고객기업의 재무제표 비교가능성은 감사보수에 반영되는가?

This study analyzes the association between client’s financial statement comparability and audit fees. We further examine whether auditor tenure or auditor size affect the relation between financial statement comparability and audit fees. Auditors may be burdened with the audit contract even if their clients do not clearly violate accounting standard. For instance, possibility of bankruptcy, management conflict, extensive reliance on financial statements by external investors could be audit risks to the incumbent auditor. These engagement risks may lead auditors to be involved in a lawsuit. We suggest that lower financial statement comparability is one of these engagement risks for the following reasons. First, the comparability of financial statements is an influential factor toward audit contract that should be fully considered because it is directly related to the information usage costs of investors or potential investors. If a firm reports highly comparable financial statements, it is predicted that the probability of depending only on the auditor's opinion would be significantly lower for an investor with a low acquisition costs of accounting information. In other words, an investor of a firm with lower comparability is more likely to be reliant on the financial statements of the firm, which increases the auditor's risk of being burdened. Therein, lower comparability of financial statements lead to higher audit fees. Second, a firm that report highly comparable financial statements with other firms tend to be face less stock price crash risk. If an auditor do not recognize this in advance, it is very likely to become involved in a lawsuit. In other words, if an auditor audits a firm with highly comparable financial statements, the likelihood of being audit failure would be relatively lower than the other cases. Collectively, we first hypothesize and predict that there exists a positive association between reporting lower comparable financial statements and charging higher audit fees. Next, this study suggests that the negative relationship between comparability and audit fees may be strengthened or mitigated depending on auditor’s characteristics. First, we expect that auditor tenure affects this association. Prior research provides two different perspective of audit tenure on audit quality. On the one hand, studies argue that longer tenure increase auditor’s knowledge of the client firm that leads to higher audit quality. On the other hand, studies also insist that longer tenure impairs auditor independence. Thus, we provide a null hypothesis for testing the effect of tenure on our first hypothesis. Previous studies document that large auditors provide high quality audit services. The underlying assumption of this finding is that the larger the size of the auditor, the greater the transfer of knowledge within the audit firm. Thereby, Big N auditors may maintain a certain level of audit service through strict quality control. Thus, we predict that our hypothesis 1 is affected by client firms those who made contract with Big N auditors. By using firms listed in Korean stock market from year 2011 to 2016, we find that auditors charge higher audit fees to clients with lower financial statement comparability as expected. This finding implies that financial statement comparability is one of the key factors that affects audit pricing. We further find that a positive relation between lower financial statement comparability and higher audit fees incrementally decreases in the presence of longer auditorclient relationship and the contract with Big 4 auditors. These findings suggest that the increased expertise due to long audit contract and the knowledge transfer inside Big 4 audit firms mitigate the effect of low financial statement comparability reflected on audit fees. In addition, our results show that both audit hours and unit audit fee increase as the level of financial statement comparability decreases. Our study contributes to the literature in the following ways. First, the results of the current study suggests that comparability of financial statements is one of the key determinants of audit fees. Second, the empirical finding that the longer tenure mitigates the effect of lower comparability of financial statements on audit fees is a result of emphasizing the increased expertise of auditors with longer tenure. Also, we provide that Big N auditors are less likely to reflect lower comparability of financial statements as an audit risk by charging incrementally higher audit fees. Lastly, our empirical finding that auditors charge higher audit fees on clients who report less comparable financial statements suggests that investors need to be cautious about accounting information of the firm with these higher acquisition costs.