감사품질에 따른 감액손실의 인식 및 가치관련성의 차이|RISS 상세보기

다국어 초록 (Multilingual Abstract)

Prior research of write-offs primarily focuses on the managerial incentives of managers. But up to the present there has been no empirical study to examine the effect of how the audit quality has an effect on the frequency, magnitude and value relevance of write-offs of long-lived assets. Thus, examining the relation between the audit quality and the asset impairment loss is clearly an interesting and important research topic. An entity shall assess possible recognition of impairment loss when there is an indication that expected future economic benefits of an asset is considerably less than its carrying amount, as a result of technological obsolescence or rapid declines in market value. When it is determined that an asset may have been impaired and that its estimated total future cash flows from continued use or disposal is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount and the difference shall be recognized as an impairment loss. However, it is difficult in practice to estimate future cash flows from continued use or disposal accurately. Thus, the determination of the recoverable amount of an asset is likely to be highly dependent on the discretion of managers. In other words, management might be using write-offs to accomplish their strategic earnings objectives. Especially, it is likely for managers to have more incentives for over-evaluating the recoverable amount of asset to report higher earnings when their firms face certain conditions. Under these circumstances, external auditors can have an important effect on the usefulness of impairment accounting information. Specifically we predict that the higher the audit quality is, the greater the usefulness of impairment accounting information. Because highly-esteemed auditors can thoroughly monitor and control the actions of managers, firms with high quality audits can provide the more reliable impairment accounting information to market participants. On the other hand, auditors with poorly valued reputations can easily acquiesce to auditee pressure, including pressure to allow earnings management. This will lead to a difference in the frequency/size of an impairment loss recognition and value relevance of an asset impairment loss between firms with high quality audits and firms with low quality audits. However, it is very difficult directly to estimate the audit quality. Therefore, in this paper we use auditor size (BIG5 or NonBIG 5 auditors) as a surrogate for the audit quality. Auditor size may currently be good measurement because prior research shows that auditor size is a good proxy for audit quality and enhances earnings quality in the earnings quality model. Specifically, Much prior research shows that the difference in audit quality exists between BIG5 auditors and NonBIG5 auditors depending on the affiliation with foreign BIG5 audit firms. They report that BIG5 auditors provide higher quality audits than NonBIG5 auditors because of litigation risk and reputation concerns. Consequently, BIG5 auditors are likely to be more conservative and to prevent the aggressive and potentially opportunistic reporting. If external auditors can perform more conservative and extensive audit procedures in recognition of write-offs, the frequency and size of reported write-offs can be affected by audit quality. Additionally, numerous research studies have tested the value relevance of asset impairment loss. They have shown that association between write-offs and market response has a negative relationship. However, if high-quality auditors report the asset impairment loss, they are likely to experience a decrease of negative information content because market participants can probably interpret the asset impairment loss audited by high-quality auditors as accounting conservatism. In other words, if the asset impairment loss audited by BIG5 auditors provides a positive signal to the stock market, negative response of write-offs could be relatively mitigated. Hence, this paper first examines whether there are difference in frequency and size of an impairment loss recognition depending on the types of auditors. Additionally, we investigate whether market participants evaluate an impairment loss differently depending on the types of auditors. If BIG5 auditors produce higher quality audits than NonBIG5 auditors, then the market may respond favorably to the asset impairment loss. Specifically, it is hypothesized (1) that the lower the audit quality is, the smaller the frequency and size of an impairment loss recognition are and (2) that the lower the audit quality is, the smaller the pricing multiple on impairment loss. Asset impairment accounting was introduced in 2000. Therefore, this study uses recent non-banking firms of 1,731(firm-years) with December fiscal year listed on the Korean Stock Exchange over 2000-2003. Consistent with the prediction, we find that significant difference in the frequency, size and value relevance of an asset impairment loss exists between BIG5 auditors and NonBIG5 auditors. More specifically, our results of empirical testing are as follows: (1) that frequency and size of an impairment loss recognition is smaller for firms that are audited by low-quality auditors (NonBIG5 auditors) than for those that are audited by high-quality auditors (BIG5 auditors) and (2) that pricing multiple on asset impairment loss is smaller for firms that are audited by low-quality auditors (NonBIG5 auditors) than for those that are audited by high-quality auditors (BIG5 auditors). These effects are notable in firms with the impairment losses on tangible assets. The regression results show that market participants perceive the asset impairment loss of BIG5 auditors more favorably than that of NonBIG5 auditors. These indicate that market participants consider the audit quality as an significant factor when they evaluate the asset impairment loss. It also can be interpreted as audit quality enhancing the information value of reported asset impairment loss by adopting a more conservative accounting policy. This paper contributes to audit quality studies by using specific line items and asset impairment loss as vehicles for market participants response to audit quality. Also, this paper suggests that external auditors and standard-setters should pay more attention to enhancing audit quality for the improvement of the usefulness of impairment accounting information.

번역하기

참고문헌 (Reference)

1 Elliot, J, "Write-Offs as Accounting Procedures to Manage Perceptions." (36) : 91-119, 1998

2 Elliot, J, "Write-Offs as Accounting Procedures to Manage Perceptions" (36) : 91-119, 1998

3 Paek, W. S, "Types of Auditors and Conservatism." (41) : 241-260, 2005

4 Paek, W. S, "Types of Auditors and Conservatism." (41) : 241-260, 2005

5 Francis, J, "The Role of Big6 Auditors in the Credible Reporting of Accruals." (18) : 17-34, 1999

6 Francis, J, "The Role of Big6 Auditors in the Credible Reporting of Accruals" (18) : 17-34, 1999

7 Gaver, R, "The Relation between Nonrecurring Accounting Transactions and CEO Cash Compensation." 73 (73): 235-253, 1998

8 Gaver, R, "The Relation between Nonrecurring Accounting Transactions and CEO Cash Compensation." 73 (73): 235-253, 1998

9 Johnson, W. B, "The Market for Audit Services." 12 (12): 281-308, 1990

10 Johnson, W. B, "The Market for Audit Services." 12 (12): 281-308, 1990