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Audit quality and accrual quality: Do big 4 auditors indeed enhance accrual quality of ‘powerful’ clients?

Title
Audit quality and accrual quality: Do big 4 auditors indeed enhance accrual quality of ‘powerful’ clients?
Authors
Park S.
Ewha Authors
박소라
SCOPUS Author ID
박소라scopus
Issue Date
2017
Journal Title
Journal of Applied Business Research
ISSN
0892-7626JCR Link
Citation
Journal of Applied Business Research vol. 33, no. 2, pp. 343 - 350
Keywords
Audit qualityBig 4ChaebolExternal auditorAccrual quality
Publisher
CIBER Institute
Indexed
SCOPUS scopus
Document Type
Article
Abstract
External auditors are considered ‘watchdogs’ which closely monitor corporate financial reporting process and provide guidelines for investors and financial institutions. However, recent accounting scandals in Korea indicate that external auditors may cater their audit reports to their clients’ needs. Based on a sample of listed companies on the Korea Stock Exchange from 2001 to 2010, this study finds the evidence consistent with such conjecture. First, large business conglomerates in Korea (so called ‘chaebols’) audited by Big 4 have lower accrual quality than the others, indicating that Big 4 auditors may not serve as watchdogs to enhance accrual quality of ‘powerful’ clients. However, powerful clients who pay greater non-audit service fees to Big 4 auditors have higher accrual quality than the others. This result suggests that non-audit services provided by Big 4 may not necessarily harm the quality of accounting information, contrary to the traditional view in the literature. © by author(s); CC-BY.
DOI
10.19030/jabr.v33i2.9908
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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