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INTERNATIONAL JOURNAL OF CURRENT LIFE SCIENCES

RESEARCH ARTICLE

ISSN: 2249- 1465

International Journal of Current Life Sciences - Vol. 4, Issue 8, pp. 4680-4687, August, 2014

THE INVESTIGATION OF AUDIT QUALITY EFFECTS ON CONDITIONAL AND UNCONDITIONAL

CONSERVATISM IN COMPANIES LISTED IN TEHRAN STOCK EXCHANGE
Farideh Mehri1, Saeid Jabbarzade Kangarluei2 And Mehdi Mostafavi3
1Department

of Accounting, Islamic Azad university West Azerbaijan science and Research Branch, Iran
of Accounting, Islamic Azad University Tehran Science and Research Branch, Iran
3Department of Accounting, University of Tehran Aras International Campus, Iran
AR TIC L E I NF O
ABS TR AC T
2Department

Article History:
th

Received 10 , July, 2014

Received in revised form 17th, July, 2014
Accepted 14th, August, 2014
Published online 28th, August, 2014
Key words:

Audit quality. Audit tenure. Firm size . Auditing

Discretionary accruals. Conditional
conservatism. Unconditional conservatism.

The aim of this research is to review the effect of audit quality on conditional
and unconditional accounting conservatism in firms listed in Tehran stock
exchange. We have examined 90 firms in a 5 year period between 2006 to 2010
and the research variables consists of audit quality (independent variable) and
conditional and unconditional conservatism (dependent variable) and firm size,
leverage, growth rate and the rate of market value to book value and return on
asset (as proxies).for testing the research hypothesizes we have used multivariable regression and Eviews. Results show that audit firm size has no effect
on conditional and unconditional conservatism in firms listed in TSE.
Additionally audit tenure has positive significant effect on conditional and
unconditional accounting conservatism and firms being audited by the same
auditor for more than 4 years are showing more conditional and unconditional
conservatism. Also auditor industry specialization has negative significant effect
on the (UN) conditional conservatism while testing it by jones model shows that
it has no effect on conditional conservatism but it has negative significant effect
on unconditional conservatism. So it can be said that firms being audited by
specialist auditors have less conditional and unconditional conservatism.

INTRODUCTION
Extensive research indicates that conservatism is one of
the salient features of the financial reporting that has
attracted more attention due to financial scandals in recent
years (e.g., Enron, WorldCom companies). Also, in our
country the audit organization committee in the theoretical
concepts of financial reporting, considered conservatism
as a component of reliable qualitative character but words
do not conservatism, term Caution uses instead of
conservatism. Thus, according to the motivations of
managers and restrict them by auditors, feel the need of
audit quality. The opportunistic behavior of managers
seeking to identify the later profits and delaying losses
because this can increase the amount of compensation
awarded to them (Rahmani, 2009).
Accordingly Lafond and Watts (2008) consider
conservatism as a deterrent factor for too optimistic
managers.
Wolk and et al (2004) in definition of conservatism pay
attention to the lack of asymmetric according to the
identified assets and profits and conservatism can be
defined as: "Conservatism is the identification and
evaluation of the benefits sooner than an asset."
In our country, the audit organization committee in
theoretical concepts of financial reporting considered
conservatism as a component of reliable quality and

Copy Right, IJCLS, 2014, Academic Journals. All rights reserved.

conservatism are defined:"Caution is the degree of care to

perform the judgment is required to estimate the
uncertainty conditions so that incomes and assets in excess
of the liabilities and costs and debs do not provide less
than actual amount" (Section 18 - Chapter 2 - Theoretical
concepts of financial reporting, 2006)
Scandals in the recent worldwide such as Enron and
WorldCom and make concerns regarding to the
reliability of financial statements While the primary
responsibility for preparing the financial statements is
management but accusing finger is pointed towards
auditors to the extend these events is considered as the
failure and lack of independence auditor and poor audit
quality (Karami and Bazrafshan, 2009).
Independent audits ensure that the information contained
in financial reports is fair and accurate. In the perspective
of agency theory, the audit can play a major role in
reducing transmission is asymmetric information between
individuals (Willenborg, 1998).
Pittman and Fortin (2004) found that auditors can increase
the credibility of financial statements to meet the needs of
creditors. In other words, auditors are the most effective
way to reduce agency costs. Studies have shown that
conditional and unconditional conservatism is positively
associated with audit quality and the more quality of
auditors are more conservative (Basu et al, 2001, Chang et
al, 2003). In contrast, accounting researchers believe audit

