지방의회의원의 결산검사 참여가 회계품질에 미치는 영향

The purpose of a financial statement audit is to provide accurate and useful financial information on the local governments’ financial conditions and operation results. Local council appoints the settlement audit committee members and the representative among the settlement audit committee members in accordance with the ordinance. One of the local councilors is appointed as the representative of the settlement audit committee. The primary role of the representative in the settlement audit committee is to oversee the overall affairs of the settlement audit. The local councilor who participates in the settlement audit committee as the representative is obligated to ensure the independence of the settlement audit committee in an objective manner from the perspective of accountability. However, it will be practically difficult for that the local councilor performs the general affairs of the settlement audit in a neutral state that completely excludes his or her political position. Therefore, this study empirically investigates the effect of local councilor’s participation in the settlement audit on the comprehensiveness of financial accounting information. As a result of analyzing 226 basic-level local governments in Korea from FY2014 to FY2018, accounting quality decreases when the proportion of the local councilor in the settlement audit committee increases. This result suggests that the smaller the size of the settlement audit committee is, the lower frequency of requests for data is. This affects the incentive for the local councilor who participates in the settlement audit committee to pursue private interest. Furthermore, this study finds that when monitoring is stronger, the negative effects of the higher proportion of the local councilor in the settlement audit committee on accounting quality is weaker. This suggests that the high demands for accounting transparency reduce the pursuit of the private interest of local councilors who take part in the settlement audit committee. The theoretical implications of this study are as follows. First, this study is the first study to empirically analyze the effect of local councilor’ participation in settlement audit on accounting quality. Prior studies (Yang, 2019; Yun et al., 2017; Lee, 2013) only conduct the comparative or review studies from an institutional perspective in relation to the settlement audit committee, but there is little empirical evidence related to local governments’ settlement audit committee. This study newly proposes the empirical analysis model, which expects to be a meaningful starting point for further research to effectively evaluate the effect of local governments’ settlement audit on accounting quality. Second, this study attempts to supplement the methodology for evaluating the quality of accounting information of local governments. Existing study to research governments’ accounting errors (Kim and Han, 2016) uses qualitative characteristics of accounting information to measure accounting quality. Comprehensive information on financial statements such as ‘other net assets’ and ‘etc accounts’ increases information asymmetry between information providers and users, as well as information risk and search costs. This study measures accounting quality from the perspective of information users using and evaluating the financial information (Dechow and Dichev, 2002; Lee and Masulis, 2009; Kim and Han, 2016). Third, this study presents a methodology for measuring the independence of the local governments’ settlement audit committee. This study first presents a proxy to measure the independence of the local governments’ settlement audit committee for the proportion of local councilors who participated in the settlement audit. This enables discussions on the role of local councilors in the settlement audit committee. Fourth, this study provides various policy implications for improving the accounting quality of local governments.