CATALYSTS OF FINANCIAL STABILITY”: ANALYZING THE NEXUS BETWEEN AUDIT QUALITY AND EARNINGS PERSISTENCE; EGX 30 TR INDEX; AN EMPIRICAL STUDY

Abstract

Our study aimed to explore the nexus between audit quality (AQ) and earnings persistence (EP) in Egypt. Using an ordinary multiple regression model from 2020 to 2023 for 21 Egyptian firms listed in the EGX TR Index, the study sample results demonstrate a positive and significant impact of audit quality and the persistence of earnings for 21 Egyptian firms. Meanwhile, audit quality significantly affects the persistence of Egyptian firm earnings by ensuring financial reporting reliability. Audit quality significantly influences investors and stakeholders’ confidence and trust, promotes disclosure and transparency, and reduces information asymmetry by independent auditors. Furthermore, the study revealed a positive and significant impact of return on assets (ROA) on earnings persistence (EP), while there was a converse impact of number of shares (NS) and firm sector (SEC) on earnings persistence (EP). Our results uncovered important implications for Egyptian firms, highlighting the significance of audit quality and return on assets in driving earnings persistence. It emphasized the need for professional and governmental bodies to prioritize corporate governance and the transparency of financial reporting in Egyptian firms. In accordance with the overarching goals of the Egypt Vision 2023 plan for sustainable development