신설된 재무기준 감사인 지정 사유가 기업의 이익과 영업현금흐름의 조정에 미치는 영향

The revision of the “Act on External Audit of Stock Companies” in 2018 expanded the scope of auditor designation by introducing new conditions based on firms’ financial performance. Specifically, a firm is subject to auditor designation if the firm meets one of the following conditions for the three consecutive years: (i) negative operating income, (ii) negative operating cash flows, and (iii) interest coverage ratio less than one. We examine whether the introduction of these conditions for auditor designation affects firms’ earnings and operating cash flow management. Using the sample of firms that met at least one of the conditions in 2016 and 2017, we examine the differences in earnings management and operating cash flow management between firms that do not meet the conditions in 2018 (and thus avoid being subject to auditor designation) and those that still meet the conditions in 2018 (and thus are subject to auditor designation). We find that firms that avoid auditor designation are more likely to inflate operating income in 2018 by reporting more income-increasing discretionary accruals than firms that are subject to auditor designation. In addition, firms that avoid auditor designation tend to classify core expenses as non-core expenses within the income statement (classification shifting) to inflate operating income in 2018, and they also report higher unexpected operating cash flows in 2018. Overall, these results suggest that some firms manage to avoid being subject to auditor designation by managing earnings or operating cash flows. Our study has important policy implications for regulators.