본문 바로가기
KERD
논문KCI 등재

A Study on Audit Regulation Engagement Interview and Audit Quality

Hong YIN|Yanbin DU
한국유통과학회 (Korea Distribution Science Association)|2021.08|산경연구논집 (The Journal of Industrial Distribution & Business)|제12권 제8호|pp. 7-19

0

조회

0

다운로드

0

인용

0

참고문헌

키워드

Audit QualityDiscretionary AccrualsAudit Engagement InterviewAudit Delays

초록

Purpose: This paper aims to investigate (1) whether the interviewed auditors conduct higher quality audit than the non-interviewed auditors and (2) whether the frequency of audit engagement interviews has an impact on audit quality. Research design, data, and methodology: Using a sample of Chinese A-share listed firms between 2011 and 2019, this paper empirically tests the effect of audit engagement interviews on auditor’s behavior. We collect the data of audit engagement interviews on the CICPA’s website. We use OLS regression, fixed-effect model and random-effect model to examine the association between audit engagement interviews and audit quality. Results: Findings indicate that the audit quality of the interviewed auditors is significantly greater than that of the noninterviewed auditors. The frequency of the audit engagement interviews is positively associated with audit quality. The interviewed auditors spend significantly more time on the audit. Furthermore, the positive association between audit engagement interviews and audit quality only exists in non-Big 4 auditors. Conclusions: Our findings provide evidence for the effectiveness of audit regulation enforcement. The results suggest that in an emerging market with weak legal systems, preventive regulations such as audit interviews have a deterrent effect and are necessary in alleviating information asymmetry and improving information environment.

Abstract

Purpose: This paper aims to investigate (1) whether the interviewed auditors conduct higher quality audit than the non-interviewed auditors and (2) whether the frequency of audit engagement interviews has an impact on audit quality. Research design, data, and methodology: Using a sample of Chinese A-share listed firms between 2011 and 2019, this paper empirically tests the effect of audit engagement interviews on auditor’s behavior. We collect the data of audit engagement interviews on the CICPA’s website. We use OLS regression, fixed-effect model and random-effect model to examine the association between audit engagement interviews and audit quality. Results: Findings indicate that the audit quality of the interviewed auditors is significantly greater than that of the noninterviewed auditors. The frequency of the audit engagement interviews is positively associated with audit quality. The interviewed auditors spend significantly more time on the audit. Furthermore, the positive association between audit engagement interviews and audit quality only exists in non-Big 4 auditors. Conclusions: Our findings provide evidence for the effectiveness of audit regulation enforcement. The results suggest that in an emerging market with weak legal systems, preventive regulations such as audit interviews have a deterrent effect and are necessary in alleviating information asymmetry and improving information environment.

참고문헌 (57)