*Corresponding author: Farideh Mehri

Department of Accounting, Islamic Azad University West Azerbaijan Science and Research Branch, Iran

International Journal of Current Life Sciences - Vol. 4, Issue 8, pp. 4680-4687, August, 2014
quality has multiple aspects and these aspects lead to
After events conservatism is a more timely recognition of
definition that most of which have different appears. The
concept bad news than good news in profit. For example,
most common definition of audit quality includes the
the basic rule of cost or market value, eliminating goodwill
following elements:
impairment testing performed in asymmetric identify
Table 1 Used variables descriptive analysis in research hypotheses model
variable
Observations
Average
median
mode
St.d
variance
Minimum
Minimum

CONSER(c)
450
416/0
005/0477/2271/0
073/0
477/2256/1

CONSER(u)
450
364/00005/0855/1118/0
014/0
855/1015/1-

SIZE
450
621/5
586/5
986/4
568/0
322/0
009/4
659/7

LEV
450
731/0
622/0
706/0
788/0
621/0
076/0
990/9

GROWTH
450
054/0
024/0
012/0
108/0
011/0
0106/0
236/1

MBV
450
702/2
622/1
27-Jan
017/4
137/16
82/20
22/37

ROA
450
045/0
009/0
018/0
191/0
036/0
193/0076/2

AUDIT
450
222/0
00/0
00/0
416/0
173/0
00/0
00/1

TENURE
450
333/0
00/0
00/0
471/0
222/0
00/0
00/1

SPECIAL
450
466/0
00/0
00/0
499/0
249/0
00/0
00/1

potential losses against the potential benefits are from this

The possibility of errors in the financial
type (Beaver and Ryan, 2005). Based on the above
statements that the auditor should report to
discussions, the main are problem of this study stated as
discover them.
follows: What is the impact of audit quality on the
The probability that the auditor for financial
unconditional and conditional conservatism?
statements with significant errors does not
contain issued conditional report.
Background of the study
The accuracy of the information that the auditor
Bauwhede & willekens (2004) took the test the effects of
has issued about a report.
audit firm size on audit quality in the Belgian market for a
A measures for auditing ability in reducing bias
sample sizes of 1302 the company. They re in order to
errors and distortions and improve the quality of
measure the size of auditor consider indicators such as
accounting data (Meyer and John, 2007)
Table 2 Dependent variable normality test
ROA
0.438
0.102

MBV
0.494
0.121

GROWTH
0.110
0.451

LEV
0.201
0.163

SIZE
0.037
0.754

It is not clear which factors is crucial to determine the

ability of auditors. As a result, we cannot directly evaluate
the quality of the audit. Balsam et al have described audit
quality as an issue of "multi-dimensional and invisible"
and say, "cannot be regarded as only a feature for an
independent auditor which can be used as a proxy for audit
quality" as we cannot directly observe its effects. And the
various indicators, such as auditors, auditor industry
specialization, and auditor tenure, comparison of non-audit
and audit fees should be calculated and obtained, in order
to assess audit quality (Balsam et al, 2003).
Table 3 Chow test results for the regression model of
first sub-hypothesis testing (1.1)
Significant level
0.001

Statistic F
3.502

It should be noted that previous studies have shown how

the size of the audit is larger, the auditor specialization in a
specific industry are more and the client by the company's
audit firm tenure is longer, audit quality of client
participation is greater. So In this study as indicators of
audit quality audit firm, audit firm tenure and industry
expertise will be used. In recent studies, conservatives are
divided into two types: The first type of conservatism is
the conservatism of independent events and also called
news unconditional conservatism. Previous events
conservatism arises from the applying those accounting
standards so that reduce profits independently from current
economic news. For example, immediate recognition of
advertising and research and development expenses as the
cost, even if the future cash flows expected to be positive.
Another type of conservatives is the events associated with
conservatism that conservatism related to news events,
also called conditional conservatism and income disparity.

