Studying and Testing the Impact of Audit Quality and Commitment of Governance Rules Degree on Both Abilities of Net Income and Comprehensive Income in Predicting Future Operating Cash Flows of Companies Listed in the Egyptian Stock Exchange

Document Type : Original Article

Authors

1 Accounting Department Faculty of Commerce Damnhour University Damnhour Egypt

2 Professor of Accounting and Auditing, Faculty of Commerce Alexandria University Egypt

Abstract

This research aimed to test both abilities of current net income and current comprehensive income in predicting future operating cash flows. In addition, the research aimed to test and compare the effect of audit quality and company commitment of governance rules, as moderating variables, on both relationships. It has been applied after the adoption of IFRS in Egypt in 2015.
To achieve these objectives and test the hypotheses, an applied study has been conducted on a sample of non-financial companies listed in the Egyptian stock exchange during the period from 2016 to 2018. The quarterly observations were chosen according to “Firm-Year Quarter–Observations” method. The final sample of this study consisted of 51 companies with 545 quarterly observations.
The findings indicated that there is statistically significant difference between the predictive abilities of current net income and current comprehensive income, as there is a significant evidence about the superiority of current net income over current comprehensive income in predicting future operating cash flows. The findings also indicated that the predictive abilities of current net income and current comprehensive income in predicting future operating cash flows and the significant difference between them were significantly affected by audit quality and were not significantly affected by company commitment of governance rules.

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