  1. Mujeeb Saif Mohsen AL-ABSY, "Involvement of Board Chairmen in Audit Committees and Earnings Management: Evidence from Malaysia", The Journal of Asian Finance, Economics and Business, 7(8), pp.233~246 (2020), 한국유통과학회
  2. Bandura, A., "Modification of SelfImposed Delay of Reward through Exposure to Live and Symbolic Models", Journal of Personality & Social Psychology, 2(5), pp.698~705 (1965)[DOI]
  3. Becker, C., "The Effect of Audit Quality on Earnings Management", Contemporary Accounting Research, 15(1), pp.1~24 (1998)[DOI]
  4. Bikhchandani, S., "Learning from the Behavior of Others", Journal of Economic Perspectives, 12(3), pp.151~170 (1998)[DOI]
  5. Bing, L., "The Oversight Role of Regulators : Evidence from SEC Comment Letters in the IPO Process", Review of Accounting Studies, 22(3), pp.1229~1260 (2017)[DOI]
  6. Brown, S. V., "The Spillover Effect of SEC Comment Letters on Qualitative Corporate Disclosure : Evidence from the Risk Factor Disclosure", Contemporary Accounting Research, 35(2), pp.622~656 (2018)[DOI]
  7. Cahan, S. F., "After Enron : Auditor Conservatism and Ex-Andersen Clients", The Accounting Review, 81(1), pp.49~82 (2006)[DOI]
  8. Casterella, J. R., "Is SelfRegulated Peer Review Effective at Signaling Audit Quality?", Accounting Review, 84(3), pp.713~735 (2009)[DOI]
  9. 채수준, "감사품질이 주가급락 위험에 미치는 영향: 유통, 서비스 기업을 중심으로", 유통과학연구, 15(8), pp.47~54 (2017), 한국유통과학회[DOI]
  10. Chen, G., "Is China’s Securities Regulatory Agency a Toothless Tiger? Evidence from Enforcement Actions", Journal of Accounting and Public Policy, 24(6), pp.451~488 (2005)[DOI]
  11. Christensen, B. E., "Does the Disclosure of PCAOB Inspection Findings Increase Audit Firms' Litigation Exposure?", The Accounting Review, 96(3), pp.191~219 (2021)[DOI]
  12. Clor-Proell, S. M., "The Effects of Presentation Salience and Measurement Subjectivity on Nonprofessional Investors’ Fair Value Judgments", Contemporary Accounting Research, 31(1), pp.45~66 (2014)[DOI]
  13. Cohen, D. A., "Real and AccrualBased Earnings Management in the Pre-and-Post-SarbanesOxley Periods", The Accounting Review, 83(3), pp.757~787 (2008)[DOI]
  14. De Angelo, L. E., "Auditor Size and Audit Quality", Journal of Accounting and Economics, 3(3), pp.183~199 (1981)[DOI]
  15. Dechow, P. M., "Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences", Journal of Accounting and Economics, 50(2-3), pp.344~401 (2010)[DOI]
  16. Dechow, P. M., "SEC Comment Letters and Insider Sales", Accounting Review, 91(2), pp.401~439 (2016)[DOI]
  17. Dechow, P. M., "Detecting Earnings Management", Accounting Review, 70(2), pp.193~225 (1995)[DOI]
  18. Defond, M. L., "Do PCAOB Inspections Improve the Quality of Internal Control Audits", Journal of Accounting Research, 55(3), pp.591~627 (2017)[DOI]
  19. Ettredge, M., "The Effects of Firm Size, Corporate Governance Quality, and Bad News on Disclosure Compliance", Review of Accounting Studies, 16, pp.866~889 (2011)[DOI]
  20. Eutsler, J., "Risky Business : Assessing the Generalizability of the PCAOB’s Risk-Based Inspection Reports for Annually Inspected Audit Firms", Auditing : A Journal of Practice &Theory, 39(2), pp.117~138 (2020)[DOI]
  21. Fan, J. P. H., "Do External Auditors Perform a Corporate Governance Role in Emerging Markets? Evidence from East Asia", Journal of Accounting Research, 43(1), pp.35~72 (2005)[DOI]
  22. Feroz, E. H., "The Financial and Market Effects of the SEC’s Accounting and Auditing Enforcement Releases", Journal of Accounting Research, 29, pp.107~142 (1991)[DOI]
  23. Ferris, S. P., "The Effect of SEC-Ordered Suspensions on Returns, Volatility, and Trading Volume", Financial Review, 27(1), pp.1~34 (1992)[DOI]
  24. Firth, M., "The Timeliness and Consequences of Disseminating Public Information by Regulators", Journal of Accounting & Public Policy, 28(2), pp.118~132 (2009)[DOI]
  25. Fogarty, T. J., "The Imagery and Reality of Peer Review in the US: Insights from Institutional Theory", Accounting, Organizations and Society, 21(2-3), pp.243~267 (1996)[DOI]
  26. Gabrielsen, G., "Managerial Ownership, Information Content of Earnings, and Discretionary Accruals in a Non-US Setting", Journal of Business Finance & Accounting, 29(7-8), pp.967~988 (2002)[DOI]
  27. Geiger, M. A., "Audit Firm Size and Going-Concern Reporting Accuracy", Accounting Horizons, 20(1), pp.1~17 (2008)[DOI]
  28. Ghosh, A., "Auditor Tenure and Perceptions of Audit Quality", The Accounting Review, 80(2), pp.585~612 (2005)[DOI]
  29. Ghoshal, S., "Short Memories? The Impact of SEC Enforcement on Insider Leakage", Journal of Law, Finance, and Accounting, 5(2), pp.273~305 (2020)[DOI]
