감사계약의 Realization Rate의 결정요인에 관한 연구

This study analyzes a realization rate(hereafter “RR”) of audit client listed in Korean stock market in 2014 and 2015 and tests whether the RR is associated with the contract structure, audited company size, audit risk factor, and auditor type. An engagement RR, defined as a ratio of actual audit fee to standard fee (actual audit hour times standard audit fee per hour), reveals an engagement level profitability controlling for audit cost. In empirical tests, we find that the RR tends to be higher when a client is bigger and lower in the initial year of audit contract and then improves as tenure increases. We find no statistically significant association between audit risk and the RR. We think that while auditor increases audit fee by laying on audit risk premium as audit risk increase, they also increase audit effort to suppress audit failure probability, therefore increasing audit cost set off realization rate improvement effect. Further, we find the RR on Big 4 engagement is significantly higher than that of Non-big 4. Overall, Big 4 retains more profitable engagements while putting more audit effort. This study contributes to the audit fee literature by disaggregating audit fee into audit effort and audit profitability. Moreover, since the RR is a widely used performance indicator in accounting firms, we are able to investigate how auditors’ incentive affects audit fee and audit quality using unique massive data of Korean audit market.