Description
Title: Conflicting Iranian Data on Social Capital, Intellectual Capital, and Audit Fee
Abstract: We examine how social capital (SC) and intellectual capital (IC) affect audit fees among the companies listed on the Tehran Stock Exchange in the current study (TSE). We created an index of social capital for each province between 2011 and 2016 using a principal component analysis (PCA) because the norms and network criteria are highly correlated. A substitute for measuring value-added intellectual capital is the Policy model (VAIC). This study also uses the ordinary least squares (OLS) regression to test our research hypotheses. According to the research literature, auditors evaluate the credibility of their clients based on where the firm is headquartered; on the one hand, investors and lenders can have more faith in the financial reporting honesty of the firms headquartered in areas with high social capital. Our results show that companies with headquarters in provinces with high social capital pay higher audit fees, which is inconsistent with the findings of the earlier studies. Given that Iranian businesses are facing severe financial pressure as a result of economic sanctions, it is likely that those firms that are situated in more affluent areas have abused the high level of confidence that auditors and other market participants have in them by engaging in earnings manipulation to conceal their subpar financial performance. We discovered strong evidence that employed capital efficiency (ECE) and audit costs positively correlated among the various IC components. This study clarifies the fact that under extreme financial pressure, managers occasionally exploit the negative aspects of social and intellectual capital when preparing financial reports.
Keywords: social capital; norms; networks; intellectual capital; human capital efficiency; structural capital efficiency; employed capital efficiency; audit fee; Tehran stock exchange
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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