The effect of audit firm characteristics on financial reporting quality: Evidence from Borsa İstanbul

Without doubt, the appropriateness and consistency of the decisions taken can only be possible with the reliable information used in the decision phase. An independent audit service is needed to increase the accuracy and reliability of financial reports, which are an important element for the effective functioning of capital markets. In this context, the study aims to analyze whether the characteristics of the independent audit firm affect the quality of the financial reports submitted by the company. For this purpose, 608 firm/year data belonging to companies listed in Borsa Istanbul and traded in the manufacturing sector between 2017-2020 were tested with regression analysis. In this study, which supports the limited number of studies in Turkey sample on financial reporting quality in a different perspective, AWCA (Abnormal Working Capital Accruals) Model developed by DeFond and Park (2001) was preferred to represent the financial reporting quality. In the study, the relationship between the status of being a member of the Big 4 of the independent audit firm, the annual audit income and the number of audited public interest institutions and the quality of the presented financial reports were examined. The findings of the study indicate that there is a statistically significant relationship between the status of the independent audit firm as Big 4 and the quality of financial reports. Keywords: Financial reporting quality, auditing, abnormal working capital accruals.