The importance of independent auditors on the quality of financial statements
The existence of transparent and reliable financial information is one of the main factors in assessing the current situation and performance of a company in its activities and also in making decisions about trading its securities. In today's economic environment with the presence of diverse economic actors and the complex structure of economic relations between them, reliable information is considered to be information that has been monitored and commented on by a professional and independent group on the process of its preparation and presentation. A prominent example of independent professional groups are audit firms, which mainly examine and monitor the internal control structure of the reporting unit and its final product, namely financial statements, and comment on this matter. Therefore, auditors play an undeniable role in improving the quality of financial reporting. Comparability states that financial statements should be comparable, not that similar and uniform accounting methods are used. In this situation, users make decisions by comparing the current value of companies and their risk levels. By obtaining such information and predicting risk, users can compare different companies and make decisions. The Financial Accounting Standards Board believes that the benefits of information increase when it provides a model to compare the results of one economic entity with another. One of these qualitative characteristics of accounting is the comparability of financial statements, and in order for users of financial statements to be able to make optimal and correct economic decisions with the help of these statements, they need a set of financial information with high comparability in the form of financial statements. Comparability also states that financial statements should be such that they can be compared with each other, not that similar and uniform accounting methods are used. In these circumstances, users make decisions by comparing the current value of companies and their risk level. Users can compare different companies and make decisions by obtaining this information and predicting risk.
Now that one of the important issues for users of financial statements is awareness of the quality of financial statements, and comparing the financial statements of companies of the same level and in the same industry is an important issue, this analysis can determine the quality of financial statements of companies compared to their peers and allows users of financial statements to make decisions on financial issues with more awareness. Since the separation of ownership from management has led to the introduction of auditing in joint-stock companies, and considering that studies related to the selection of auditors seek to answer the question of why the client chooses a specific type of auditor from among different auditing firms and auditing organizations, and does the type of auditor affect the qualitative characteristic of comparability?
The comparability of financial statements is an important qualitative characteristic that affects the usefulness of accounting information (Statement No. 2 of financial statements). Since financial statements are prepared by managers based on the application of accounting standards, the comparability of financial statements is affected by the way in which accounting and auditing standards are implemented by auditors. Previous studies have shown that companies audited by the same Big 4 auditing firms have financial statements with higher comparability than companies audited by different Big 4 auditing firms. They also showed that each auditing firm has its own unique set of business rules that improve the comparability of financial statements within the auditing firm. This paper assumes that auditors who apply these business rules play an important role in improving the comparability of financial statements. The comparability of financial statements is controlled by the use of accounting standards, namely generally accepted accounting principles, and also by the application of these standards. Each of the Big 4 auditing firms has its own unique set of business rules that guide auditors in applying accounting and auditing standards. Given that this set of business rules leads to systematic differences in the application of accounting and auditing standards by each audit firm, our analysts observed that accruals and profits are more comparable between clients of the same audit firm than between clients of different audit firms. However, the application of generally accepted accounting principles is not absolute. Many standards are principles-based and usually require a choice among several acceptable methods, which requires professional judgment (e.g., estimating doubtful debts, goodwill amortization, etc.). Since the set of internal rules can provide comprehensive solutions for each client, independent auditors must rely on their professional judgment in interpreting and applying accounting and auditing standards.