미청구공사 계정금액이 신용등급과 감사인의 감사시간 및 감사보수에 미치는 영향

Since the introduction of the International Financial Reporting Standards (IFRS) in 2011, unbilled revenue account appears as an asset on the financial statements of order-based production industries such as construction and shipbuilding firms, which prepare financial statements based on the percentage-of-completion method. This unbilled revenue account is an uncollected receivable which has not yet been billed to the client. Although recognized as an asset by construction and shipbuilding firms, it is risky due to a high possibility of significant portions being written off as losses in the near future. Unbilled revenue account is classified as a high risk asset due to the following reasons. First, unbilled revenue account takes longer to collect compared to trade receivable. Second, it is impossible to determine the risk involved in unbilled revenue by considering the size of its allowance. For trade receivable, firms are required to put allowances in case payments are not collected. Thus, the risk involved can be estimated by the amount of allowances. Firms do not separately list the allowance for the unbilled revenue because current accounting standards require the unbilled revenue to be recognized as an asset after deducting the amount that is least expected to be collected. Hence, it is impossible to estimate the risk of the unbilled revenue based on the size of its allowance. Furthermore, unbilled revenue is recognized as an asset arbitrarily by the construction firm based on the percentage-of-completion method without verification from the client. Thus, the financial statement of the client does not define the unbilled amount as a liability. Since the existence of the amount of the unbilled revenue is not determined by confirmation of the client, unbilled revenue is highly prone to audit failures. As firms in the order-based industries recently announce large sums of unexpected losses, the transparency in accounting for such firms are being questioned. This refers to the problem where the amount in unbilled revenue account increases continuously until it suddenly faces a loss at a particular point of time. This results in increased distrust towards the accounting information produced by the order-based production industries and deterioration of investor protection. However, the amount of unbilled revenue account may increase in the early stages of the construction even under the normal circumstances, depending on the time difference between the cost spent by the construction company and the client’s approval of the construction progress, and the heavy-tail payment method of the shipbuilding industry. Nevertheless, as the losses incurred by the companies in order-based production industry are related to unbilled revenue accounts, all construction and shipbuilding companies that show unbilled revenue accounts in their financial statements are evaluated negatively. Unbilled revenue account is one of the asset accounts in financial statements which are prepared by applying the percentage-of-completion method. It is different from the financial statements prepared by commercial enterprises because concepts including planned total construction cost, the percentage of completion of construction based on the cost spent, and actual rate of construction progress are applied. So, it is relatively difficult for users who lack in-depth accounting knowledge to comprehend. Thus, we have conducted empirical research on how the credit rating agencies and external auditors known to have expertise in interpretation of financial statements accept the unbilled revenue of construction and shipbuilding industries which have relatively large amounts of unbilled revenue included in their financial statements. The findings of this study are as follows. In order to examine the perception of the credit rating agencies on unbilled revenue, this study has conducted both Logit and OLS regressions using credit ratings as a dependent variable. Regression results show that there is a negative relation between credit ratings and the amount in the unbilled revenue account. This means that when credit rating agencies decide credit ratings for each firm, a relatively high portion of unbilled revenue in the total asset is perceived negatively. In addition, this study examines the stance external auditors hold toward unbilled revenue account. The results of the analysis show that the amount in unbilled revenue account and both audit hours and audit fees are positive relation. This means that an external auditor increases audit hours to verify the quality of the unbilled revenue as an asset, which also results in an increase of audit fees. Contributions of this study are as follows. Credit rating agencies negatively perceive financial statements with large amounts of unbilled revenue. External auditors also reflect the uncertainty of unbilled revenue negatively when they audit financial statements with an unbilled revenue account. In spite of the contributions, this research has its own limitations as follows. Because credit ratings used as one of the key variables in this research are granted mainly to large firms or firms that have issued bonds, the analysis of the influence of unbilled revenue on credit ratings was conducted only for the firms whose credit ratings were available among the firms with unbilled revenue accounts included in their financial statements.