Current study investigates the effect of accounting quality on investment restrictions and the methods of financing in companies listed in Tehran Stock Exchange during 2005- 2010. Therefore, the hypotheses have been analyzed throughout the investment model obtained from the total capital expenditure of companies as the investment and accounting quality which is resulted from discretionary accrual of Jones model. The statistical results obtained by endogenous switching method and ordinary least square in the research indicates that there is a negative and significant relation between the accounting quality and the investment cash-flow sensitivity, in other words, the investment cash flows sensitivity is decreased due to the improvement of accounting quality, thus the financial restrictions are also reduced. Then, the effect of accounting quality on the amount of bank credits and capital rises for financing have been studied separately and without consideration of controlling variables which results indicate that the amount of bank credits are increased because of higher accounting quality, whereas, there is no significant relation between the accounting quality and capital rising.

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