법정 외부감사에서 배제된 소규모 비상장기업의 이익조정

The ‘hot potato’ of the Korean accounting circle in 2014 is about expanding the criteria for mandatory legal external audits and the external audit effects such as harnessing auditor designation rules. Under the expanded criteria, limited liability corporations are required to receive legal external audit and firm revenue has become a new standard for determining legal external audit. In October 2013, Finance Service Commissions revealed a policy reform to enhance accounting transparency. Two major thrusts of this reform are 1) a mandatory external audit for unlisted stock companies including firms such as limited liability companies that are still in the blind spot of accounting reform, and 2) an increase of the lower bound of total asset of companies subject to external audit from 10 billion to 12 billion won.  In September 2014, the amendment on enforcement decree of External Audit of the Corporations Law increased the minimum total asset of the firms to 12 billion won. On the contrary, efforts to encourage voluntary audit are in motion.  Two amendments are pending in the National Assembly: amendments for Special Tax Treatment Control Act allowing tax shield for audit costs and Basic Act for National Taxes including whether a company has taken external audit into the criteria for determining targets for tax audit.  All this reflects the regulatory authorities’ sympathy towards small and medium size companies and faith in reform for accounting transparency. The heated debate on external audit effects is triggered by 1) an increase in total asset size of firms subject to external audit to 12 billion won and 2) an expansion of auditor designation system.  Various stockholders have attempted to defend their positions with their own logics of the ‘appropriate’ direction of policy on external audit.  However, it simply shows the gravity of this issue that reflects subjective evaluation of value and vested interest they represent. Our study, using discretionary accruals, investigates whether excluding small unlisted stock companies from mandatory audit will lower the accounting transparency of excluded companies.  Additionally, we include revenue and debt ratio in the analyses and verify the validity of accounting circle’s argument about adding revenue to the existing criteria for external audit (size of total asset and liability, and number of employees). Results show that discretionary accruals of small unlisted stock companies excluded from external audit are significantly bigger than those of companies that took external audit and this effect is amplified with bigger revenue and debt ratio.  Results also remain consistent with separate samples of companies that received the audit or  that did not. Supplementary analyses comparing companies that took legal external audit and those that received voluntary external audit reveal that legal external audit is more effective than voluntary audit in thwarting discretionary accruals.  This implies that excluding firms from the legal external audit will undermine the transparency of small unlisted stock companies. In an analysis on the influence of large accounting firms on small companies receiving voluntary audit, results show that large accounting firms tend to promote discretionary accruals more often. This indirectly suggests that auditing by smaller accounting firms or small scale auditing team may be more effective for small companies. We believe that findings of our study, when considered together with the higher than average rate of tax evasion by unlisted small and medium stock companies excluded from external audit, will contribute to the discussion about the social costs and benefits of external audit.  Furthermore, we  provide the following policy implications: 1) excluding firms from external audit will harm accounting transparency and therefore it is not recommended to  exclude small and medium size companies from the audit, and 2) future amendment of regulation should incorporate revenue as a criterion for external audit.