상법상 감사의 특성이 공시품질에 미치는 영향

Listed firms in South Korea have a unique internal audit system. A firm with total assets more than 2 trillion Korean won has to maintain a mandatory audit committee(Commercial Act Article 542-11). In contrast, listed firms that are exempt from this act may voluntarily choose between establishing an audit committee and appointing a statutory internal auditor. Most of the Korean studies of internal audit system have only focused on the audit committee, even though nearly 80% of the Korean listed firms hire statutory internal auditors. This is primarily because the details of internal auditor characteristics are not publicly available and, as a result, few prior studies have to rely on survey data. We utilize public data on statutory internal auditors disclosed in annual reports. While the characteristics of statutory internal auditors themselves may not be equivalent to those of internal audit department, they would be reasonable proxies as statutory internal auditors are leading and representing their internal audit departments. The primary responsibility of statutory internal auditors is to represent the stockholders, and to prevent the manager from making opportunistic decisions by decreasing information asymmetry. In fulfilling their responsibility, statutory internal auditors are likely to facilitate corporate disclosure and improve the quality of disclosure. Corporate disclosure is an effective scheme to reduce information asymmetry and enhance monitoring management. This paper, therefore, examines the effect of the statutory internal auditor characteristics on disclosure quality. In addition, this study presumes that the statutory internal auditor with better expertise and activity will prevent the manager from withholding bad news disclosure. This paper posits activity and expertise of the statutory internal auditor as the key factors that will affect disclosure quality. The activity is measured by two variables: (1) weighted value of full-time and part-time statutory internal auditor, (2) the rate of attendance in boards of director meetings. The expertise is measured by five factors: (1) accounting expertise, (2) financial expertise, (3) legal expertise, (4) indicator variable representing a newly hired statutory internal auditor, (5) statutory internal auditor’s compensation. We utilize the disclosure score measured by the Korea Corporate Governance Service(CGS) as the dependent variable. The findings of this study are as follows. First, the main result shows that the weighted value of full-time and part-time statutory internal auditor and the rate of attendance in boards of directors are positively associated with the disclosure quality. Second, the accounting expertise, legal expertise, statutory internal auditor’s compensation show a positive association with the disclosure quality. Additionally, this paper provides evidence that the legal expertise of the statutory internal auditor is positively associated with bad news disclosure frequency. This study provides insights to investors and regulators on the importance of the role of internal audit function in improving monitoring mechanism.