대규모 기업집단 내 감사인 동일화가 감사보수 및 감사투입시간에 미치는 영향

Abstract

In this study, we examine the effect of identical auditor in Korean Business Group on audit fees and audit hours using 1,069 firm-year samples from 2001 to 2007. According to the exposure draft of Korean New-ISA(International Standards on Auditing and Related Services) issued by Korea Certified Public Accountant(KICPA), the group engagement partner or the group engagement partner's firm is responsible for the group audit opinion although component auditors may perform work on the financial information of the components for the group audit and as such are responsible for their overall findings, conclusions or opinions. Considering K-IFRS mainly using consolidated financial statements as reporting unit and New-ISA clearly stating responsibility of group auditor for economic entity, it may be contributable to perform preliminary empirical test whether the identification of audit engagement may have benefits such as efficiency, cost savings in external audit and maintenance of private information in the level of group. In the same vein, Simunic (1984) argue that knowledge spillover gained from non-audit services decrease the set-up costs of external audit. this implies that auditors may save their efforts performing services for their clients. Moreover, assuming external audit market is competitive, costs attributable to the audit clients can be decreased mainly due to price elasticity. Although efficiency in external audit may reduce the audit fees and audit hours, competition among auditors may also induce fee discount and reduction of audit efforts. According to Roh and Bae(2008)'s survey, auditors are thinking that they serve approximately 69% of effort and get 57% of fees compared with appropriate level. these results imply that compared with increased legal liabilities and auditors' efforts, audit fees are not sufficient to the auditors' expectation. Under the changes in institutional circumstances, the results from this study may present the empirical implications and contributions about new issues in K-IFRS and New-ISA. Also, Considering that Korea business group have economically significance effects and financial information users demands high quality in financial information, more efforts need to be provided by realizing the audit fees in order to enhance the credibility. For validation of our empirical test, we need to consider and reflect the economic factors to accelerate the probability of auditors' identification in our empirical model appropriately. Because a Korean Business Group is economically one large financial circle consisting of many firms in various industries and managed by a controlling firm, there may exist various non audit services which generate economic rents belonging to auditors and thereby influence audit engagement. So, this implies that auditor choice of affiliated firms is not random and create the selection bias problems which mislead the interpretation of incremental fixed effect in a dummy variable surrogating identical auditor. In order to control this empirical issue, we calculat the probabilities of choice of group auditors considering the economic significance of an affiliated firm at first stage probit regression, then examined the effect of auditor's identification on audit fee and hours(Heckman 1979). In order to examine the effect of group auditor on audit fees and hours, we test two hypotheses in alternative forms. First, we hypothesize that after controlling the selection bias derived from the choice, identical auditors charge lower audit fee than component auditors. As expected, we find that identical auditor are paid lower audit fee than component auditors. This result implies that efficiency related with the understanding and knowledge from the group firm decreases cost of external audit of the affiliated firm. Second, we also hypothesize and test that identical auditors make less efforts than component auditors mainly due to the efficiency generated from the knowledge of the group firm. We also find that identical auditors make less effort than component auditors. These empirical results are consistent when grouping our sample by similar size and using audit fee per hours as dependent variable. Specifically, from the negative sign on same auditor to audit fees per hours, we may infer that although identical auditors save their efforts, audit fees need to be raised up in order to enhance the quality. From these findings, we may infer that efficiency and audit fee discount co-exist. Moreover, fee discount which may also induce auditors to reduce their efforts can impair the audit quality(Kwon et al. 2006). Uplifting the reliability of financial information based on substantial economic entities may be one of the key issues in New-ISA. Empirical findings in this study may provide the empirical implication for regulators to prepare the plans about auditors' efforts and audit fees for raising the audit quality of large economic entities.