CONSER(u)
0.188
0.276

CONSER(c)
0.257
0.113

variables
Z(K-S)
P-Value

market share,clients of the audit firm,partners of the audit

firm,total assets and operating income audit firm. Their
hypothesis was that "there is no significant relationship
between audit firm size and audit quality, finally, the
results of their study showed that there is no significant
relationship between audit quality and auditor size (Azarin
far, 2007)
Table 4 Results of Hausman test for regression
model to test the first hypothesis (1-1)
Significant level
0.586

Degree offreedom
6

StatisticChi-Sq
4.672

Hamilton et al (2005) found that with increasing auditor

tenure conservatism decreased .Jenkins & Velury (2006)
concluded that with auditor tenure conservatism increased.
Dodge and et al (2007) in their research studied the
relationship between auditor tenure and audit quality
between 1993 and 2001. They consider audit tenure at
three levels: 1- Short term tenure (2 to 3 years) 2 medium
tenure (4 to 8 years) 3 - Long-term tenure (9 years or
more).Their hypothesis was that there is a relationship
among the different levels of audit tenure. They concluded
from the study that 1- auditor conservative decreased with
tenure increases, 2 - Audit failure report in the first year of
the client company is higher and how the audit firm tenure
about the client firm is longer, audit quality is higher. Ran
Zijl et al (2010) in this paper tested the effect of auditor
tenure and non-audit services on conservatism profits. In
this study, 2235 samples were used between 2005 and
2008 .In this study, Basu model was used to measure the
working enclosure calls. In this study, three variables firm
size, and leverage and growth are considered as control
variables. Finally, they concluded that audit tenure and
non-audit services are positively associated with
conservative profits.

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International Journal of Current Life Sciences - Vol. 4, Issue 8, pp. 4680-4687, August, 2014
Cano Rodrguez (2010) in his articles in Spain tested the
There is a relationship between audit firm tenure and
effectiveness of audit as conditional and unconditional
unconditional conservatism.
conservatism and concluded that there are differences
Sub-hypothesis
between the size of the conditional and unconditional
conservatism companies that are audited by great auditor
There is a relationship between audit firm in the industry
sand companies that are not audited by the auditors. It also
specialization and unconditional conservatism.
auditors motivates toward impose unconditional
RESEARCH METHODOLOGY
conservatism are more than the conservatism of the
condition.
Research methodology is descriptive and causal form.
Table 5 Results of statistical analysis to test the first hypothesis (1-1)
P-value
0.768
0.942
0.303
0.165
0.482
0.23
Adjusted R Square
-0.004

Statisticst
0.295
0.072
1.03
-1.038
0.703
-1.201
(D-W)
2.115

Coefficient
0.001
0.0002
0.0008
-0.011
0.004
-0.002
P-value
0.627

variable
audit firm size
Financial Leverage
Market value to book value
Company size
Rate of return on assets
Ratio of asset growth
Statistics F
0.801

Research hypotheses
According to the above theoretical research hypotheses
can be formulated as follows:
Table 6 Chow test results for the regression
model of second sub-hypothesis testing (1.2)
P-Value

statistic F

0.001

3.344

First hypothesis
Conditional conservatism is the impact on audit quality .
Sub-hypothesis
There is a relationship between the size of the audit firm
and conditional conservatism.

Degree offreedom
6

It is descriptive because its purpose is describing the

conditions or under explored phenomenon, and it is for
better understanding the condition. It is causal because in
this research cause and effect exploration is under focus.
Resent research has explored the relationship between
variables and searching to prove the existence of this
relationship in present condition according to historical
data; therefore, it can be classified as after event kind. This
research is applicable for its purpose. Moreover, recent
research is descriptive for the way it is gathering
information and the statistical sample firms financial
information are gathered by librarian manner.
Statistical society, sample selection and research time
era
In recent study, classified and audited financial data from
accepted active firms in Tehran stock exchange market has
been used to test research hypotheses.

