외부감사인의 교체 빈도와 감사품질

This study examines how the frequency of auditor turnover in an industry affects audit quality. Despite the great interest of regulators and academia, the effect of audit market competition on audit quality is yet inconclusive. This study attempts to provide an answer to this controversy by introducing a novel proxy for audit market competition. Frequent changes in a firm’s external auditor are evidence of fierce competition among auditors to attract new clients. Basing on this observation, we use auditor turnover frequency within an industry-year as a proxy for audit market competition and reexamine the effect of competition on audit quality. Using 20,971 observations of Korean public firms from 2002 to 2018, we find, on average, no significant association between the frequency of auditor turnover and the magnitude of discretionary accruals. However, for the subsample of firms audited by Big 4 auditors, auditor turnover frequency is associated with higher audit quality. In contrast, for non-Big 4 auditors, we find no evidence of audit quality changes associated with auditor turnover frequency. These contrasting findings suggest that only Big 4 auditors respond to fierce competition by enhancing audit quality. Our study contributes to the literature by providing evidence on the effect of competition using a novel proxy. More importantly, this study provides implications to the recent debate on the potential impacts of the adoption of the mandatory auditor rotation policy in Korea.