  30. Gramling, A. A., "Are PCAOBIdentified Audit Deficiencies Associated with a Change in Reporting Decisions of Triennially Inspected Audit Firms?", Auditing, 30(3), pp.59~79 (2011)[DOI]
  31. Guay, W. R., "A MarketBased Evaluation of Discretionary-Accrual Models", Journal of Accounting Research, 34, pp.83~105 (1996)[DOI]
  32. Gunny, K. A., "How Busyness Influences SEC Compliance Activities : Evidence from the Filing Review Process and Comment Letters", Contemporary Accounting Research, 37(1), pp.7~32 (2020)[DOI]
  33. He, X., "Reputational Implications for Partners after a Major Audit Failure : Evidence from China", Journal of Business Ethics, 138(4), pp.703~722 (2016)[DOI]
  34. Herbig, P., "The Relationship of Reputation and Credibility to Brand Success", Journal of Consumer Marketing, 10(3), pp.18~24 (1993)[DOI]
  35. Hilary, H., "The Credibility of SelfRegulation: Evidence from the Accounting Profession's Peer Review Program", Journal of Accounting and Economics, 40(1-3), pp.211~229 (2005)[DOI]
  36. Hunter, I., "The Influence of Mental Set on ProblemSolving", British Journal of Psychology, 47(1), pp.63~64 (1956)[DOI]
  37. Johnson, E. S., "The Impact of PCAOB Auditing Standard NO.5, the PCAOB Inspection Regime, and the Great Recession on Audit Fees and Audit Quality", Journal of Accounting, Auditing and Finance, (4), pp.1~24 (2020)[DOI]
  38. Khurana, I. K., "PCAOB Inspections and the Differential Audit Quality Effect for Big 4 and Non-Big 4 US Auditors", Contemporary Accounting Research, 38(1), pp.376~411 (2021)[DOI]
  39. Krishnamurthy, S., "Auditor Reputation, Auditor Independence, and the Stock-Market Impact of Andersen’s Indictment on Its Client Firms", Contemporary Accounting Research, 23(2), pp.465~490 (2006)[DOI]
  40. La Porta, R., "Law and Finance", Journal of Political Economy, 106(6), pp.1113~1155 (1998)[DOI]
  41. Lamoreaux, P. T., "Does PCAOB Inspection Access Improve Audit Quality? An Examination of Foreign Firms Listed in the United States", Journal of Accounting &Economics, 61(2-3), pp.313~337 (2016)[DOI]
  42. Levitt, SD, "Was There Really a Hawthorne Effect at the Hawthorne Plant? An Analysis of the Original Illumination Experiments", American Economic Journal, 3(1), pp.224~238 (2011)[DOI]
  43. Lewellyn, K. B., "The Role of National Culture and Corruption on Managing Earnings around the World", Journal of World Business, 52(6), pp.798~808 (2017)[DOI]
  44. Nicholls, C., "The Impact of SEC Investigations and Accounting and Auditing Enforcement Releases on Firms'Cost of Equity Capital", Review of Quantitative Finance &Accounting, 47(1), pp.57~82 (2016)[DOI]
  45. Ollinger, M., "Investigating the Effect of Mental Set on Insight Problem Solving", Experimental Psychology, 55(4), pp.269~282 (2008)[DOI]
  46. Pittman, J. A., "Auditor Choice and the Cost of Debt Capital for Newly Public Firms", Journal of Accounting & Economics, 37(1), pp.113~136 (2004)[DOI]
  47. Pratt, J., "The Effects of Client Characteristics on Auditor Litigation Risk Judgments, Required Audit Evidence, and Recommended Audit Fees", The Accounting Review, 69(4), pp.639~656 (1994)[DOI]
  48. Rose, C., "The Impact of Corporate Reputation on Performance : Some Danish Evidence", European Management Journal, 22(2), pp.201~210 (2004)[DOI]
  49. Roychowdhury, S., "Earnings Management through Real Activities Manipulation", Journal of Accounting & Economics, 42(3), pp.335~370 (2006)[DOI]
  50. Seetharaman, A., "Litigation Risk and Audit Fees : Evidence from UK Firms Cross-Listed on US Markets", Journal of Accounting and Economics, 33(1), pp.91~115 (2002)[DOI]
  51. Skinner, D. J., "Audit Quality and Auditor Reputation : Evidence from Japan", Accounting Review, 87(5), pp.1737~1765 (2012)[DOI]
  52. Smith, D. B., "An Investigation of the Information Content of Foreign Sensitive Payment Disclosures", Journal of Accounting and Economics, 6(2), pp.153~162 (1984)[DOI]
  53. Teoh, S. H., "Perceived Auditor Quality and the Earnings Response Coefficient", The Accounting Review, 68(2), pp.346~366 (1993)[DOI]
  54. Tian, X., "Disciplining Delegated Monitors: When Venture Capitalists Fail to Prevent Fraud by Their IPO Firms", Journal of Accounting & Economics, 61(2-3), pp.526~544 (2016)[DOI]
  55. Wang, Q., "Determinants of Segment Disclosure Deficiencies and the Effect of the SEC Comment Letter Process", Journal of Accounting & Public Policy, 35(2), pp.109~133 (2016)[DOI]
  56. Warfield, T. D., "Managerial Ownership, Accounting Choices, and Informativeness of Earnings", Journal of Accounting and Economics, 20(1), pp.61~91 (1995)[DOI]
  57. Weber, J., "Does Auditor Reputation Matter? The Case of KPMG Germany and ComROAD AG", Journal of Accounting Research, 46(4), pp.941~972 (2008)[DOI]

