THE EFFECT OF AUDIT COMMITTEE AND INTERNAL AUDIT QUALITY CHARACTERISTICS ON PRODUCT DIVERSIFICATION

Abstract

The purpose of this study is to investigate the effects of audit committee
characteristics and the company’s internal control system on product
diversification among companies listed on the Tehran Stock Exchange.
For this purpose, five hypotheses were developed to examine this issue,
and data from 130 member companies of the stock exchange for the period
2013-2019 were analyzed. The research’s regression model was
investigated and tested using panel data with fixed effects. The results
showed that, among the audit committee’s characteristics, its financial
expertise and independence, due to increased levels of supervision,
transparency, and appropriate disclosure, have a significant positive effect
on product diversification. Still, the size of the audit committee has a
significant effect on diversification. No product. Also, the results confirm
that among the features of the company’s internal control system, the
presence of weakness mentioned in the audit report has a significant
negative effect on product diversification. On the other hand, regarding
the ratio of employees in the internal audit department to the total number
of employees in the business unit, the results indicate that this ratio does
not significantly affect product diversification.