : is determined to play the mediating role in firm size-audit fee relationship. Variable Fixed FIRMSIZE *FIRMSIZE LEV QTOBIN Durbin-Watson F Statistic Sig. Level Adjusted Determination Coefficient * 5% error level Table 5: Regression test and Significance model Estimated Estimated T statistic Coefficient deviation Significance level 0.000* 0.044* 0.041* 0.000* 0.036* 0.000* According to table 5, Durbin-Watson stat. is between 1.5 and 2.5. Therefore, the assumption of correlation between errors is not verified and regression can be employed. According to F value ( ) at error level of less than 0.05, it is concluded that the regression model which consists of independent, control, and dependent variables is an acceptable model and independent and control variables are able to determine and explain the stock price changes. The adjusted coefficient of determination is reported 0.762, showing that 76.2% of total changes in dependent variable depends on independent and control variables in this model. significance level is less than 5%. Also, the impact factor is negative between and audit fee, indicating the negative and significant effect of on audit fee. Since error level is less than 5%, H0 hypothesis is not verified at 95% confidence level. Therefore, it is claimed that is effective in audit fee. As a result, the first hypothesis is verified. *Firm Size significance level is less than 5%. The impact factor is negative between and audit fee, indicating the negative and significant effect of *Firm Size on audit fee. Since error level is less than 5%, H0 hypothesis is not verified at 95% confidence level. Therefore, it is claimed that is found to have a significant relationship with firm size and audit fee in listed companies in Tehran Stock Exchange. Therefore, the second hypothesis is verified. Page 2053

7 Discussion and Conclusion This article aims to study the effect of on audit fee in listed companies in Tehran Stock Exchange. The spatial scope covers all listed companies in TSE from 2009 to A descriptive-correlational study was performed. According to the nature of data, the study is quantitative. In terms of the objective, the study is applied. The hypotheses outlined here are as follows: Hypothesis 1: reduces audit fee. The result of hypothesis testing shows that is reversely related to audit fee which is positively correlated with firm size. Hypothesis 2: is determined to be the moderator in firm size-audit fee relationship. The hypothesis testing shows that plays the moderating role in firm size-audit fee relationship. The following recommendations seem practical: 1. Considering the lack of familiarity of Iranian managers with, a lesson entitled Accounting and is recommended in accounting, management, and other related courses. 2. Concerning the unreliability of, companies are recommended to publish the reports in audited and non-audited sections in the website. Auditors are also required to use e- signature to validate their reports. 3. Standards need to be developed for financial reporting by Securities and Exchange Organization and Audit Organization. Limitations The most important limitations are as follow: 1. Since the sample size consisted of those described in the third chapter, the generalization is cautiously performed to listed companies in TSE with different features. 2. Lack of resources is one of the limitations due to few studies in this field in Iran. Page 2054

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