투자기회수준과 차별적 감사수요 - 대리인비용에 기초하여 -

This paper analyzes the association between investment opportunity level and the demand for differential audits. Becker et al.(1998) and Francis et al.(1999) suggest that Big5 auditors are more likely to curb earnings management because of their higher audit quality and report that firms with Big5 auditors are less likely to have more discretionary accruals. These studies implicitly assume that the likelihood of earnings management is the same across firms. However, this is unlikely to be the case. Earnings management arises from agency conflict which is likely to depend on factors such as the firms' capital structure(Jensen and Meckling 1976), dividends policy(Easterbrook 1984) and investment opportunities(Myers 1977). Skinner(1993) reports that high investment opportunity firms are more likely to choose income-increasing accounting methods. For firms with greater agency conflict, good quality audit is likely to be in a higher demand and more valuable. This paper investigates the association in three ways. First, this paper investigates whether Big4 auditors can constrain the manipulation of discretionary accruals for high investment opportunity firms. Then this paper tests whether high investment opportunity firms are more likely to have Big4 auditors. Lastly, this paper examines whether, in comparison with low investment opportunity firms, high investment opportunity firms that employ Big4 auditors have less discretionary accruals and higher perceived audit quality. In conclusion, this paper reports that high investment opportunity firms are more likely to have more discretionary accruals but they are less likely to have more discretionary accruals when they also have Big4 auditors. These results suggest that the likelihood of earnings manipulation is higher for firms with high agency cost require high audit monitoring. Lastly, this paper reports that high investment opportunity firms have less discretionary accruals but higher perceived earnings quality when they employ Big4 auditors. This paper contributes to the extant literature by providing evidence on the missing link between investment opportunity and audit quality. High investment opportunity firms are more likely in demand for high quality audit which reduces earnings management and increases perceived audit quality. The results of this paper would be germane to empirical studies on earnings management and audit quality alike.