The effect of independent audit quality on financial performance: A study on companies listed in the BIST 50 index

Independent auditing involves the evaluation and reporting of financial statements prepared by companies for external stakeholders. High-quality independent auditing contributes to the establishment of trust in markets. This, in turn, provides a basis for investors, creditors, and potential partners to make healthier and more informed decisions.This study examines the relationship between audit quality and financial performance using data from BIST 50 companies for the period 2019–2024. Financial performance is measured by return on assets, return on equity, price-to-earnings ratio, and market-to-book ratio. Audit quality is represented by the size of the audit firm and audit firm rotation, which are widely used indicators in the literature. Firm size and leverage ratio are included as control variables. The analysis is conducted using panel data methodology. The research findings indicate that being audited by one of the Big Four audit firms has a negative but statistically insignificant effect on firms' return on assets, return on equity, and market-based performance indicators. Moreover, audit firm rotation exhibits a negative effect on return on assets, return on equity, and the market-to-book value ratio, while showing a positive effect on the price-to-earnings ratio; however, none of these effects are statistically significant. In addition, the dummy variable representing the COVID-19 period is found to have a negative and statistically significant effect only on the price-to-earnings ratio.