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Determinants of enforcement action by the financial supervisory service of Korea from the perspective of audit firms

Title
Determinants of enforcement action by the financial supervisory service of Korea from the perspective of audit firms
Authors
Kang M.-J.Lee H.-Y.Woo Y.-S.
Ewha Authors
우용상
SCOPUS Author ID
우용상scopus
Issue Date
2015
Journal Title
Journal of Applied Business Research
ISSN
0892-7626JCR Link
Citation
vol. 31, no. 3, pp. 821 - 834
Keywords
Audit firmsEnforcement actionFinancial supervisory service of Korea
Publisher
CIBER Institute
Indexed
SCOPUS scopus
Abstract
In this study, we examine the determinants of enforcement action by the Financial Supervisory Service of Korea from the perspective of audit firms. Enforcement action is an indication of audit failure. Both clientand audit firm-specific factors are involved in its occurrence. Most published studies of enforcement after audit failure focus on client characteristics because details about audit firms from financial statements and information about organizational structure are not publicly available. However, examining the issues surrounding enforcement from the perspective of audit firms may also be valuable in elucidating the potential determinants of audit failure resulting in enforcement action. Utilizing publicly available data from audit firms in South Korea, we identify several audit firm characteristics as determinants of enforcement action. The results of our empirical analysis reveal that the likelihood of audit failure is positively associated with the ratio of accounts receivable to total assets, the ratio of audit fees to total revenue, the ratio of partners to the total number of CPAs, CEO ownership, and age of audit firms. In addition, the likelihood of audit failure is negatively associated with ownership concentration and profitability. These associations are more pronounced in non-affiliated audit firms than affiliated audit firms. Several useful implications for regulators are described for improving audit quality by means of enforcement action. © 2015, CIBER Institute. All rights reserved.
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경영대학 > 경영학전공 > Journal papers
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