Perception of Iranian investors on factors influencing on auditor independence

The potential conflicts of interests among owners, managers, and other security holders create an environment in which an outside auditor may contribute significant value to investors. In fact, recent corporate scandals such as Enron and World Com have focused the world's attention on whether audit firms are supplying audits of sufficiently high quality. The auditing process is supposed to serve as a monitoring device that will reduce managers’ incentives to manipulate reported earnings. Therefore, it is hypothesized that the higher the auditing quality the lower the earnings management activities by managers. High audit quality should be associated with high information quality of financial statements because financial statements audited by high quality auditors should be less likely to contain material misstatements. In this context, the objective of study is identifying which one of the six types is more effective than the others on auditor's independence. The finding of the study shows Iranian investors believe that all six types are effective on auditor independence. Also respondents confirmed that most important factors that influence auditor are tenure of an audit firm, existence of an audit committee, reputation of audit firms, provision of Non audit services (internal audit) and audit fees and size of audit firm respectively.