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Auditors’ Response to Audit Fee Lowballing: The Change in Audit Hours and Hourly Audit Fees

이유진|최종학|박선영
경영연구소 (Management Research Center)|2021.12|Seoul Journal of Business|제27권 제2호|pp. 1-36|DOI 10.35152/snusjb.2021.27.2.001

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참고문헌

키워드

audit hourshourly audit feesauditor changelowballing

초록

This study examines how lowballing auditors adjust audit hours and hourly audit fees. Using Korean data, we first find that both lowballing auditors and other auditors increase audit hours in the first year of an audit engagement. However, only lowballing auditors charge lower hourly audit fees in the initial year. The results suggest that lowballing auditors charge low hourly fees to win a new audit contract while exerting more effort to maintain an appropriate level of audit quality. Our findings mitigate regulators’ concern that lowballing auditors would reduce effort and sacrifice audit quality to attract new contracts.

Abstract

This study examines how lowballing auditors adjust audit hours and hourly audit fees. Using Korean data, we first find that both lowballing auditors and other auditors increase audit hours in the first year of an audit engagement. However, only lowballing auditors charge lower hourly audit fees in the initial year. The results suggest that lowballing auditors charge low hourly fees to win a new audit contract while exerting more effort to maintain an appropriate level of audit quality. Our findings mitigate regulators’ concern that lowballing auditors would reduce effort and sacrifice audit quality to attract new contracts.

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