The Impact of Client Size and Financial Performance on Audit Opinion: Evidence from a Developing Market

Ahmed A.  Diab; Samir I.  Abdelazim; Aref M.  Eissa; Eid Mahmoud  Abozaid; Mona Mohamed  Elshaabany

doi:10.36941/ajis-2021-0020

Authors

Ahmed A. Diab College of Business Administration, Prince Sultan University, P.O.Box No. 66833 Rafha Street, Riyadh 11586, Saudi Arabia; Faculty of Commerce, Beni-Suef University, Qism Bani Sweif, Bani Sweif, Beni Suef Governorate, Egypt
Samir I. Abdelazim Faculty of Commerce, Beni-Suef University, Qism Bani Sweif, Bani Sweif, Beni Suef Governorate, Egypt; College of Business Administration, Majmaah University, Industrial Area, Al Majma'ah 15341, Saudi Arabia
Aref M. Eissa College of Business Administration, Majmaah University, Industrial Area, Al Majma'ah 15341, Saudi Arabia; Faculty of Commerce, Cairo University, Cairo University Rd, 12613, Egypt
Eid Mahmoud Abozaid Faculty of Commerce, Beni-Suef University, Qism Bani Sweif, Bani Sweif, Beni Suef Governorate, Egypt; College of Business, Jouf University, Sakaka, Saudi Arabia
Mona Mohamed Elshaabany College of Business, Jouf University, Sakaka, Saudi Arabia

DOI:

https://doi.org/10.36941/ajis-2021-0020

Keywords:

Audit opinion, company size, financial performance, Egypt

Abstract

This research investigates the effect of audit client size and its financial performance on audit opinion in the Egyptian audit market. A few studies have investigated the association between these factors in the audit context, especially in African developing countries. Data are manually collected from the annual financial reports of firms registered in the Egyptian Stock Market, focusing on a sample of EGX 70 from 2012 to 2016, and binary logistic regression is used in data analysis. We found that the company size is insignificantly, positively, related to a qualified, rather than an unqualified, type of audit opinion. In contrast, the client's financial performance has a significant but negative relationship with the qualified type of audit opinion. This study provides insights for managers and investors in developing countries to understand and perceive audit opinions in these contexts.

Received: 31 October 2020 / Accepted: 12 December 2020 / Published: 17 January 2021