Purpose: The main purpose of the current research is to investigate the impact of the merger of audit firms on the quality of financial reporting.
Methodology: To carry out this research, 116 companies admitted to the Tehran Stock Exchange between 2013 and 2022 are examined.
Results: The results of this research show that the merger of audit firms has a direct and significant effect on the quality of accruals and the earnings sustainability, and on the discretionary accruals of companies. Therefore, in general, it can be said that the merger of audit firms improves the quality of financial reporting. Meanwhile, the merger of audit firms does not have a significant effect on the earnings reaction coefficient. In addition, the results indicate that the size of audit firms only moderates the relationship between the merger of audit firms and discretionary accruals, and does not have a significant effect on other relationships.
Conclusion: Therefore, in general, the merger of audit firms, regardless of their size, improves the quality of financial reporting.
Contribution: This research, for the first time, examines the impact of the merger of auditing firms in an emerging market. Also, by expanding the range of variables related to the quality of financial reporting, it expands the recent research of Zimmerman et al. (2022) in the United States. In addition, this article, for the first time, examines the moderating role of audit firm size in the relationship between audit firm integration and financial reporting quality.