Do Audit Fees and Audit Hours Influence Credit Ratings?: A Comparative Analysis of Big4 vs Non-Big4
0
조회
0
다운로드
1
인용
0
참고문헌
키워드
초록
We examine the relationship between credit ratings / changes and audit fees (hours) for Big4 and Non-Big4 firms. Audit fee (hours) may be considered as a default risk metric for credit ratings agencies. However, firms audited by Big4 are larger, better performing and operate with lower leverage compared to firms followed by Non-Big4. Therefore, the association between audit fee (hours) may be different for firms followed by Big4 and Non-Big4 audit firms. We find that there is a negative association between audit fees and credit ratings for firms followed by Big4 audit firms. However, we find an insignificant relation for firms followed by Non-Big4. We conjecture the different association due to the Big4 firms having more robust accounting procedures; Big4 firms must offer competitive audit fees because they are engaged in fierce competition with other Big4 firms. Moreover, Big4 and Non-Big4 firms have different relationships with their clients because Non-Big4 firms are more income dependent on their clients. Using a sample of 1,717 firm–year observations between 2002 and 2013, we establish a relation between audit fees in period t and credit ratings in period t+1, for firms followed by Big4 auditors. We do not find a significant relation for firms followed by Non-Nig4 firms, suggesting that credit ratings agencies perceive audit fee differently for Big4 and Non-Big4 firms. Client firms followed by Big4 auditors that experience a credit rating change in period t+1 pay lower audit fees in period t compared to firms that do not experience a credit rating change. Our additional analysis suggests a different association between firms audit fees and firm performance for firms that experience a credit rating increase and decrease. Firms that experience a credit ratings increase in period t+1 have strong performance and lower audit fees in period t. On the other hand, firms that experience a credit rating decrease have weak financial performance and negative audit fees compared to firms that do not experience a credit ratings change. Our results suggest that audit fees combined with financial performance influence a credit ratings agency' perception of default risk.
Abstract
We examine the relationship between credit ratings / changes and audit fees (hours) for Big4 and Non-Big4 firms. Audit fee (hours) may be considered as a default risk metric for credit ratings agencies. However, firms audited by Big4 are larger, better performing and operate with lower leverage compared to firms followed by Non-Big4. Therefore, the association between audit fee (hours) may be different for firms followed by Big4 and Non-Big4 audit firms. We find that there is a negative association between audit fees and credit ratings for firms followed by Big4 audit firms. However, we find an insignificant relation for firms followed by Non-Big4. We conjecture the different association due to the Big4 firms having more robust accounting procedures; Big4 firms must offer competitive audit fees because they are engaged in fierce competition with other Big4 firms. Moreover, Big4 and Non-Big4 firms have different relationships with their clients because Non-Big4 firms are more income dependent on their clients. Using a sample of 1,717 firm–year observations between 2002 and 2013, we establish a relation between audit fees in period t and credit ratings in period t+1, for firms followed by Big4 auditors. We do not find a significant relation for firms followed by Non-Nig4 firms, suggesting that credit ratings agencies perceive audit fee differently for Big4 and Non-Big4 firms. Client firms followed by Big4 auditors that experience a credit rating change in period t+1 pay lower audit fees in period t compared to firms that do not experience a credit rating change. Our additional analysis suggests a different association between firms audit fees and firm performance for firms that experience a credit rating increase and decrease. Firms that experience a credit ratings increase in period t+1 have strong performance and lower audit fees in period t. On the other hand, firms that experience a credit rating decrease have weak financial performance and negative audit fees compared to firms that do not experience a credit ratings change. Our results suggest that audit fees combined with financial performance influence a credit ratings agency' perception of default risk.
참고문헌 (26)
- Alissa, W., "Firms' use of accounting discretion to influence the credit ratings", Journal of Accounting and Economics, 55(1), pp.129~147 (2013)
- Differences in conservatism between big eight and non-big eight auditors, "Basu, S.", Emory University, ~ (2001)
- Bell, T. B., "Auditors’' perceived business risk and audit fees: Analysis and evidence", Journal of Accounting Research, 39, pp.35~43 (2001)
- Boot, A. W. A., "Credit ratings as coordination mechanisms", Review of Financial Studies, 19(1), pp.81~118 (2006)
- Becker, C., "The effect of audit quality on earnings management", Contemporary Accounting Research, 15(1), pp.1~24 (1998)
- Behn, B., "Audit quality and properties of analyst earnings forecasts", The Accounting Review, 83(2), pp.327~359 (2008)
- 전규안, "비정상 감사시간이 신용등급과 부채조달비용에 미치는 영향", 세무와회계저널, 15(5), pp.9~55 (2014), 한국세무학회
- Crouhy, M., "Prototype risk rating system", Journal of Banking & Finance, 25, pp.47~95 (2001)
- Davis, L. R., "Audit effort, audit fees, and the provision of non-audit services to audit clients", The Accounting Review, 68, pp.135~150 (1993)
- DeAngelo, L. E., "Auditor Size and Audit Quality", Journal of Accounting and Economics, 3(3), pp.183~199 (1981)
- Ederington, L., "The informational content of bond ratings", Journal of Financial Research, 10, pp.211~226 (1987)
- Gul, F. A., "Auditors’ response to political connections and cronyism in Malaysia", Journal of Accounting Research, 44, pp.931~963 (2006)
- 한정희, "감사인순환제도와 보수주의", 국제회계연구, 27(27), pp.141~162 (2009), 한국국제회계학회
- Credit Rating Targets, "Hovakimian, A.", ~ (2009)
- Hovakimian, A., "The debt-equity choice", Journal of Financial and Quantitative Analysis, 36(1), pp.1~24 (2001)
- Hull, J., "The relationship between credit default swap spreads, bond yields, and credit rating announcements", Journal of Banking and Finance, 28, pp.2789~2811 (2004)
- 김희수, "신용등급과 감사보수 및 감사시간 간의 상관관계에 대한 연구", 연세경영연구, 47(1), pp.41~70 (2010), 경영연구소
- Kisgen, D, "Credit ratings and capital structure", Journal of Finance, 61(3), pp.1035~1072 (2006)
- Khurana, I., "Litigation risk and the financial reporting credibility of Big4 versus non-Big4 audits: Evidence from Anglo-American countries", The Accounting Review, 79(2), pp.473~495 (2004)
- Johnstone, K. M., "Engagement planning, bid pricing, and client response in the market for initial attest engagements", The Accounting Review, 76, pp.199~220 (2001)
- Moody’s Investor service, "Moody's Rating Symbols and Definitions", ~ (2009)
- Norden, L., "Informational efficiency of credit default swap and stock markets: The impact of credit rating announcements", Journal of Banking & Finance, 28(Special Issue), pp.2813~2843 (2004)
- 박범진, "기업의 신용평가 변동과 감사보수 간의 관련성에 관한 연구", 국제회계연구, 45(45), pp.23~50 (2012), 한국국제회계학회
- 박종일, "초과감사보수가 신용등급에 미치는 영향 : 상장기업과 비상장기업의 비교분석", 회계ㆍ세무와 감사 연구, 53(2), pp.393~432 (2011), 한국공인회계사회
- Public Company Accounting Oversight Board PCAOB, "An Audit of Internal Control Over Financial Reporting That Is Integrated with an Audit of Financial Statements", Auditing Standard No. 5, ~ (2007)
- "Standard and Poor's Ratings definitions", Standard and Poor's, ~ (2012)