The Value Relevance of Audit report, Auditor Type and Auditor Tenure: Evidence from Iran

The aim of this paper is to investigate the value relevance of the audit report, auditor type and
auditor tenure in the Iranian context. This study evaluates the effects of various independent
variables on the value relevance using a multiple regression analysis approach for 156
companies listed on the Tehran Stock Exchange (TSE) over a 10 year period. The results
indicate that audit report has not the value relevance. Hence, unqualified audit report and
other audit report are not different in capital market. Empirical results showed that the auditor
type has a positive impact on the value relevance. This result is consistent prior studies. Thus,
the value relevance of firms audited by government audit has more than firms audited by
private audit. Also, when the tenure of auditors is long, it has a negative impact on the value
relevance. This result is consistent prior studies. The empirical evidence indicates that audit report is not valued by the capital market in Iran and that audit privatization impact on the
value relevance in capital market. Hence, the market regulators proposed that the more
monitoring considered on audit quality to improve the value relevance in capital market. The
results presented in the paper have important implications for both the auditing profession
and regulators in Iran.