내부회계관리제도 검토의견이 감사인 교체에 미치는 영향

This study investigates whether the review on internal accounting control affects auditor switch. Prior studies find that the material weaknesses on internal accounting control decrease the reliability of financial statement and increase the risk of audit and litigation(Ge and McVay 2005; Ashbaugh et al. 2008; Lee et al. 2008; Kim et al. 2008). These risk factors lead to the higher possibility of switching auditor, specially between Non-Big 4 or downward from Big 4 to Non-Big4(Krishnan and Krishnan 1997; Shu 2000; Johnstone and Bedard 2004). There are some reasons for auditor change in the direction of Non-Big 4, because the company wants to change the auditor with the less conservatism compared to prior auditor for the better review opinion(Holland et al. 1993; Berton 1995; McDonald 1997). In Korea, the auditor provides the review opinion on internal accounting control by considering that there are material weaknesses or there are material limitations for reviewing the internal accounting control. Thus there is the possibility of conflicting the view on materiality between manager and auditor. Although the auditor might give the favorable opinion in case of the review(Verrecchia 1983; Louwers et al. 1997), the auditor might give the unfavorable opinion, non-unqualified opinion, due to the serious conflicting between manager and auditor for materiality. Thus when there might be disagreements between two groups for materiality, manager might not accept the auditor's opinion and tends to buy the opinion through the auditor change, the less conservative auditor(Dye 1991; Shon and Lee 2008). And the incentive for auditor switch might depend on the nature of review opinion. First, the incentive for opinion shopping depends on the number of weaknesses of internal accounting control, meaning the level of seriousness of weaknesses on internal accounting control. The risk of audit and litigation alters by the number of weaknesses(Lee et al. 2008), and the effect on opinion shopping is differentiated. In Korea, the auditor significantly considers the reason of non-unqualified review opinion, specially the material weaknesses on accounting-specific issue or material limitations on review, not the material weaknesses on company-level(Choi and Koh 2011). Thus if the auditor recognized the reason of non-unqualified opinion on internal accounting control discriminatorily, the incentive for opinion shopping should be differentiated by the reason. We investigate whether the review opinion on internal accounting control affects the likelihood of auditor switch and direction, and examine changes in review opinion on internal accounting control and earnings management subsequent to auditor switch. There are three regulations affecting on auditor change, auditor-designation, auditor -rotation, and audit engagement-keeping more than 3 years. According to the law for the guidelines of auditing for public company, the auditor connot help being changed by the designated reason, cannot be changed for 3 years after the audit engagement, and have to be changed within 6 years after the audit engagement. Thus we use the sample excluding the auditor-designation and auditor-rotation. To control the regulation of audit engagement-keeping, we use two method. First, we use the dummy variable for non-unqualified review opinion on internal accounting control as independent variable and use the dummy variable for auditor switch within 3 years after review as dependent variable. Second, we exclude the sample with auditor tenure less then 3years. The result of first is provided in main test, and the result of second is provided in additional test. We got the same results by two ways. We sample the companies (in total 3,222) listed in the KOSDAQ stock market(2005-2011) for manufacturing companies. Based on a comprehensive sample of internal accounting control, we find that the likelihood of auditor switch(especially Non-Big 4 auditor switch) is higher following the non-unqualified review opinion on internal accounting control. Second, the possibility of Non-Big 4 auditor switch is higher as the number of the weakness on internal control increases. Third, the likelihood of Non-Big 4 auditor switch is also high when there are accounting-specific material weaknesses or the material limitation of review work in internal control system. However, the material weaknesses related to company-level do not affect auditor switch. Lastly, subsequent to Non-Big 4 auditor switch, the firm tends to receive unqualified review opinion on internal accounting control. As the contribution, first, this study provides the empirical evidence on the opinion shopping for review opinion on internal accounting control. In particular, the opinion shopping on audit of financial statement is prohibited by not allowing auditor switch when the client receives the non-unqualified opinion. However, this study shows the possibility of opinion shopping for review on internal accounting control. Second, this study provides further support for the opinion shopping by reporting the subsequent review opinion switch and earnings management. Third, we verify which factors affect on auditor switch by breaking down the level of weakness and the reason for non-unqualified review opinion. Lastly, we control three regulations related with auditor switch for the robustness of the result.