내부통제의 질, 감사인 규모, 보수주의의 관련성

This study examines the effect of quality of internal control and auditor size on conservatism. Three different hypotheses are established on the basis of the prior research concerning internal control, auditor size, and conservatism. Research models used in this study are the revised Basu’s earnings-return model(1997) and the revised Ball and Shivakumar’s accrual model(2005). As follows are regression results from a sample of 4,520 firm-years listed in Korea Exchange between 2005 and 2008. First, it shows that consistent with Goh and Li(2011), the first hypothesis that hight quality strengthens conservatism is supported in both research models. It means that the weakness of internal control weakens conservatism because it fails to reduce the manager’s ability to behavior opportunistically. Next, it shows that Big4 auditor, the proxy of audit risk aversion, strengthens conservatism in both research models consistent with most of the prior research. It means that auditor size contributes to the enhancement of accounting information reliability due to the risk of reputation loss and litigation. Finally, it shows that auditor size moderates the effect of internal control quality on conservatism in both research models. In other words, Big4 prevents low quality of internal control from weakening conservatism. This result is very important in respect to a new finding concerning the reciprocal relationship between internal control, auditor size and conservatism. Overall results of this study expand the possibility of research areas of internal control and auditor size related to conservatism. And this study contributes to the understanding of auditor, analyst, regulator, and accounting standards setter concerning these topics.