Asia-Pacific Journal of Business (아태비즈니스연구)

KNU The Institute of Management & Economy Research (강원대학교 경영경제연구소)
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Initial Audit Engagement and Financial Statement Comparability

감사인 교체연도의 재무제표 비교가능성

  • Yan, Jing-Shuo (Department of Accounting and Taxation, Kyung Hee University) ;
  • Choi, Seung-Uk (Department of Accounting and Taxation, Kyung Hee University)
  • 연경석 (경희대학교 경영대학 회계.세무학과) ;
  • 최승욱 (경희대학교 경영대학 회계.세무학과)
  • Received : 2021.08.31
  • Accepted : 2021.09.21
  • Published : 2021.09.30
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Abstract

Purpose - This study investigates the effect of auditor change on client firm's accounting (financial statement) comparability. Design/methodology/approach - The comparability of accounting information is measured by the difference in accruals between the two firms. Additionally, the study uses earnings-stock return relationship as another proxy of accounting comparability. In particular, the paper examines whether there is a systematic difference between initial audit years and the other years with respect to the client firm's accounting comparability. Moreover, current study tests how changes in auditor size or industry expertise before and after the switch of auditors affect the accounting comparability. Findings - The results show that the level of accounting comparability is lower in the year of auditor change than in the other years. Furthermore, this lower level of comparability is derived by the observations that switch their auditors from non-Big4 to non-Big4 or from non-specialist to non-specialist. These results are consistent when accounting comparability is measured by different proxies. Research implications or Originality - The findings of this study provide important policy implications for the regulations related with auditor selection.

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