The effect of disclosure of major audit issues on the relationship between credit risk and earnings quality
Abstract
This study examines the relationship between credit risk and earnings quality and the moderating role of key audit matters (KAMs) in this relationship. Using a sample of 112 companies listed on the Tehran Stock Exchange from 2013 to 2022, the study employs a descriptive-correlational methodology and regression analysis to test two hypotheses. The results reveal a significant positive relationship between credit risk and earnings quality, with higher credit risk leading to greater earnings management. Furthermore, the disclosure of KAMs is shown to moderate this relationship by enhancing transparency and audit quality, thereby reducing earnings management in companies with higher credit risk. The study's findings provide valuable insights for auditors, regulators, and investors, particularly regarding the benefits of KAM disclosure in improving the reliability of financial reports. Limitations include the exclusion of financial institutions and banks, as well as unaccounted political and economic factors. Future research should explore the broader impacts of KAM disclosures on corporate decision-making and risk management
Keywords:
Disclosure of major audit issues, Credit risk, Profit qualityReferences
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