The effects of audit on companies: Evidence from private companies

The purpose of this research is to determine the effects of the audit, which is made mandatory for private companies, on the company. Quantitative and qualitative methods were used to determine these effects. Panel data analysis was used as a quantitative method and semi-structured interview technique was preferred as a qualitative method. In order to determine the effects of the audit on the financial statements, the data of the companies listed in the ISO (Istanbul Chamber of Industry) 500 in 2017 from 2008 to 2017 were analyzed. 730 company observation years, panel data analysis method; In order to determine other non-financial effects, meetings were held with the financial affairs managers of 20 companies. With panel data analysis, the effect of mandatory auditing on financial performance indicators, return on assets ratio (ROA), return on equity (ROE) and return on sales ratio (ROS) was examined. According to the analysis results, it has been determined that only the audit performed by the companies in the international auditing network has a statistically significant and positive effect on ROE. It has been determined that the audit conducted by 4 large audit firms did not have the same effect on the financial performance indicators of the company. As a result of the interview, the prominent findings were: facilitating funding opportunities, giving useful advice to management at the level of business processes and internal control and improving internal control, reducing the possibility of material error due to error or abuse, and positively affecting the institutionalization process. In addition, the fact that companies consider the preparation of their financial statements in accordance with accounting standards and the preparation of their footnotes as a part of the audit service has emerged as another important finding in the analysis. Keywords: Audit, Private Companies, Financial Performance, Value of Audit