감사인 교체와 감사보수 및 감사노력 수준의 변화

Several prior studies document that audit fee drops significantly at the time of auditor switches. This phenomenon is called as ‘audit fee low-balling’ or ‘initial audit fee discounting.’ Worldwide regulators have expressed serious concerns on the issue since the low audit fees may impair auditor independence and thus audit quality. Motivated by the continuous calls for research and concerns of regulators, we revisit this audit fee low-balling topic using relatively recent firm-year observations. To investigate whether and how audit fees and audit hours change after auditor switches, we manually collect the audit hours of Korean firms listed in the stock market. The sample period starts from 2014 and ends at 2020. Our findings are summarized as follows. First, we find that, in contrast to the findings in many prior studies, audit fees increase significantly after auditor switches. Second, audit fee increases occur by increasing audit effort (e.g., audit hours); however, audit risk premiums (e.g., audit fees per hour) decrease significantly after auditor switches. Third, while the audit hours for most classes of the individual accountants increase, the significant increase is especially observed for partner and senior CPA audit hours rather than junior CPA audit hours. These findings suggest that auditors increase their effort levels at the time of auditor switches, potentially due to their concern for the audit risk related to the new clients. Fourth, we interestingly observe the decrease of audit fees per audit hours at the time of auditor switches. The finding is more pronounced when past and new auditors are all Big 4 auditors. Fifth, when we investigate the effect of auditor switches on audit quality, we find some evidence that audit quality, measured by the magnitude of discretionary accruals, does not change at the time of the auditor switches, suggesting that Korean auditors mostly maintain the level of appropriate audit quality. Lastly, our findings are robust to alternative research design and sample selection procedure. In sum, our study provides practitioners, policy-makers, regulators, and researchers with critical insights into the effect of the auditor switches on audit fees, audit hours, and audit hours per CPA ranks. The several reforms pronounced at the late 2000s and 2010s may influence auditor behaviors. We conjecture that the regulatory changes results in improved audit quality, so that auditors maintain their service quality even at the initial year of audit engagement.