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korean management review - Vol. 51 , No. 2

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korean management review - Vol. 51, No. 2, pp. 303-330
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 30 Apr 2022
Received 18 Aug 2021 Revised 07 Sep 2021 Accepted 03 Nov 2021
DOI: https://doi.org/10.17287/kmr.2022.51.2.303
The Effect of Social Capital on Audit Fees, Audit Hours, and Audit Quality
Soo Young Kwon ; Yong Mi Kim
(First Author) Korea University Business School (sykwon@korea.ac.kr)
(Corresponding Author) Korea University Business School (ykim137@korea.ac.kr)
사회자본이 감사보수와 감사시간, 감사품질에 미치는 영향

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.


Funding Information ▼ Korea University

Abstract

This study examines the effect of social capital on audit fees, audit hours, and audit quality. Using a sample of Korean public firms for the period of 2013-2017, we find that firms headquartered in areas with high social capital pay less audit fees and spend less audit hours. However, we observe that audit quality does not change. Thus, we document that auditors charge a premium when firms are headquartered in areas with low social capital, indicating that the audit fee premium is due to the tendency to maintain the reasonable level of assurances in areas with low social capital. In addition, the negative relation between social capital and audit fees is stronger for firms located in metropolitan areas. Overall, this study contributes to our understanding in the currently growing audit literature by documenting how social capital affects auditors’ decision in audit fees, audit hours, and audit quality.


Keywords: audit hours, audit fees, audit quality, social capital

Acknowledgments

The first author acknowledges financial support from Korea University Business Research (KUBS) grant in 2021.

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∙ The author Soo Young Kwon is currently a professor of accounting at Korea University Business School. He has a doctorate degree from Washington University in St. Louis. Before joining Korea University in 1993, he worked as an assistant professor at the University of Utah, US. His major research areas include audit pricing and quality, internal control over financial reporting and the role of audit committee, critical audit matters and critical accounting estimates.

∙ 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.