International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

The effect of the company's borrowing power on audit quality: Insurance Hypothesis Testing

Document Type : Original Article

Authors
Morteza Marouf 1
Ahmad Yaghoobnejad 2
hamidreza vakilifard 3
1 Ph.D Student, Department of accounting, Science and Research Branch, Islamic Azad University, Tehran, Iran
2 Associate Professor, Department of accounting, Central Tehran branch, Islamic Azad University, Tehran, Iran,
3 Associate Professor, Department of accounting, Science and Research Branch, Islamic Azad University, Tehran, Iran
10.30495/ijfma.2025.77804.2147
Abstract
The Iranian audit market comparing with other countries, has very distinctive features audit market of Iran includes two public and private sectors. On the other hand, the financing system in the country mostly takes place through borrowing from banks, and evidences show that for receiving more loans, companies may change their auditor, or based on the insurance hypothesis and in order to transfer the risk of debt default to the auditor, look for reputable and high-quality audit institutes. Therefore, this can have many economic consequences for the auditor. The goal of the present research is to study the role of “Company’s borrowing power” on audit quality, in direction of Insurance Hypothesis Testing. Data collection method in theoretical basics section is library method. Statistical population of present research, is the companies listed to the stock exchange, from which a sample including 167 companies were chosen during the period of 12 years, between 2010 to 2021. Hypothesis of the research is tested based on multi-variable regression. Results of this research demonstrates that as the borrowing power of the company increases, the audit quality also increases. While confirming the role of insurance hypothesis in audit quality promotion, findings of this research can result in development and expansion of previous researches theoretical basics about audit quality.
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