This paper examines the effect of external auditing on accounting information quality for unlisted small and medium-sized enterprises (SMEs) receiving external audits for the first time, using both real earnings management and accrual-based earnings management measures. The sample was also divided into mandatory audit and voluntary audit firms to test whether the external audit effect differs between these groups. Furthermore, the study tested whether differences in audit quality by auditor type (Big 4 versus non-Big 4) lead to differences in earnings management between mandatory audit and voluntary audit firms. For this purpose, the study analyzed a sample of 8,284 firm-years of unlisted SMEs meeting certain criteria from 2001 to 2008. The empirical results are as follows. First, when examining the effect of external auditing using level variables, for unlisted SMEs receiving their initial audit for the first time, no improvement in accounting transparency attributable to external auditing was found on average in either performance-matched discretionary accruals or real earnings management measures compared to the immediately preceding unaudited year. These results were consistent when the analysis was conducted separately for mandatory and voluntary audit firms. Second, among unlisted SMEs receiving initial audits, mandatory audit firms showed relatively greater decreases on average in both discretionary accrual changes and real earnings management measure changes from the pre-audit year to the first year of external audit compared to voluntary audit firms. These results were also consistent with findings using level variables, demonstrating consistency in the test results. In other words, the external audit effect was found to be higher for mandatory audit firms than for voluntary audit firms, revealing a difference between mandatory and voluntary audits. Third, Big 4 auditor status did not influence the external audit effect. Lastly, additional analysis revealed that both Big 4 and non-Big 4 auditors conduct external audits from a relatively more conservative standpoint for mandatory audit firms among unlisted SMEs receiving their first external audit, while conducting less conservative external audits for voluntary audit firms. This finding indicates that both Big 4 and non-Big 4 auditors provide differentiated audit services rather than uniform audit services for mandatory versus voluntary audit firms. The results of this study offer the following implications for existing research. First, the study is significant in that it analyzed not only discretionary accruals but also extended the fundamental research by jointly analyzing real earnings management, in a context where empirical studies examining audit quality for unlisted SMEs are scarce. Second, unlike prior research, this study confirmed that the external audit effect differs relatively between mandatory and voluntary audit firms. Third, the results demonstrate that the initial audit effect is greater for mandatory audit firms than for voluntary audit firms. With the recent revision of the enforcement decree of the External Audit Act raising the asset threshold for mandatory audit from 7 billion won to 10 billion won or more, this study suggests that the reduction of mandatory audit coverage could negatively affect the improvement of accounting information quality, as the results show that mandatory auditing reduces earnings management.