Does Regulator Selection of Auditors Improve Audit Quality? Evidence from Auditor Designation in Korea

Bae, G S and Kallapur, S and Rho, Joon Hwa (2013) Does Regulator Selection of Auditors Improve Audit Quality? Evidence from Auditor Designation in Korea. Working Paper. Indian School of Business.

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Abstract

Although the hiring and firing of auditors by clients is believed to create a fundamental conflict of interest, there is little research on the issue except for experimental evidence in Mayhew and Pike (2004). To provide evidence on the issue, in this paper we exploit the setting in Korea, known as auditor designation, wherein regulators selectively and episodically selected auditors for certain client firms. We fail to find that audit quality proxied by absolute discretionary accruals, audit hours, modified opinions, and the tendency to meet or beat benchmarks, is higher for designated auditors. Our results therefore question whether hiring and firing of auditors by clients is a threat to auditor independence.

ISB Creators:
ISB CreatorsORCiD
Kallapur, SUNSPECIFIED
Item Type: Monograph (Working Paper)
Uncontrolled Keywords: auditor designation, regulator selection of auditors, audit quality, auditor independence
Subjects: Business and Management
Depositing User: LRC ISB
Date Deposited: 31 Oct 2014 06:21
Last Modified: 02 Nov 2014 05:17
URI: http://eprints.exchange.isb.edu/id/eprint/87
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