Table 7 Results of Hausman test for regression model

to test the second hypothesis (1-2)
Significant level
0.426

symbol
Type of variable
BIG
Independent variable
LEV
MBV
Variables
SIZE
Control
ROA
GROWTH
Total Model Regression

StatisticChi-Sq
5.97

Statistical sample of this research consists of all firms

having the following qualifications:

Sub-hypothesis

In 2007 to 2011 financial year participate in stock

exchange.
2. Not be as one of financial investing and holding firms,
Sub-hypothesis
banks and insurances.
3. Their financial end year should be Esfand, and not
There is relationship between specialization in the industry
have any changes in the financial year in mentioned
of audit firm and conditional conservatism.
period.
Table 8 Results of statistical analysis to test the second hypothesis (1-2)
There is a relationship between audit firm tenure and
conditional conservatism.

P-value
0.731
0.975
0.295
0.175
0.449
0.234
Adjusted R Square
-0.004

Statisticst
-0.343
0.03
1.047
-1.357
0.756
-1.19
(D-W)
2.118

Coefficient
-0.001
0.0001
0.0008
-0.010
0.004
-0.002
P-value
0.624

1.

variable
Audit tenure
Financial Leverage
Market value to book value
Company size
Rate of return on assets
Ratio of asset growth
StatisticsF
0.804

symbol
TENURE
LEV
MBV
SIZE
ROA
GROWTH

Type of variable
Independent variable

Variables
Control

Total Model Regression

Second hypothesis
Unconditional conservatism is the impact on audit quality .

4.

Sub-hypothesis
There is a relationship between the size of the audit firm
and unconditional conservatism .
Sub-hypothesis

5.

Their transactions index should be active and not have

stop in transaction index more than 4 months in a
year.
In all explored years at the end of financial year, their
necessary data and information should be accessible.

Therefore, research time period consists of 5 frequent

years from 2007 to 2011, and sampling method is

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International Journal of Current Life Sciences - Vol. 4, Issue 8, pp. 4680-4687, August, 2014
systematic screening one covering 90 firms of this
Conservatism index= Operating accruals
* (1- )
research society relative to the mentioned conditions.
The first collection of assets
Table 9 Chow test results for the regression model of
third sub-hypothesis testing (1.3)
P-Value
0.001

statistic F
3.36

Variables measured in this study and how they

Variables in this study included seven variables, audit
quality, conservatism, firm size, financial leverage, asset
growth, book value of market, rates of assets return that
are described the rest of the calculation of each these
variables.
Table 10 Results of Hausman test for regression
model to test the third hypothesis (1-3)
Significant level
0.623

Degree offreedom
6

statistic Chi-Sq
4.395

Dependent variable of research

Conditional conservatism
In this research to measure conditional conservatism Shiva
Kumar and Balls model are used as follows:
TACCit = 0+ 1 DCFOi,t + 2 CFOi,t + 3
DCFOi,t*CFOi,t +i,t-1
TACCit = total accruals
CFOit = cash flow from operations
DCFOit = a dummy variable that equal to one if CFO is
negative and otherwise the value of this variable is zero.
In this model, the coefficient 3 is a conservative index
(Bani Mahd,2006)Unconditional conservatism
Also to measure the unconditional conservatism Givoly
and Hayn (2000) is used. Conservatism index is calculated
based on the following model:

Where the operating accruals is achieved from difference

between, net income and operating cash flows addition
depreciation expense, according to Givoly and
Hayn(2000) development of accruals over a long period
can be an indicator of changes in the degree of accounting
conservatism.
The studied independent variables
Audit quality based on modified Jones model (1995):
ACCRit = o + 1 [ REVit - RECit ] +
2RPEit + it
In this model:
ACCR= Total accruals
REV= Changes in the income from the year t1 to year t (REVt-REVt -1)
REC= change in net receivable accounts from
year t to year t - 1) (RECt RECt1)
PPE= GDP of property, plant and equipment in year t
It should be noted that the above model, nondiscretionary
accruals (NDA) to the residuals (DA) are fixed values and
definedas a discretionary accruals.
In addition to these patterns in order to standardize and
harmonious the factors to reduce the fluctuations, total
assets is used at the beginning of each period.
Model of research test hypotheses
CONSERit= 0+ 1 Audit Quality Proxies it+
2SIZE it+
3LEVit+4GROWTHit+5MBVit+
6ROAit+ it

