감사 전 재무제표에 대한 근사치로서의 잠정실적에 관한 연구 : 차기연도 감사시간과 감사보수를 중심으로

Abstract

Preliminary financial outcomes are produced by firms without external auditors’ assistance; hence they represent the firms’ accounting capabilities and the communication between the subject firms and auditors. In this paper we examine whether the difference between the preliminary outcome of the operation and the actual profit affect the audit risk measured by subsequent year’s audit hours/fees. Difference between preliminary and actual financial statements(PAD, henceforth) shows a disagreement between management and outside auditor. Due to the confidential nature of these, we use quarterly fair disclosure of earnings announcements as proxies of the preliminary reports. In Korea, firms are required to submit (consolidated) preliminary financial statements within 4(6) weeks prior to shareholders’ meeting. Significant portion of the announcement dates of quarterly earnings fair disclosure overlaps with the legal due dates of the preliminary reports, and thus the two results will be highly related. We define PAD in two ways; 1) if the d ifference fair d isclosure and actual outcome is less than 0 .1% of total amount, and 2) the actual difference. Our sample consists of Korean non-financial listed companies in the sample period of 2010 to 2018, and all the data is publicly available. Over the period there is increasing number of firms announcing various operating outcomes by fair disclosure. Among those outcomes there have been notably more positive PADs in sales – that is, actual outcome is smaller than preliminary outcome – suggesting that preliminary sales are frequently inflated by firms and then denied by auditors. The other outcomes show balanced portion of positive and negative PADs. Using five different operational outcome figures – sales, operating income, EBIT, net income, and net income in controlling interest - we find that firms with bigger difference between the preliminary and actual outcome are more likely to have higher audit risk. The average effect of an existence of PAD(sales) was 76 additional hours and 5.85 million KRW. After dichotomizing the sample by the signs of PADs, negative PADs showed significant and positive relations with the subsequent audit hours/fees. The results suggest that auditors perceive undervaluating firms to have more risky audit profiles. Although temporal difference of audit hours/fees prevents us from reverse causality, we apply three robustness tests to relieve potential endogeneity. First, for the firms with consecutive years of PAD the positive relation between PAD and the subsequent audit hours/fees is found to be stronger. Second, substituting the dependent variables with abnormal audit hours/fees yield results not different from the original tests. Third, we did sensitivity tests of PAD cutoff levels at 0.2%, 0.5%, 1%, 2%, and 5%. In every threshold levels the results remain consistent. Therefore we can conclude that the main results are not driven by the PAD cutoff levels. This paper suggests that the preliminary profit – although not observable from the outsiders – can be utilized as proxies for the preliminary reports. The results are robust for firm/industry characteristics, suggesting that preliminary-actual differences (PAD) can be used even after considering all the varying differences that affect the operations.