Managerial Motives and Audit Opinion: Evidence from Iran

Abstract

Managerial motives can significantly influence their decisions, impacting the company's operations and subsequent audit reporting. The effect of these motives on auditors' decisionmaking remains a crucial area of consideration. This study investigates the interplay between managerial motives and audit opinions within a sample of 164 Iranian firms over six years, from 2016 to 2022. Three proxies for managers' motives (dividend payments, bonus allocations, and debt financing) are employed for analysis. The findings reveal noteworthy associations. Dividend payments and debt financing exhibit a negative relationship with a qualified audit opinion, indicating that these factors reduce the likelihood of receiving an unfavorable audit opinion. Additionally, no significant relationship exists between managers' bonuses and audit opinions. While previous studies have explored the impact of managerial motives on firms' financial aspects, this study uniquely contributes to the literature by examining their specific effects on audit opinions within the distinctive context of Iranian firms. The insights derived from this study offer valuable implications for policymakers, auditors, and investors, emphasizing the critical role played by managerial motives in shaping audit outcomes.

Keywords: Managerial Motives, Corporate Governance, Audit Opinion