감사인 일치화가 종속기업 감사품질에 미치는 영향

Since the adoption of K-IFRS in 2011, the importance of the consolidated financial statements as primary financial statements has been grown. Additionally, the New International Standards on Auditing 600 introduced in 2013 requires the principal auditor to take a full responsibility for the consolidated financial statements. In order to avoid the additional engagement risk resulted from these changes in the audit environment, the principal auditors increasingly demand auditor conformity, i.e., financial statements of the parent company and its subsidiaries being audited by the same auditor. However, the results of the prior studies on the effect of auditor conformity on audit quality are rather conflicting and contradictory and thus, it is not yet known whether auditor conformity leads to enhancement in audit quality. Some prior studies showed that auditor conformity enhances audit quality because it helps auditors develop more experience and better understand the client, resulting in enhanced auditor expertise (the auditor expertise hypothesis). Other studies showed that auditor conformity adversely affects audit quality because it creates greater economic bonding with the clients (the economic dependency hypothesis). The major reason for the contradictory results of the prior studies is that, by analyzing parent company’s financial statements, they were not able to separate the change in the auditor-conformed subsidiaries’ audit quality from the change in the auditor-disconformed subsidiaries’ audit quality. A few studies overcome this limitation by analyzing subsidiaries’ financial statements. By using only a few restricted types of subsidiaries, however, they have their own limitations in the generalization of their findings. Moreover, prior studies fail to consider that the distinctive subsidiaries’ characteristics could moderate the effect of auditor conformity on audit quality. This paper analyzes and examines all available subsidiaries subject to the Act on External Audit of Stock Companies in Korea in order to find more general results on the effect of auditor conformity. This paper also examines whether the proportion of subsidiary’s total assets (i.e., the importance of subsidiaries) has differential influence on the relationship between auditor conformity and audit quality. Importance of subsidiaries is one of the key elements that affect auditors’ independence according to previous studies. Using all available data on subsidiaries from 2005-2010, we conduct analyses on whether auditor conformity affects discretionary current accruals of subsidiaries by using both modified Jones model (1991) and Kothari et al. model (2005). We also analyze whether the importance of subsidiaries measured by the proportion of subsidiaries’ total assets to consolidated total assets moderates the relations between auditor conformity and discretionary current accruals. The findings are as follows. First, auditor conformity enhances audit quality. The result holds even when public and non-public subsidiaries are analyzed separately. These results support the auditor expertise hypothesis in that auditors obtain additional knowledge of the clients, e.g., internal transactions, through auditor conformity. However, the significance level of the public subsidiaries is lower than that of the non-public subsidiaries, implying that the listing status is an element which affects the relationship between auditor conformity and audit quality. Second, overall, the moderating effect of the proportion of subsidiaries’ total assets on the enhancement effect of auditor conformity on audit quality was not found significant. This result implies that auditor’s independence is not impaired by the client’s importance. However, we find the marginal adverse moderating effect for public subsidiaries, implying that audit quality impairment could possibly exist for important subsidiaries. This paper expands the previous studies on auditor conformity in several aspects. First, this paper analyses the relationship between auditor conformity and audit quality from the subsidiary’s perspective by using all available data on subsidiaries. Second, this paper shows evidence that the aforementioned relationship can vary depending on the characteristics of subsidiaries. Furthermore, this paper provides practical and institutional implications in time of high demand for auditor conformity in response to the New International Standards of Auditing 600 enforcement since 2013.