The purpose of this study is to examine the effect of corporate governance mechanisms on investors’ reaction to audit quality. For this, at first the relationship of audit quality and corporate governance mechanisms with future stock return were tested. Then, the effect of corporate governance mechanisms on the relationship between audit quality and future stock return was examined.
The statistical population was the listed companies in Tehran Stock Exchange during 2004 to 2011. The results indicated that audit quality criteria (except audit institute size) and corporate governance mechanisms (except non-executive board members ratio) have significant relationships with future stock return. Also, the results showed that corporate governance mechanisms have no significant effect on the relationship between audit quality and future stock return.