4분기 부채규모 변동과 감사인 노력이 감사보고지연에 미치는 영향

The regulations by SEC require public companies to disclose the reason for the reduction of their debt, judging that the practice of reducing debt size can cause serious distortions of financial statements. The debt reduction practice in the fourth quarter is perceived as opportunistic behaviors of managers to hide potential credit risks, and will delay consensus between managers and auditors on financial statements. There have been no studies on the effects of debt reduction practices during the fourth quarter and auditor efforts on audit report delay. The purpose of this study is to investigate how the reduction of the debt size in the fourth quarter affects audit report delay. It is also to confirm whether this relationship is more pronounced for companies into which relatively more auditor efforts are put. This study shows that there is a significant positive relationship between the reduction of the debt size in the fourth quarter and audit report delay. These results suggest that the reduction of the debt size in the fourth quarter causes delayed agreement between management and auditors on the financial statements. Moreover, this relationship is more pronounced in firms with abnormal excess audit fees and abnormal excess audit hours. T hese r esults s uggest that t he r eduction of the d ebt size i n the fourth quarter can be a c ause o f audit report delay in companies with high audit risk or much more audit hours. As a result, the auditor who try to reach a higher assurance level by putting a lot of effort into his/her job think that the reduction of the debt size in the fourth quarter make the distortion risk of financial statements higher, resulting in the delay of the consensus between management and auditors on the financial statements. In addition, the positive relationship between the reduction of the debt size in the fourth quarter and audit report delay appears to be more apparent in firms that did not receive non-audit services, whose economic importance is low to auditors, or which were in the first year of audit engagement and selected Big 4 auditors. These results reveal that auditors who are relatively more independent and provide high quality auditing services asses audit risk higher for the companies involved in the fourth quarter debt reduction. This study presents empirical evidence that auditors regard clients’ debt reduction practices in the fourth quarter as opportunistic behaviors of managers trying to hide credit risk and strictly audit them, which can cause delays in audit reporting. Therefore, as a safeguard against opportunistic debt reduction, it is necessary to require companies to disclose the reasons for reducing their debt.