대형 회계법인의 합병과 감사품질의 변화

Recently, regulators have great concern on the merger of audit firms to increase the size of the firm and proposed new rules to increase the minimum requirement of the number of audit partners in an audit firm to audit listed companies. In contrast, many practitioners voice against the policy and argue that the policy is not helpful to increase audit quality and only disrupt current audit market. This study is aimed to answer for this controversy by investing the effect of audit firm mergers on audit quality. In early 2005, two large audit firm mergers occurred in Korea: Anjin and Hana accounting firms merged to form Hana-Anjin and Yunghwa and Hanyoung accounting firms merged to form Hanyoung. For empirical analysis, we use the magnitude of discretionary accruals and accrual quality as proxies for audit quality and use the difference-in-differences method to control for the change of general audit quality during the sample period. We find that the merger results in improved audit quality for the merged auditors. Specifically, the audit quality of the merged auditors in the 3-year post-merger period is higher than that in the 3-year pre-merger period. We also perform additional analyses using two small auditor mergers occurred in the past, but fail to find evidence on the significant audit quality changes. By providing direct answer to the question of regulators, these findings provide important policy as well as practical implications.