The Effect of Periodic Auditor Designation on Audit Quality: Focusing on the Amount of Conservatism

Abstract

Purpose - This purpose of this study is to verify how the periodic auditor designation system, which was implemented in Korea in 2019, affects audit quality using the amount of conservatism. Design/Methodology/Approach - To establish hypotheses, previous studies were reviewed, and 1,031 samples were selected from KOSPI-listed companies in Korea for 2019 and 2020. The dependent variable was the amount of conservatism; the impact of periodic auditors, Big 4 auditors, debt ratios, total assets, ROA, loss, and audit complexity were empirically analyzed. Findings - The study found significant differences in audit quality among other variables, and confirmed a statistically significant difference in audit quality based on periodic auditor designation between the Big 4 and Non-Big 4 accounting firms. The study concluded that periodic auditor designation is effective in suppressing opportunistic behavior and enhancing the reliability of financial reporting, ultimately strengthening conservatism. Research Implications - This study is meaningful in that it targets empirical data from 2019 and 2020 using the amount of conservatism on the effect of periodic auditor designation on audit quality. Since this system was first implemented in Korea in 2019, there are not many related data, so there are limitations in the analysis of related studies.