관련 논문AI추천

The Impact of Auditor-Client Traffic Convenience on Earnings Management in ChinaHong YIN, Yanbin DU한국유통과학회 · Asian Journal of Business Environment2021 · 제11권 제4호The Impacts of Mandated Audit Communication on Audit Hour, Audit Fee and Firm’s Earnings Management심재연, 유승원, 유용근한국국제회계학회 · 국제회계연구2021 · 제99호The Relevance between Managerial Overconfidence and Audit Quality Following the Introduction of the New External Audit Law안상봉, 지상현한국세무회계학회 · 세무회계연구2024 · 제81호Does Korea’s Seminal Audit Reform Improve Audit Quality?김효진, 윤순석, Charles R. Pryor한국세무회계학회 · 세무회계연구2024 · 제81호Auditor size and analysts’ earnings forecast accuracy: The moderating effect of earnings manipulation안재환한국공인회계사회 · 회계ㆍ세무와 감사 연구2023 · 제65권 제4호Mandatory Auditor Rotation, Auditor Tenure, and Audit Quality: Comparison between Korea and China최종서, 진메이옌한국국제회계학회 · 국제회계연구2012 · 제43호

이 간행물의 다른 논문 (3건)

A Study on Artificial Intelligence Education Design for Business Major Students서응교, 박소현pp. 21-32The Influencing of Aging on Time Preference in Indonesia김도형pp. 33-39Effects of Wage on FDI Inflows Based on the Threshold of Institutional QualitySunhae Lee, Young-Hoon JEONpp. 41-52
원문 보기