The relationship between the companies’ political connections and audit fees

Abstract

Purpose

The purpose of this study is to investigate whether the political connections of companies are correlated with auditor selection, audit fees and abnormal audit fees.

Design/methodology/approach

The research data contains 756 observations of companies listed on the Tehran Stock Exchange during 2011-2019. In this study, the relationship between companies with political relationships and the selection of a qualified auditor, audit fees and abnormal audit fees are reviewed. The regression used for test the hypotheses.

Findings

The results of hypotheses testing indicate that there is a positive and significant correlation between the political relationships of companies and certified auditor selection, auditing fees and abnormal audit fees. In addition, the political relationships of companies have a significant and inverse effect on the relationship between institutional ownership and auditing fee and abnormal audit fees. It was also found that there is a positive and significant correlation between companies and political relationships and abnormal audit fees.

Originality/value

So far several studies conducted on audit fees, however, no study conducted on the relationship of political relationship of the companies with audit fees and the results of the current study may bridge the gap in the current field.

Citation

Salehi, M. (2020), "The relationship between the companies’ political connections and audit fees", Journal of Financial Crime, Vol. 27 No. 4, pp. 1123-1141. https://doi.org/10.1108/JFC-04-2020-0066