회계오류에 대한 외부감사의 역할

Using the existence of accounting error, prior period adjustment, the magnitude of this error, the absolute amount of this error, and the choice of financial statement between the statement of retained earnings and the income statement we associated the auditor’s differentiated response to the prior period adjustment with an audit report lag. That is, firms with a prior period adjustment show a higher audit risk compared with firms without such an adjustment, and firms reporting a loss due to prior period adjustment show a management’s opportunistic pattern relative to the firms reporting a gain. Since the material error is likely to be reported in the statement of retained earnings, auditors respond to a prior period adjustment differently due to the type of financial statement. This research has been conducted for the KOSPI companies between 2005 and 2010 period when the accounting statement #1 was applied. First, audit report lag is found to have a positive and significant relation with the existence of prior period adjustment, and the magnitude of adjustment. This result shows evidence indicating that auditors evaluate the audit risk high in accordance with the size of the adjustment as well as the existence of prior period adjustment. Second, audit report lag in the case of the firm reporting the adjustment in the statement of retained earnings is longer than that of the firm reporting it in the income statement. This implies that auditors evaluate the audit risk high since the adjustment reported in the statementof retained earnings is the material one. Third, audit report lag shows a positive relation with gains from prior period adjustment rather than losses. This is due to a fact that auditors exert a better care for the firms which manipulated the reported income in the past and correct this error by reporting a loss as a prior period adjustment. Last, information content of audit report lag has been investigated using the long window rather than short window which has a confounding effect problem. Empirical evidence shows that the companies with the prior period adjustment show a negative price reaction. As the audit report lag becomes expanded, price reaction becomes positive. This means the negative price reaction to the firms with accounting error is offset by the continued effort on the part of the auditors. This study contributes to this line of research by measuring the accounting error in a diverse way, and examines the response to the audit risk on the part of auditor. The major contribution of this research is that accounting error is a main factor in determining the audit report lag. Also, the finding that the negative stock market reaction to the firm with accounting error is offset by auditor’s effort confirms that auditor’s due care contributes to the reliability of the financial statement.