The Effect of Auditing Quality Characteristics on Accounting Conservatism:The Case of Egypt

Purpose
Prior literature on accounting conservatism examines the effect of audit quality on conservatism show mixed results about this relationship, in this study, researchers extend previous studies by investigating the impact of the audit quality which is measured by audit firm size and auditor tenure on the enhancement of the level of accounting conservatism in the financial reports of the most active 50 nonfinancial companies listed in the Egyptian stThis study has used on nonprobability– purposive sample as it focuses on the most actively traded Egyptian nonfinancial companies listed in the Egyptian Stock Exchange, according to disclosure book  50 most active companies, over the period 20072015. Research data used to measure accounting conservatism, audit quality and other variables collected mainly from Thomson Reuters Eikon databasebooks issued by the Egyptian Stock Exchange Authority. Intensive analysis of the results obtained was conducted, starting with the descriptive analysis for the data, and followed by the correlationanalysis of variables. After that testing the research hypotheses by utilizing the regression analysis to identify whether these hypotheses will be accepted or rejected.

Findings After excluding outliers from the study data set, the regression analysis shows that audit firm size, firm leverage and firm profitability play a major role in affecting accounting conservatism in the Egyptian firms whereas audit firm size has a positive significant relationship with accounting conservatism which enhances the rule of big audit firms in the quality of financial reports, firm leverage has a positive significant relationship with accounting conservatism, and firm profitability has a negative significant relationship with accounting conservatism, while firm size and auditor tenure have a weak role whereas firm size has a positive insignificant relationship with accounting conservatism, and auditor tenure has a negative insignificant relationship with accounting conservatism. Based on these results, the study provided recommendations to the interested parties.