지급보증이 감사보수 및 감사시간에 미치는 영향

The Korean Financial Reporting Standards No. 17 defines contingent liabilities as those satisfying one the following conditions: (1) "a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or (2) a present obligation that arises from past events but is not recognized because it is not probable or the amount of the obligation cannot be measured with sufficient reliability.“ Contingent liabilities are not recognized as a liability in the main body of financial statements. They are disclosed as a part of notes instead. One of major contingent liability items in Korea is loan guarantees. While loan guarantees account for a large portion of net assets, their roles in audit risk have not been examined. Prior studies on loan guarantees have examined the evaluation of loan guarantees using option pricing models and changes of firm values with respect to loan guarantees (see Merton 1977; Sosin 1980; Jones and Mason 1980; Kim 1991). These prior studies can be classified in terms of two primary areas: the signaling effect of loan guarantees and the riskiness of contingent liabilities. The purpose of this study is to examine the associations of loan guarantees with audit fees and audit hours. There are two conflicting assertions in study on loan guarantees. One assertion is that loan guarantees are treated as contingent liabilities, so the value of guarantor firm will be decreased. Another assertion is that loan guarantees have a signalling effect which suggests that a guarantor firm has an ability to redeem the possible liabilities from loan guarantees, so investors perceive loan guarantees as good news. This study clarifies these two conflicting assertions from the auditors' perspectives. If auditors consider loan guarantees as contingent liabilities, auditors would estimate audit risk as high as the amount of loan guarantees increases, therefore, they are likely to charge higher audit fees. In addition, auditors will spend more time in audit procedures to reduce high audit risk because of a large amount of loan guarantees. If auditors, however, consider loan guarantees as a signal which a guarantor firm has an sufficient ability to redeem the possible liabilities from loan guarantees, auditors would estimate audit risk as low in case of large loan guarantees. As a result, auditors would make an audit engagement contract with a company with much loan guarantees in spite of little audit fees. Also auditors are unlikely to increase time spent in conducting audit procedures since they believe loan guarantees do not affect or even lower audit risk. Using the sample of the non-financial public companies that disclosed audit fees and audit hours in their audit reports and annual reports from 2003 to 2005, the results of this study show that auditors ask for higher audit fees and spend more time in audit procedures as the amount of loan guarantees increases. These results suggest that auditors consider loan guarantees as a factor that increases audit risk rather than a signal of sufficient financial strength. Further analyses reveal that for firms belonging to one of the largest thirty business groups referred to as Chaebol, no association between loan guarantees and audit fees is found while for those that are not a member of Chaebol, a positive association between loan guarantees and audit fees is found. These results suggest that auditors believe firms that are members of Chaebol do not have high audit risks due to their relatively sound financial health or mutual supports among member firms. Alternatively, the benefits of keeping Chaebol firms without increasing fees are greater than the costs pertaining to loan guarantees. Interestingly, positive associations between loan guarantees and audit hours, however, are found in both groups, suggesting that regardless of the effect on audit costs, auditors spend more time possibly to reduce audit risk pertaining to loan guarantees. We also separately examine the sample firms with respect to debt ratio. The results show that there is a positive association between the amount of loan guarantees and audit fees for firms with high debt ratio. A positive association between loan guarantees and audit hours is also found for high debt ratio firms. These results suggest that auditors of firms with high debt ratio are concerned with a potential audit risk associated with contingent liabilities increasing fees and audit hours. On the other hand, auditors of firms with low debt ratio are not concerned with additional audit risks from contingent liabilities.