Title:
THE RELATIONSHIP BETWEEN AUDIT QUALITY AND NONFRAUDULENT FINANCIAL STATEMENTS - AN EMPIRICAL STUDY ON COMPANIES LISTED IN THE EGYPTIAN STOCK EXCHANGE

Authors:
Noha Mohamed zaki

Abstract:
This study aims to examine the relation between external audit quality and Financial Statements' Fraud Prevention. As a result of the increase of manager's desires toward maximizing their personal benefits on account of the benefits of other parties; they tend to follow unethical behavior, through committing fraud, which has a negative impact on the reliability of the information represented by the financial Statements. To restrict this unethical behavior some studies (Okoli and Izedonmi, 2014; Al- Nimer, 2015 ; Rahimi and Amini, 2015) pointed to the possibility of relying on external audit process, particularly when it is of a good quality, because of its ability to prevent Fraud in the Financial Statements. The Study uses correlations deign to investigate this relationship. The sample consists of 100 firms listed in the Egyptian stock exchange for the period starting from 2012 till 2015. Where audit quality is measured by accounting conservatism, which is measured by MTB. While financial statement's fraud is measured by integrated results of three models that detect fraud which includes; Altman Z Score, P Score, Beneish M- Score. The results of correlation indicates that there is non-significant negative relationship between audit quality and financial statement's fraud, and there is no significant effect for firm size and audit firm size on this relationship; the results reveal that audit quality isn't a good predictor for Financial Statements' Fraud Prevention in Egypt.