The Influential Role of Independent Auditors in Mitigating Agency Conflicts between Managers and Shareholders

Objective: Independent auditors seek to enhance audit quality to maintain professional credibility, avoid litigation, and bolster the credibility of financial statements. Higher audit quality leads to a greater degree of conservatism in financial reporting. The current study aims to investigate the role of independent auditors in reducing agency conflicts between managers and shareholders. Methodology: The statistical population comprises firms listed on the Tehran Stock Exchange (TSE) during the period 2015–2024. After systematic screening, 131 firms were selected as the final sample. The research hypothesis was tested using multiple linear regression analysis. Findings: The results of the regression analysis indicate that auditor conservatism can mitigate agency conflicts between managers and shareholders. Agency conflicts between shareholders and managers arise from agency problems and managers’ misuse of financial reports, which compromises the quality of this information. Auditor conservatism has the potential to mitigate this issue. Conclusion: As expected, leveraging greater information transparency and higher auditor conservatism can reduce agency conflicts between managers and shareholders.