비정상 투자, 현금배당 및 초과현금보유 수준이 감사보수 및 감사시간에 미치는 영향

This study investigates whether the relation between the level of abnormal investment, cash dividends, and excess cash holdings and audit fees as well as audit hours. Specifically, we examine whether auditors’ audit risk by analyzing the relation between abnormal investment, cash dividends, and excess cash holdings and auditor pricing behavior as well as the behavior of auditors’ additional audit effort. Auditors’ risk assessments are ongoing and may uncover unexpected relationships and private information during analytical review procedures and management interviews. Exposure to business risks due to their association with the client motivates auditors to identify signals of audit risk because they impose additional audit costs (Bell et al. 2001; Gleason et al. 2017). The investment decisions are one of the most fundamental and important factors that determine the value of the firm and therefore investors’ wealth. Prior literature shows that high quality financial reporting and corporate governance mechanisms can help prevent or mitigate firm’s suboptimal investments by disciplining managers’ behaviors (Biddle et al. 2009). Thus, prior literature recognizes the possibility that firms may depart from this optimal level and either over- or under-invest can lead to risk-taking behaviors in corporate investment. Whereas, the ability to pay dividends is dependent on the availability of cash. In addition, recent studies suggest cash dividends convey information regarding the quality of firms’ reported earnings with dividend-paying firms reporting higher-quality earnings than nondividend-paying firms (e.g., Skinner and Soltes 2011; Tong and Miao 2011; Caskey and Hanlon 2013; Kim et al. 2016; Nam 2016 etc.). Meanwhile, prior research links excess cash holdings to risks associated with manager opportunism and external monitoring (e.g., Pinkowitz et al. 2006; Dittmar and Mahrt-Smith 2007; Gleason et al. 2017 etc.). On the other hand, Keynes (1936) claim that although firms reserve cash for precautionary motives, high levels of cash holdings often mitigate the demand for raising cash through external capital markets. Thus, there are from different perspectives. In that sense, our study synthetically extends these literature by examining whether the level of investment, dividends’ information, and excess cash holdings is associated with auditors’ assessment of their clients’ business risk. Specifically, our study extends the previous studies abnormal total investment classify into abnormal R&D investment and non-R&D investment, also dividend-pay firms, and excess cash holdings are associated with audit fees as well as audit effort in regard to auditors’ risk perceptions. For analysis, we follow Biddle et al. (2009) in estimating a firm’s likelihood of the level of abnormal investment. In particular, we divide total investment into R&D and non-R&D, respectively. Following Lawson and Wang (2016) and Tong and Miao (2011), our proxy for firms’ dividend payout policies is an indicator variable set equal to one if firm pays ordinary cash dividend in period t-1 (t), and zero otherwise. And we use the Oler and Picconi (2014) model to estimate excess cash holdings. Our sample covers KOSPI and KOSDAQ listed firms in non-financial industries from 2003 to 2016 (based on the dependent variable from 2004 to 2016). The empirical main findings of this study are following. First, after controlling for several factors that affect audit fees and audit hours, we find no a significant relation between abnormal total investment and audit fees as well as audit hours. Whereas, we find a positive and significant association between abnormal R&D investment and audit fees as well as audit hours, we also find a negative and significant association between abnormal non-R&D investment and audit fees as well as audit hours. These results suggest that total investment is associated with audit risk is different according to the sources (R&D versus non-R&D investment). Second, we find that dividend-paying firms are associated with lower audit fees and audit hours. This results suggest that divided policies provide auditors with assurance when clients exhibit higher earnings quality and cash dividends mitigate clients’ higher earnings manipulation risk. Third, we find a negative and significant association between excess cash holdings and audit fees as well as audit hours. Inconsistent with Gleason et al. (2017), we show that excess cash holdings may affect auditors’ assessments regarding the financial soundness instead of agency conflicts. Fourth, we classify sample into KOSPI versus KOSDAQ listed firms, we also find similar results. Merely, we find that a negative and significant association between dividend payouts and audit fees is more pronounced for KOSDAQ listed firms. As well, we find that a positive (negative) and significant association between R&D (non-R&D) investment and audit fees is more pronounced for KOSPI (KOSDAQ) listed firms. Finally, in additional analysis, we find that R&D or non-R&D investment, cash dividends and excess cash holdings have an interactive effect with respect to audit risk by auditors: We find that the positive and significant association between R&D investment with cash dividend-pay firms as well as non-R&D investment with cash dividend-pay firms and audit fees, we also find the positive and significant association between R&D investment with cash dividend-pay firms and audit hours. These results suggest that divided-pay firms tend to exhibit more over-investment than under-investment activity reinforcing our conjecture that many more outflow of cash will make it harder for the company as well as lower financial soundness may affect auditors’ assessments as business risk and audit risk. In summary, our findings suggest that auditors perceive abnormal R&D investment as a risk factor. On the contrary, non-R&D investment, dividend-pay firms, and excess cash holdings as having lower audit risk that they incorporate into audit fees and hours. In that sense, we provide new evidence on abnormal R&D investment, non-R&D investment, cash dividends, and excess cash holdings as one of determinants of audit fee and hour models from auditor’s perspective, who assesses the sources of business risk and audit risk based on client characteristic when auditing process. Thus, our study contributes to investment efficiency, dividend payout, cash holdings, and auditing literatures by being the first to show that auditors’ pricing as well as audit effort decisions at the same time. Therefore, our findings are provide to useful information, including academics as well as practitioners, investors, regulatory, and policymakers’ perceptions about importance of novel audit risk.