Table 11 Results of statistical analysis to test the third hypothesis (1-3)

P-value
0.477
0.926
0.337/337
0.164
0.487
0.219
Adjusted R Square
0.003

Statistics t
0.711
0.091
0.959
-1.393
0.694
-1.228
(D-W)
2.111

Coefficient
0.003
0.0003
0.0007
-0.011
0.004
-0.002
P-value
0.586

Table 12 Chow test results for the regression

model of second sub-hypothesis testing (1.4)
P-Value
0.001

statistic F
3.458

Table 13 Results of Hausman test for regression

model to test the second hypothesis (1-4)
Significant level
0.623

Degree of freedom
6

variable
Expertise in Industry
Financial Leverage
Market value to book value
Company size
Rate of return on assets
Ratio of asset growth
StatisticsF
0.843

statistic Chi-Sq
4.395

symbol
INDUSTRY
LEV
MBV
SIZE
ROA
GROWTH

Type of variable
Independent variable

Variables Control

Total Model Regression

CONSER it is the conditional and unconditional

conservatism
Audit Quality Proxies it Indicator of the quality
of the audit (audit firm size, industry
specialization on audit firm and audit firm tenure)
Size: is the size of a company is calculated by
using sales volumes.
LEV it is the financial leverage( divided by total
debt to total assets at end of period)
GROWT Hit growth of assets (assets increased

Table 14 Results of statistical analysis to test the second hypothesis (1-4)

P-value
0.808
0.696
0.427
0.21
0.374
0.879

Statistics t
0.242
-0.39
0.796
-1.255
0.888
-0.152

Coefficient
0.022
-0.001
0.0008
-0.0148
0.006
-0.005

variable
Expertise in Industry (jones model)
Financial Leverage
Market value to book value
Company size
Rate of return on assets
Ratio of asset growth

Adjusted R Square

(D-W)

P-value

Statistics F

0.065

2.47

0.975

symbol
DA
LEV
MBV
SIZE
ROA
GROWTH

Type of variable
Independent variable
Variables
Control

Total Model Regression

0.712

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International Journal of Current Life Sciences - Vol. 4, Issue 8, pp. 4680-4687, August, 2014
toward the end of the first period)
According to results, achieved significance level from
Kolmogorov-Smirnov for dependent variable is more than
MBVit is the ratio of market value to book value
test error level ( = 0), and the normality hypothesis of
ROAit is the rate of return on assets
dependent variable is accepted.
Table 15 Chow test results for the regression
Table 18 Chow test results for the regression
model of first sub-hypothesis testing (2.1)
model of second sub-hypothesis testing (2.2)
P-Value
statistic F
0.002

P-Value
0.006

3.234

Average size of the audit firm during the study is less than
5/0, this indicate that during the research years company
more using private organizations auditors who members of
the community. And expertise mean in auditor industry
indicate that the companies in the industry have turned
more towards specialist auditors, it also the average tenure
shows that most companies tend to have their auditors but
it's not over four years.
Table 16 Results of Hausman test for regression
model to test the first hypothesis (2-1)
Significant level
0.401

Degree of freedom
6

statistic Chi-Sq
6.197

In addition, the average unconditional and conditional

conservatism indicates that member firms of the sample
reporting using a conservative approach in their reports.
The results obtained of the research hypotheses test
Research Variables Descriptive Statistics

statistic F
2.855

The first hypothesis test results

The first sub-hypothesis test results
Chow test results for the first hypothesis of the model are
presented in Table 3.
Table 19 Results of Hausman test for regression
model to test the second hypothesis (2-2)
Significant level
0.287

Degree of freedom
6

statistic Chi-Sq
7.737

According to this the significance level of test is less than

(05/0) errors level, the above hypothesis H0, is rejected.
Accordingly, the panel method - data regression model to
test the first hypothesis recommended. In models based on
data panel, it is necessary to estimate method based on
random or fixed effects be tested and selected the most
appropriate method for fitting model. In this regard, the
first regression model, based on random effects fitted and
then through Hausman test appropriate applied methods
considered.

