기업의 독점적 정보비용과 감사 계약

Proprietary information enables firms to create and maintain their competitive edge in the product market. The potential losses arising from the leakage of such information to competitors are referred to as proprietary costs. Firms incorporate these costs into various economic transactions with business partners, including auditors. As auditors can acquire various in-depth private information during the external audit process, contracts with auditors can incur proprietary costs to firms. This study investigates whether firms’ concerns about proprietary costs affect the extent to which firms utilize their incumbent auditors for non-audit services and future audits. Firms with higher proprietary costs have greater incentives to minimize the risk of information leakage. When a firm purchases various services from external parties, it can reduce the possibility of information leakage by limiting the number of service providers as fewer parties will have access to sensitive inside information. Conversely, engaging multiple service providers increases the likelihood of information leakage. By contracting with the incumbent auditor for additional consulting services, firms can effectively minimize the need to share sensitive information with new service providers, thereby lowering the risk of potential information leakage. In this case, firms with higher proprietary costs may be more likely to purchase non-audit services from their incumbent auditors. Furthermore, these firms are expected to retain their incumbent auditors for subsequent audit engagements to avoid redundant dissemination of internal information to new auditors. However, if firms perceive their increased reliance on the incumbent auditors as excessive and thus risky, they may refrain from selecting the auditors for non-audit services and become more likely to switch the auditors after a short period. To provide answers to these opposing possibilities, this study provides empirical evidence on how proprietary costs affect firms’ tendency to purchase non-audit services from their incumbent auditors and to switch the auditor in subsequent years. This study uses data from publicly listed firms in South Korea from 2004 to 2021. Firms with high proprietary costs are identified as those with high R&D intensities or those with large market share differences compared to closest competitors in the same industry. The empirical analyses reveal that firms with higher proprietary costs are more likely to purchase non-audit services from their incumbent auditors and retain their auditors in subsequent audit engagements. This result suggests that firms with high proprietary costs prefer to contract with their current auditors, rather than to seek new service providers, which helps reduce the potential risks of information leakage through multiple sources. Moreover, firms that purchase non-audit services from their auditors are even less likely to switch their auditors in the subsequent engagements, suggesting that proprietary costs reduce the likelihood of auditor switches not only directly but also indirectly through the purchase of non-audit services from their current auditors. Additional analyses reveal that the positive association between proprietary costs and the purchase of non-audit services from the auditor weakens in more concentrated industries and for firms facing mandatory auditor rotation requirements. Such results suggest that market structure and regulations restrict a firm’s decisions to contract with auditors. The findings of this study deepen our understanding of the factors influencing firms’ decisions to contract with auditors. In many countries, concerns about auditor independence have led to regulations that limit the auditor’s provision of non-audit services and require mandatory auditor rotation. However, if firms make such contracting choices based on their economic incentives tied to proprietary costs as documented in this study, uniform restrictions on such contracts could inadvertently lead to sub-optimal decisions, resulting in substantial economic losses to firms. This study provides valuable insights for audit policymakers. Striking a balance between regulatory objectives and firms’ economic realities can lead to more comprehensive and effective audit policies. By addressing these complexities, this study hopes to contribute to more informed and nuanced discussions on audit regulations worldwide.