희석주당순이익이 감사시간과 감사보수에 미치는 영향

Diluted EPS is an information that indicates that basic earnings per share may decline due to the conversion and exercise of potential ordinary shares. However, diluted EPS is complex and difficult to understand because it is calculated through multiple assumptions and complex computations. For example, assuming a conversion and exercise, the net income attributable to ordinary shareholders and the number of ordinary shares should be adjusted. The complexity of the accounting process and the appropriateness of disclosure are likely to increase the auditor's audit risk, which can be expected to result in an increase in audit hour(fee). Empirical results show that the audit hour(fees) increases when the diluted EPS is smaller than the basic EPS (when diluted EPS is reported). In addition, relationship between the diluted earnings per share and the audit hour(fee) is positive in the sample of managers with poor ability. This implies that the auditor does not increase the audit risk by trusting the manager's ability to prepare the financial statements for an company with superior managerial ability, which means that the audit risk can be differentiated according to the manager's ability. Finally, the effect of diluted EPS on audit hour(fee) is significant in the sample of Big auditor. This means that Big accounting firms conduct audits more conservatively because of the risk of litigation and concerning their reputation in capital market. The contribution of this study is that external auditors are playing an essential role in lowering the audit risk in high audit risk situations. Also, superior managerial ability is a factor to lower risk, and there is a difference in audit quality between the Big accounting firm and the small and medium sized accounting firm.