경영자의 실제이익조정 활동이 회계감사 품질관리 검토시간에 미치는 영향

Since 2014 Korea has imposed all listed companies should disclose in their audit reports the number of audit quality control reviewers and review hours they used. This legislation intends to enhance audit quality and the transparency of the financial statements. This study is the first to examine the effects of the hours of audit quality control reviews on the quality of the financial statements. This study investigates the effects of audit quality control review hours on the extent of companies’ real activities of earnings management, which typically are proxied for managements’ opportunistic behaviors of earnings management. The sample of 1055 firm-years over two-year period from 2014 to 2015 were selected. Using the method proposed by Roychowdhury (2006), this study measures real earnings management activities by estimating abnormal cash flow, abnormal production costs and abnormal discretionary expenditures. In the first stage, expected audit hours are estimated using widely known drivers of audit hours. Then in the next stage, audit quality control review hours are regressed on real earnings management activities and the residuals of expected audit hours and some control variables. Findings are as follows: First, audit quality control review hours are more likely to be positive(+) when the extent of a firm’s real earnings management of abnormal operating cash flows and abnormal production costs are high. Second, audit quality control review hours is high when the extent of abnormal discretionary expenditures are high. Third, marginally significant associations between abnormal production costs and audit quality control review hours are found. These results, together, suggest that high audit quality control review hours are more likely associated with high levels of real activities of earnings management. This finding suggests that audit risk is higher for firms with high levels of real activities of earnings management. Audit quality control review appears to partly effectively cope with the possibilities of misrepresentations of the financial statements due to managements’ opportunistic behaviors of earnings manipulations.