Explaining Audit Quality Based on Audit Firm Ranking and Audit Committee Characteristics: The Moderating Role of Auditor Report Timeliness in Companies Listed on the Iraq Stock Exchange
Keywords:
Audit Quality, Audit Report Lag, Audit Firm Ranking, Audit Committee, Financial Expertise, Audit Committee Independence, Audit Committee Experience, Corporate Governance, Agency Theory, Iraq Stock Exchange, JEL Clasification: E61, D22, C54, G32Abstract
Objective: This study aimed to explain the effects of audit firm ranking and audit committee characteristics on audit quality and audit report lag and to examine the moderating role of audit report lag among companies listed on the Iraq Stock Exchange.
Methodology: This applied study employed a quantitative, descriptive-correlational, and ex post facto design. The statistical population consisted of companies listed on the Iraq Stock Exchange, from which 143 companies were selected through systematic screening for the 2016–2025 period, yielding 1,430 firm-year observations. Data were extracted from annual financial statements, independent audit reports, corporate governance reports, and mandatory disclosures. Audit quality, audit firm ranking, financial expertise, independence, size, experience, gender composition of the audit committee, and audit report lag were examined. Multivariate panel-data regression models were estimated using EViews, with Chow and Hausman tests applied for model specification and year effects controlled.
Findings: Audit firm ranking had a significant positive effect on audit quality (β=0.004823, p=0.0001) and a significant negative effect on audit report lag (β=-3.2714, p<0.001). Financial expertise (β=0.003914, p=0.0019), audit committee independence (β=0.006247, p=0.0113), and member experience (β=0.000412, p=0.0387) significantly improved audit quality, whereas committee size and female membership were not significant. Financial expertise (β=-2.1184, p=0.0026), independence (β=-1.8745, p=0.0081), and experience (β=-0.2874, p=0.0328) also significantly reduced audit report lag. The interaction between audit firm ranking and audit report lag was negative and significant (β=-0.000913, p=0.0140), confirming the negative moderating effect of audit report lag.
Conclusion: Higher-ranked audit firms and audit committees characterized by greater financial expertise, independence, and professional experience contribute to higher audit quality and more timely audit reporting. However, prolonged audit report lag weakens the beneficial effect of audit firm ranking on audit quality. Accordingly, improvements in audit quality should integrate stronger audit firm capabilities, more competent and independent audit committees, and enhanced timeliness of auditor reporting.
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Copyright (c) 1404 Navid Reza Namazi, Hayder Fadhil Almasoodi, Amin Nazemi, Mohammad Sadegh Zadeh Maharlouei (Author)
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