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Korean Academic Society of Business Administration
[ Article ]
korean management review - Vol. 51, No. 4, pp.957-977
ISSN: 1226-1874 (Print)
Print publication date 31 Aug 2022
Received 14 Dec 2021 Revised 14 Apr 2022 Accepted 18 Apr 2022
DOI: https://doi.org/10.17287/kmr.2022.51.4.957

감사인 자율교체에 따른 이익유연화의 변화

Yong Mi Kim ; Seung-Weon Yoo
(First Author) Korea University Business School ykim137@korea.ac.kr
(Corresponding Author) Korea University Business School acyoo@korea.ac.kr
Voluntary Auditor Changes and Income Smoothing


Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This study examines the effect of a voluntary auditor change on income smoothing. Investigating a sample of public companies for 2011-2018, we find that auditor changes are negatively associated with income smoothing when Big4 audit firms replace non-Big4 audit firms and that auditors consider previous earnings persistence. Overall, this study provides evidence that new auditors perceive income smoothing as opportunistic behavior, and this perspective is more prominent for Big4 audit firms. The results suggest that auditors, compared to investors and credit rating agencies, have a different perspective on income smoothing and auditors' evaluation depends on the earnings informativeness of client firms.

Keywords:

Auditor changes, Income smoothing, Earnings persistence

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∙ The author Yong Mi Kim is a Ph.D. Candidate at Korea University Business School and a lecturer at Ulsan National Institute of Science and Technology. Her research interests include the market for audit services and financial reporting choices.

∙ The author Seung-Weon Yoo is a professor at Korea University Business School. His research focuses on the earnings forecast, analysts’ behavior, auditing and managerial incentives and corporate governance.