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특수관계자 거래에서 발생하는 감사위험을 감사인이 감사노력과 감사보수에 어떻게 반영하는지 연구하기 위하여, 본 연구는 특수관계자 거래 규모와 감사계약별 realization rate와의 관계를 분석한다. Realization rate는 감사보수를 표준감사보수(직급별 실제감사투입시간×직급별 표준임률)로 나눈 비율이며, 이는 개별 감사계약에 투입된 (표준)원가 대비 실제 수익을 나타내기 때문에 감사계약의 수익성을 측정하는 지표가 된다. 실증분석 결과, 특수관계자 거래 규모가 클수록 realization rate는 낮은 것으로 나타났는데, 이는 특수관계자 거래로 인해 감사보수가 증가되는 정도보다 감사투입시간의 증가 정도가 상대적으로 더 높다는 결과이다. 즉, 감사인은 특수관계자 거래에 따른 감사위험을 관리하기 위해 감사계약의 수익성인 realization rate가 하락하는 것을 감수하면서도 감사자원을 더욱 투입하여 적극적으로 감사업무를 수행한다고 해석할 수 있다.
This study examines the relation between related-party transactions and the realization rate of audit engagements to shed lights on how auditors incorporate the risk associated with related-party transactions into audit effort and audit pricing. Related-party transactions increase audit risks because managers can use related-party transactions to manage earnings or to transfer wealth for the interest of controlling shareholders. In addition, as the auditing standards require additional audit procedures to identify and verify the transactions with related parties, auditors are expected to put more effort for firms with related-party transactions. Although prior studies find that related-party transactions are positively associated with audit fees and audit hours, the relation between related-party transactions and the realization rate of audit engagements is not clear. If auditors respond to significant related-party transactions by increasing both audit fees and audit hours proportionally, we expect to observe an insignificant relation between related-party transactions and the realization rate. Alternatively, if auditors charge higher audit fees to the client, relative to audit effort, more related-party transactions can be associated with a higher realization rate. Or, if auditors exert more effort relative to audit fees, to lower their audit risk, more related-party transactions would be associated with a lower realization rate. Using 6,662 firm-year observations from 2014 through 2017, we first confirm the findings in prior studies that related-party transactions are positively related to audit fees and audit hours. More importantly, we find that related-party transactions are negatively associated with the realization rate of audit engagements. This result suggests that auditors put extra effort for clients with more related-party transactions, which leads to a lower profitability from the audit engagement. We perform several additional analyses, including partitioning the sample into firms with Big 4 and non-Big 4 auditors, examining the effect of related-party transactions associated with income and those associated with expenses. The results are generally consistent with our main argument that related-party transactions are associated with a lower audit profitability as the increased audit effort exceeds increased audit fees. This study contributes to the literature on auditors’ behaviors in adjusting their audit effort in response to audit risk factors. While prior studies document the effect of related-party transactions on audit fees and audit hours, the relation between related-party transactions and audit profitability (i.e., audit realization rate) depends on the relative magnitude of adjustments made to the audit effort relative to audit fees. We also extend prior studies on audit fees and audit hours by focusing on the measure of audit profitability, a realization rate. We call for more research on realization rates because the measures can be estimated from the detailed disclosure on audit hours that is available in Korea, and because it can provide insights into the auditors’ behaviors in both audit pricing and audit effort.
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related-party transactions, realization rate, audit profitability, audit fees, audit hours.
