이익유연화를 위한 회계발생액 조정과 감사품질

There could be two perceptions about income smoothing. Income smoothing improves earnings informativeness if managers use their discretion to reveal their private information. On the other hand, income smoothing makes earnings noisier if managers smooth reported income for their private advantage. The different perceptions about income smoothing will be perceived by auditors as well. If income smoothing conveys managers' private information and future performance assessment to the capital market, it can decrease the audit risk evaluated by auditors. However, income smoothing can increase the audit risk, if managers smooth reported income for their private advantage. In the second case, auditors may prevent managers from smoothing reported income. Our study investigates the auditors' assessment of earnings management for income smoothing. Even though income smoothing has been widely documented from a viewpoint of capital market, our study deals with this subject from the auditor's view. We find that the higher-smoothing firms increase reported income by positive accruals management. And the results show that big 4 or industry specialist auditors prevent managers from increasing reported income. Auditors compared to investors generally have more expert knowledge of accounting and audited firms' information. Thus, the auditors' assessment of income smoothing may be superior to investors' assesment. Specially, big 4 or industry specialist auditors compared to general investors and other auditors may correctly and easily detect the incentive of income smoothing. Therefore, our study provide additional information into the literatures about income smoothing. Moreover, our results suggest that information users with advanced knowledge of accounting can make rational decision. It is necessary to promote education for accounting theory and practice to investors.