Modeling the Causes of Business Failure Using Audit Variables: an Interpretive Structural Approach (a case study of agricultural firms in the Tehran Stock Exchange)

Document Type : Original Article


1 Department of Accounting, Sirjan Branch, Islamic Azad University, Sirjan, Iran

2 Department of Accounting, Sirjan Branch, Islamic Azad University, Sirjan, Iran,


Interpretive structural modeling is a method for designing systems, especially accounting and management systems. This approach was first introduced by Warfield and has recently been frequently used by researchers in studies for modeling the relationships between variables. This approach makes it possible for the researcher to illustrate the complex relationships between the variables in a rather complex circumstance. It is now considered to be an important tool for organizing and directing the complexity of the relationships between variables. At first, this technique identifies the variables and then specifies the contextual relationships between the variables using the knowledge of experts and their experiences, and finally, it creates a multi-layered structural model. The present study is an applied research of the mixed type in terms of its purpose. In this study, the aforementioned technique was used to structure the factors explaining the causes of business failure (bankruptcy) of agricultural firms in the Tehran Stock Exchange. For this purpose, experts in this field (auditing-financial managers) in the agricultural firms accepted in Tehran Stock Exchange. In addition, 12 variables of audit report disclosures were identified as factors explaining the business failure. Then, the rate of effectiveness of these variables on one another in the model explaining business failure was coded using the initial access matrix. Finally, they were leveled using the final matrix. The results of interpretive structural modeling showed that the factors explaining business failure were modeled at six levels, with the type of auditing opinion at the highest level and had a greater impact on other factors. The highest degree of effectiveness was associated with other disclosures related to environmental-economic-regulatory factors which were at the lower levels. Therefore, it can be claimed that the disclosures associated with environmental-economic-regulatory factors explained the causes of business failure better than other audit variables.


  • Receive Date: 18 August 2020
  • Revise Date: 15 December 2020
  • Accept Date: 25 January 2021
  • First Publish Date: 13 February 2021