Effects of Stock Crash Risk on Audit Efforts

[Purpose] In this study, we investigated whether auditors’ perceptions of stock crash risk influence audit hours and audit fees. Crash risk is defined as the possibility that a stock bubble will collapse and prices will plummet. [Methodology]We built a regression model to analyze the effects of crash risk on audit hours and audit fees. The dependent variable was Audit hour and Fee, and the independent variable was Crash risk. [Findings] We found that audit hours and audit fees were significantly higher in firms with high crash risk than in those with low crash risk. [Implications]This findings have contributions because role of auditing are important when crash risk is detected to participants in the capital market. Thus, results of this study are expected to be valuable to market participants.