International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

The Effect of Financial Statement Readability on Audit Report Readability

Document Type : Original Article

Authors
Hassan Mohammadzadeh Moghadam 1
Mahdi Salehi 2
Zohreh Hajiha 3
1 Department of Accounting, Zahedan Branch, Islamic Azad University, Zahedan, Iran
2 Department of Accounting, Ferdowsi University of Mashhad, Mashhad, Iran.
3 Department of Accounting, East Tehran Branch, Islamic Azad University,Tehran, Iran
10.30495/ijfma.2024.70971.1951
Abstract
Abstract
Purpose –The main objective of the present study is to assess the relationship between financial statement readability and audit report readability. The procedure of the study is descriptive correlation based on published information from listed firms on the Tehran Stock Exchange from 2013 to 2022 with a sample of 143 firms (1287 observations). The method used for hypothesis testing is linear regression using panel data. The results indicate a positive and significant relationship between the readability of financial statements and the readability of the audit report based on the three indicators of text length and Felsch. In this paper, in contrast with the previous studies, four indicators have been used to measure financial statement readability, three of which are the FOG, Text Length, and Felsch, and the fourth one is a new indicator that is used for the first time obtained from the exploratory factor analysis of the above three indicators. Moreover,
Since the present focus on emerging financial markets such as Iran has been examined to determine the relationship between the readability of financial statements and the readability of the audit report, it can bring helpful information in this regard for readers. Also, in the present study, three indicators have been used to measure the readability of the audit report, which can help obtain valuable results.
Keywords
financial statement readability
audit report readability
audit
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