바쁜시즌의 기말감사가 감사품질과 감사시간에 미치는 영향

Abstract

In this paper, we investigate the effect of busy season on audit quality and audit hour. And we also examine the effect of audit hour used before end-of-year and work overload of each audit firm on the relationship between busy season and audit quality. In Korea, over 95% of corporations have December year-end so there have been raised concern that scheduling and heavy workload can negatively effect to professional skepticism (and therefore audit quality) by prematurely completing audit assignments. Moreover general meeting of shareholders should be held within three months after fiscal year end then external auditor should submit the audit report to the company’s board of director a week before the general meeting of shareholders. Considering the clients’ closing and shareholders meeting schedule, the audit firm can have actual audit period about a month from January to February. According to Korean Institute of Certificated Public Accountants, the number of audit firm with more than 100 accountants is 9, more than 50 accountants is 11, more than 10 accountants is 121, audit team is 16 and less than 10 accountants is 240, so the total number of audit firm is 397. Meanwhile the number of corporations with December year-end and external audit obligation is 22,596. It means that one audit firm typically is needed to perform 57 external audit within about 8 weeks on average. Thus, when audit work is concentrated in short term, lack of commitment of auditors will increase and effectiveness of external audit will be deteriorated. Moreover accumalted fatigue and work intensity cause the high turnover rate of auditor and this will deteriorate continuity of audit and audit quality. Most of studies about busy season effects on audit quality have been investigated using survey and experimental method (Kelley and Margheim 1990; Raghunathan 1991; Sweeney and Summers 2002). These studies did not directly test the impact of busy season on audit quality because it was done at the level of audit firm not individual engagements. A recent study of Lopez and Peters (2012) showed that the results audit firm’s work overload negatively effect on audit quality. But their work overload variable was measured as the ratio of the audit fees on specific month compared to the total audit fee by accounting firm, there is a limitation in that it is a measure of accounting firm level rather than at the level of audit work. According to amended Act on External Audit of Corporation, the audit firms should disclose detailed external audit work information about the date, time and the number of auditors by their ranks. This study identify the most busy season by each audit firms using audit work information and end-of-year external audit are conducted in busy season, we identify this engagement as busy season audit. Then we examines whether the busy season audit is related with low-quality audits. Also we study whether total audit hour and audit hour by rank is changed when engagements are belong to busy season. Additionally we investigate whether audit effort measured increased total audit hour, interim audit and audit firms’ work overload can mitigate or worsen the audit quality deterioration in busy season. This study analysis on the sample of 1048 which disclose detailed external audit work information. As a result, we find that the decline in audit quality for busy season audit compare to non-busy season audit. A total audit hours used after end-of-year are not different from non-busy season audit but the audit hours of partners and senior auditors are reduced. And audit effort can mitigate the audit quality deterioration in busy season but work overload of audit firm do not effect audit quality. These results show that audit effort and audit hours used after end-of-year audit directly affect the audit quality. This paper contribute in the following three aspects. First, this study take into account the time, audit team member for each individual audit level. The exact measurements of the relationship between audit quality and the busy season was more a clearer to show the relationship. Second, we use archival data and show empirically the decline of audit quality due to the busy season unlike past studies be made through laboratory studies or surveys. Third, this study shows the way how audit firm adjust limited resources for the busy season. These results are helpful for investors and auditors, as well as by the regulatory authorities to understand the reason of audit quality deterioration and help establish the policy to improve them.