Table 17 Results of statistical analysis to test the first hypothesis (2-1)

P-value
0.026
0.001
0.365
0.271
0.000
0.000
Adjusted R Square
0.288

Statistics t
-2.387
3.177
-0.905
1.101
-4.086
3.342
(D-W)
2.002

Coefficient
-0.048
0.047
-0.003
0.043
-0.1003
0.029
P-value
0.000

variable
audit firm size
Financial Leverage
Market value to book value
Company size
Rate of return on assets
Ratio of asset growth
StatisticsF
6.454

Average size of the audit firm during the study is less than
5/0, this indicate that during the research years company
more using private organizations auditors who members of
the community. And expertise mean in auditor industry
indicate that the companies in the industry have turned
more towards specialist auditors, it also the average tenure
shows that most companies tend to have their auditors but
it's not over four years.

symbol
TENURE
LEV
MBV
SIZE
ROA
GROWTH

Type of variable
Independent variable

Variables Control

Total Model Regression

Hausman test for the first hypothesis of the model are

presented in Table 4.
The findings suggest the hypothesis H0 is accepted.
Accordingly, using sub-hypothesis of first regression
testing model by fixed-effects recommended.
The results of the fitted model show in Table 5.

Table 20 Results of statistical analysis to test the second hypothesis (2-2)

P-value
0.02
0.001
0.569
0.282
0.000
0.000
Adjusted R Square
0.297

Statistics
t
-2.332
3.15
-0.569
1.076
-4.069
3.342
(D-W)
2.061

Coefficient

variable

symbol

Type of variable

-0.055
0.046
-0.002
0.041
-0.099
0.029
P-value
0.000

Audit tenure
Financial Leverage
Market value to book value
Company size
Rate of return on assets
Ratio of asset growth
StatisticsF
8.506

TENURE
LEV
MBV
SIZE
ROA
GROWTH

Independent variable

In addition, the average unconditional and conditional

conservatism indicates that member firms of the sample
reporting using a conservative approach in their reports.
Dependent variable normality exploration
In this research, Kolmogorov-Smirnov test was used to
evaluate normality of the dependent variable data.

Variables Control

Total Model Regression

Coefficient of determination regression is model 004/0.

Also, the test results show that Dorbin- Watson statistic is
between5/1 to 5/2 and therefore, there is a strong
correlation between the errors of the regression model and
its lack of correlation between the errors, accepted as one
of the basic assumptions of the regression model. Fstatistic for the model is less than error level (05/0 = ),

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International Journal of Current Life Sciences - Vol. 4, Issue 8, pp. 4680-4687, August, 2014
and hence the estimated regression is significant
conservatism. This finding raised the claim in the first substatistically and relationships between variables are linear.
hypothesis (1.4), inconsistent with this hypothesis and
rejected at the 95% confidence level.
Table 21 Chow test results for the regression model
of Third sub-hypothesis testing (2.3)
P-Value
0.004

Results of the second main theory test

statistic F
2.953

The results of the sub-hypothesis test

Overall, the results showed that the size of the audit firm
has no significant effect on the conditional conservatism.
This finding raised the claim in the first sub-hypothesis
(1.1), inconsistent with this hypothesis and rejected at the
95% confidence level.
Table 22 Results of Hausman test for regression
model to test the Third hypothesis (2-3)
Significant level
0.241

Degree of freedom
6

Overall, the results showed that the size of the audit

firm has had significant negative impact on
unconditional conservatism. This finding raised the
claim in the first sub-hypothesis (2.1) consistent with
this hypothesis and accepted at the 95 percent
confidence level.
The results of the sub-hypothesis test

statistic Chi-Sq
7.951

The first sub-hypothesis test results

Overall, the results showed that the size of the Audit
tenure has no significant effect on the conditional
conservatism. This finding raised the claim in the first subhypothesis (1.2), inconsistent with this hypothesis and
rejected at the 95% confidence level.

