A사의 경영권 양수 과정에서의 분식회계와 감사 실패에 대한 감리사례 분석

Our paper aims at a case study on the result of audit review for company A. Specifically, our study analyses each issues regarding the violation of the accounting principle such as goodwill·investment securities using equity method·short-term financial instrument·advance payment engaged in embezzlement and breach of trust in the process of takeover. Prior study suggests that it is difficult for firms identified by the FSS(Financial Supervisory Services) as fraudulently manipulating their financial statements to be considered as a reliable one. These study shows why investors in the capital market are needed to understand the violation of the accounting principle and audit failure for the firm identified by the FSS as fraudulent one. Therefore, our study is focusing on the cause and effect of various issues regarding the violation of the accounting principle in the process of takeover. Prior study suggests that frequent transfer of control of a company is considered as important sign for the violation of the accounting principle. Specifically, in case of firms designated to investment sensitive list, it is highly probable that they come to indulge in making fictitious assets and garbling income in order to avoid facing delisting situation. In details, company A commit the violation of the accounting principle related to goodwill, investment securities using equity method, short-term financial instrument and advance payment in the process of takeover. These kinds of accounting frauds were executed to hide the embezzlement of public funds made by management. Namely. our case study shows the typical window dressing behavior in the process of transfer of control of a company; This case is the combination of management’s embezzlement and the violation of the accounting principle in the process of takeover. In addition, based on prior studies on the motive for earnings management, our paper suggests a variety of ex-ante clues signaling window dressing behavior engaging in goodwill, investment securities using equity method, short-term financial instrument and advance payment in the process of transfer of control of a company, and also suggests a variety of signals related to window dressing behavior based on analysis materials made by regulatory agency. On auditor’s part, A accounting firm is relatively small one compared with prior auditors for company A. For that reason, economic dependence on a client A of accounting firm A seemed to be higher compared with prior auditors for company A. Furthermore, it is highly probable that this economic dependence on a client A of accounting firm A leads to auditor’s damaged independence-in-appearance. The quality of audit services is defined to be the market-assessed joint probability that a given auditor will both (a) discover a breach in the client's accounting system, and (b) report the breach. The probability that a given auditor will discover a breach depends on the auditor's technological capabilities, the audit procedures employed on a given audit, the extent of sampling, etc. The conditional probability of reporting a discovered breach is a measure of an auditor's independence from a given client. Thus, auditor's independence is one of the essential components which is required for high audit quality. But, in our study, economic dependence on a client A of accounting firm A is likely to be combined with damaging auditor independence-in-appearance and this could lower the quality of audit services. Namely. our case study suggests the typical example for the relation between economic dependence and audit quality. Therefore, our study based on prior studies and analysis materials made by regulatory agency makes several contributions to the related parties in the capital market. First, from the perspective of investors, our study suggests that careful approach in evaluating firms identified by the FSS as fraudulently manipulating their financial statements is needed. Second, from the perspective of auditors, our paper is expected to be a guideline for minimizing the risk of audit failure.