Investigating the relationship between client importance and audit quality: Evidence from TSE

The purpose of this study is to investigate the effect of client importance on audit quality in Tehran Stock Exchange (TSE). The results of previous researches in some countries suggest that the auditor independence may be affected by the economic importance of certain clients, which can affect audit quality. The results of this study, using a sample comprising of 1164 year-company observations during 2005 to 2012 from among listed companies in TSE and using logistic regression analysis showed that there is no significant relationship between the client importance and qualified audit opinion (as a measure of audit quality). In other words, it can be said that the independence and audit quality in Iran's capital market is not affected by the economic importance of clients. The results after controlling other factors that based on the previous researches can affect the qualified audit opinion showed that the probability of revealing qualified audit report has a positive relationship with financial leverage and performance of the previous year and has a negative relationship with the concentration of ownership, the size of the auditor, returns on assets and liquidity ratios