Overall, the results showed that the Audit tenure has

had significant negative impact on unconditional
conservatism. This finding raised the claim in the first
sub-hypothesis (2.2) consistent with this hypothesis and
accepted at the 95 percent confidence level.
The results of the sub-hypothesis test
Overall, the results showed that the auditing firm
specializes in industry have a significant positive impact

Table 23 Results of statistical analysis to test the Third hypothesis (3-3)

P-value
0.0305
0.001
0.372
0.289
0.000
0.001
Adjusted R Square
0.283

Statistics
t
2.087
3.148
-0.893
1.06
-4.059
3.197
(D-W)
1.994

Coefficient

variable

symbol

Type of variable

0.0813
0.046
-0.033
0.041
-0.099
0.028
P-value
0.000

Expertise in Industry
Financial Leverage
Market value to book value
Company size
Rate of return on assets
Ratio of asset growth
StatisticsF
8.427

INDUSTRY
LEV
MBV
SIZE
ROA
GROWTH

Independent variable

The third sub-hypothesis test results

Overall, the results showed that the size of the Expertise
in Industryhas no significant effect on the conditional
conservatism. This finding raised the claim in the first
sub-hypothesis (1.3), inconsistent with this hypothesis
and rejected at the 95% confidence level.
Table 24 Chow test results for the regression model of
second sub-hypothesis testing (2.4)
P-Value
0.002

statistic F
3.25

Table 25 Results of Hausman test for regression

model to test the second hypothesis (2-4)
Significant level
0.213

P-value
0.808
0.696
0.427
0.21
0.374
0.879
Adjusted R Square
0.293

Degree of freedom
6

Variables Control

Total Model Regression

on unconditional conservatism. It has been alleged in the

third sub-hypothesis (2.3) consistent with this hypothesis
and accepted at the 95 percent confidence level.
The results of the sub-hypothesis test
Generally, the results indicate that the industry
specialization (Jones model) has a significant negative
impact on unconditional conservatism. It has been
alleged in the fourth sub-hypothesis (2.4) consistent
with this hypothesis and accepted at the 95 percent
confidence level.

CONCLUSIONS
The findings of this study can be stated as follows

statistic Chi-Sq
8.355

The first hypothesis test

Audit firm size has a significant impact on conditional
Table 26 Results of statistical analysis to test the second hypothesis (2-4)
Statistics
t
0.242
-0.39
0.794
-1.255
0/888
-0.152
(D-W)
1.994

Coefficient

variable

symbol

Type of variable

0.022
-0.001
0.0008
-0.0148
0.006
-0.005
P-value
0.000

Expertise in Industry (jones model)

Financial Leverage
Market value to book value
Company size
Rate of return on assets
Ratio of asset growth
StatisticsF
8.488

DA
LEV
MBV
SIZE
ROA
GROWTH

Independent variable

The third sub-hypothesis test results

Overall, the results showed that the size of the Expertise in
Industry has no significant effect on the conditional

Variables Control

Total Model Regression

conservatism. This finding is consistent with findings

from Baud & Wilkins (2004) and in contrast with the
findings Salehi (2012). There is no significant impact of
audit firm tenure on conditional conservatism. These

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International Journal of Current Life Sciences - Vol. 4, Issue 8, pp. 4680-4687, August, 2014
findings are agree with the results of Salehi et al (2012)
the quality of the audit with respect to interventions such
and inconsistent with the findings Rajabi (2006), Geiger
as education, use of force expert and an acceptable level of
and Ganandan (2004) and Bazrafshan (2009).
attention paid to have control over unconditional
conservatism. Regarding the effect of specialization
Audit firm industry specialization has no significant
auditor in industry on unconditional conservatism and
impact on conditional conservatism. This result is
negative effects on the Jones model about auditing firm
consistent with the findings of Hogan and Jeter (1999)
proposed that in order to control the degree of
and Zhoalder (2004). Audit firm industry specialization
conservatism attention to training their employees.
has a significant impact on conditional conservatism
(model-Jones). This finding is consistent with the findings

of Hogan and Jeter (1999) and Zhoalder (2004).

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